Downtown Brooklyn's affordable housing policy failure

 6 Sq Ft.

 

As the massive Brooklyn megadevelopment once known as Atlantic Yards reaches its 20th anniversary, news of the project’s progress has been scarce. But recent changes affecting the development anchored by Barclays Center may put the 22-acre site–now known as Pacific Park–back in the spotlight. As The Real Deal reported in a wrap-up of its progress over the past two decades, current developer Greenland USA has defaulted on nearly $350 million in loans attached to the project’s second phase. With foreclosure imminent, an auction, scheduled for next month, may mean a new developer will be responsible for fulfilling crucial affordable housing agreements and inherit penalties for unbuilt units.

According to The Real Deal, Greenland USA, part of China’s state-owned Greenland Group, which owns a 95 percent stake in the project, defaulted on loans tied to its remaining six unbuilt sites–more than 3,200 rental apartments. The U.S. Immigration Fund, which had assembled the loans through its foreign investor program, intends to foreclose on the sites, with an auction slated for January 11, 2024.

Launched with much fanfare and controversy in 2003, helmed at the time by developer Forest City Ratner, the (then) $2.5 billion megaproject was to include a new stadium that would be home to the former New Jersey Nets and 15 residential and office buildings, the highlight of which would be a glassy supertall designed by Frank Gehry. At the project’s center, a platform would be built above the MTA’s Atlantic Yards railyard at the nexus of Pacific Street and Atlantic, Carlton, and Vanderbilt Avenues.

At present, nine of the planned 15 buildings have risen. The Gehry tower, dubbed “Miss Brooklyn,” never happened, though the celebrated stadium–and the Nets, which Ratner purchased and later sold to Russian billionaire Mikhail Prokhorov–have become part of Brooklyn’s colorful urban fabric. (The team is now owned by Joe Tsai, chairman of the Chinese multinational technology company Alibaba Group.).

The project has been plagued with challenges from its earliest days. Legal actions taken by residents and property owners displaced by the developers’ eminent domain agreement with the state delayed work for years; a planned modular residential tower hit snags; the 2008 financial crisis dealt another blow, as did the Covid pandemic.

Post-pandemic prices affecting the cost of building the rail yard platform have been an additional challenge. The Real Deal notes Greenland reached a tentative deal with the MTA in August covering the platform’s first phase, consisting of three residential towers.

A recent setback that may significantly affect the project’s next chapter is the expiration in 2022 of the 421a property tax break. Greenland stated that without the tax break, it could not build the new units.

Atlantic Yards Report

Crucially, Empire State Development (ESD), the gubernatorially-controlled state authority that oversees/shepherds Atlantic Yards/Pacific Park, won't comment on what conditions may be attached to the auction of six development sites over the railyard next month

Will the May 2025  affordable housing deadline, with $2,000/month fines for 876 (or 877) remaining units, transfer? Will the bidder(s) also be responsible for building the platform and paying the MTA $11 million a year for development rights?

Those are major expenditures that significantly affect the value of any bid. How can any potential bidder proceed before they know whether and how they assume those obligations.

Could Gov. Kathy Hochul waive those obligations and/or commit public funds? ESD--which has ignored my queries--would only say Hochul is committed to the “successful buildout and completion of this project" and is reviewing it.

To the Real Deal, City Comptroller Brad Lander and Fifth Avenue Committee head Michelle de la Uz expressed concern that ESD would make a deal without public input. Former Deputy Mayor Alicia Glen, a real estate developer herself, believes the penalties should remain. And Brooklyn Borough President Antonio Reynoso worries that it would be precedent to renege on other deals.

I'd add that the state has consistently shown an unwillingness to push the developer, so it offered a 25-year deadline on a project long professed to take ten years, and it allow for "affordable housing" to be defined as any units participating in government programs rather than broad spectrum originally promised by original developer Forest City Ratner.

Also note that--unmentioned in the article--both ESD and embattled developer Greenland USA have lost longtime staff working on Atlantic Yards