Don't Blame the Economy for Atlantic Yards Delays

Everyone knows that jobs and affordable housing once promised at Atlantic Yards are delayed because of the economy and litigation, right? Maybe not so much.

It is true that since the project was approved by the New York State Public Authorities Control Board in December 2006, the benchmark S&P 500 index has lost nearly 20% of its value. It’s also true that the benchmark index of real estate investment trusts is down nearly 40% in the same interval. But Forest City Enterprises, the parent company of Atlantic Yards developer Forest City Ratner, has lost 80% of its value since December 2006, showing much greater volatility than either the market as a whole or its peer group of real estate firms. (See the chart in the photo gallery comparing the S&P, the Wilshire REIT index and Forest City Enterprises.) So while the effects of the economic crisis were hard on the real estate industry, Forest City suffered much more than other developers.

Nevertheless, in September 2009, the New York State Empire State Development Corporation (ESDC) agreed to allow Forest City to extend the deadline for completing the Atlantic Yards project from 10 to 25 years, putting even more eggs into a shaky basket. The agency was in such a hurry to close the deal, it didn’t bother to analyze the detrimental effect to the surrounding neighborhoods of more than doubling the duration of construction, an omission State Supreme Court Justice Marcy Friedman ruled violated State environmental law. Nor did ESDC attempt to reduce project risk by opening development at the site to additional teams. Was the agency rewarded for doubling down on Forest City? Since September 2009, real estate investment trusts as a group have recovered more than a third of the value lost in the market shakeout. In comparison, the price of Forest City’s equity has barely moved. And the start of the first residential building at Atlantic Yards is already a year behind the renegotiated construction schedule.

It’s not just Forest City’s weakened condition that delays jobs and housing at Atlantic Yards. As BrooklynSpeaks and Develop Don’t Destroy Brooklyn have pointed out, Forest City’s Atlantic Yards plan calls for the most expensive development—requiring platforms to be built over the MTA Vanderbilt Yards—to be done first, holding buildable lots at the eastern end of the footprint hostage to be warehoused for parking and construction staging. Forest City’s relative lack of experience in financing the development of affordable housing (which involves piecing together specialized State and Federal tax credits and loan programs) is a further barrier to fulfilling the project’s promises.

But it may be that Forest City never intended to complete Atlantic Yards on the schedule originally approved in 2006. In September 2010, a year after the ESDC’s approval of the renegotiated project plan, Forest City Ratner CEO Bruce Ratner defended the delayed construction of Atlantic Yards’ residential towers to the press, saying of the original 10-year schedule, “It was never supposed to be the time we were supposed to build them in.”

Governor Cuomo wasn’t in office when decisions about Atlantic Yards’ schedule were made, but Justice Friedman’s ruling ordering ESDC to revisit the project plan gives him the opportunity to at least put the delivery of promised public benefits back on track. The Governor should direct the ESDC to explore revising the development schedule, so that construction of affordable housing on buildable lots can begin. To improve access to financing and add resources, his agency should promote the participation of other developers in that effort.

Unfortunately, Governor Cuomo’s ESDC is going in the opposite direction. The agency has stated it intends to appeal the court order, a move that ironically means litigation is causing delays at Atlantic Yards. Only this time, it's ESDC and Forest City who are fighting a legal battle against the public to preserve the delay in completion of the project. So the next time a public official blames the economy for delaying Atlantic Yards into the next generation, ask what options the State has pursued to get the project back on schedule. And then ask why the Cuomo administration is going back to court to keep it delayed.