A World Full of Grand Plans
Despite the Credit Crunch, Large Cities Across the Globe Have Huge Projects on Tap

Some of the biggest cities in the world are proposing the most ambitious real-estate projects in a generation, a sign of growing confidence in urban living even as the current financial landscape grows bleaker.

The list is long and expensive, with more than 15 ventures, some of which are expected to cost as much as $30 billion: Four in New York City, at least three in Dubai, two in London, Chicago and Milan, and one in Amsterdam, Los Angeles, Paris and Mumbai.Part of Brookfield Properties's Hudson Yards bid.
...

But these are inauspicious times for such plans. Banks are sharply cutting back on commercial real-estate loans. While some projects such as those in cash-rich countries like Dubai are somewhat insulated, developers are worried privately that many of these ambitious, city-changing endeavors -- difficult to complete in good times -- may be at risk.

"We think there will be a lot of projects that won't get started because they can't get financing," says Jeff Blau, president of Related Cos., a private developer involved in several colossal ventures. He is, of course, upbeat about his own company's projects. Related began construction earlier this month on the first phase of The Grand, a $3 billion project near the Walt Disney Concert Hall in downtown Los Angeles that will feature a 16-acre park and a Frank Gehry-designed tower that will include condos and a Mandarin Oriental hotel.

In an early sign of the pressure credit markets are putting on big projects, Goldman Sachs analysts on Dec. 14 downgraded the stock of one of the largest builders of urban projects nationwide, Forest City Enterprises. The downgrade said increased borrowing and construction costs are making its development projects less profitable. One of Forest City's subsidiaries, Forest City Ratner Cos., a prolific New York City builder, delayed the expected completion of a basketball arena that is the centerpiece of its $10 billion project above a rail yard in Brooklyn. The Atlantic Yards project includes 16 residential and office skyscrapers along with large retail spaces. The first phase, which includes the arena, is now projected to open in 2010 instead of November 2009.

A company spokesman says the delay isn't related to financial markets and that there is no connection between today's credit market and long-term profitability. Still, the delay lengthens the time before Forest City can derive revenue from its up-front investment at the site, which includes moving the rail yard...
(emphasis added)

Full article