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We have the financial support of well over 3,500 individual
Atlantic Yards: The Deal is Coming Undone
Today The New York Times reports that developer Bruce Ratner's
stated Atlantic Yards groundbreaking date is a fantasy given numerous financial
and legal obstacles. Despite the rather misleading headline, the Atlantic
Yards deal is coming undone. (Update: the print version of the
article has a subhead, which improves upon the misleading online headline. The
print article reads: "Brooklyn Arena Builder Plans to Break Ground in December
After Delay. But Lawsuits and Rising Costs Raise Doubts.")
Three key issues are spread throughout the article.
>>The first is that the $400 million naming rights deal with Barclays Bank
has a contract that requires "Forest City to close on the land and the
financing by the end of November." As DDDB spokesman Daniel Goldstein
states in the article, it is impossible for Forest city to close by that date.
(Amongst other major financing and legal problems
for Ratner, there is an eminent domain legal challenge
in NY State Court that won't even be argued until 2009.)
>> It is confirmed that Ratner is actively seeking $100
million more in taxpayer subsidies. This
is going to be unacceptable to nearly all local elected officials.
>> Congressman Kucinich's probe into IRS tax exempt bond regulations (a Congressional
hearing on "Gaming the Tax Code:
Public Subsidies, Private Profits, and Big League Sports in New York"
is scheduled for September 18th) is breathing down Ratner's neck and jeopardizing
his ability to gain those tax-exempt bonds.
The Atlantic Yards project is hanging by a thread, yet Ratner continues to demolish
a whole section of Prospect Heights and spend taxpayer dollars on project-specific
infrastructure work. It's time for that to stop. It's time to move forward with
a new, feasible and superior
vision to develop the rail yards -- The UNITY Plan.
More from the Atlantic Yards Report: "Times:
Barclays naming deal has November deadline; FCR seeks $100M in subsidies"
and from NoLandGrab.
The Times article follows below, in full, with emphasis added (the article
is on page B3 in the print edition):
Arena Builder Plans to Break Ground in December After Delay
By Charles V. Bagli
The developer Bruce C. Ratner has told state and city officials that he plans
to break ground in December on his long-delayed $4 billion Atlantic Yards project
in Brooklyn, which will feature thousands of apartments and offices in 16 towers
built around a glamorous basketball arena for the Nets.
But it is unclear whether Mr. Ratner will be able to meet his own deadline
to start one of the most ambitious projects in Brooklyn in decades, given the
softening economy, the crisis in the debt markets, rising costs and a persistent
group of opponents who have filed one lawsuit after another.
The developer has been rushing to have a November closing on his deal with state
officials and the Metropolitan Transportation Authority, which owns a section
of the 22 acres he plans to use for the project.
Mr. Ratner, who is the chairman of Forest City Ratner; his bankers at Goldman
Sachs; and David Stern, commissioner of the National Basketball Association, also
met last week with bond-rating agencies to discuss the proposed financing for
the $950 million arena, which was designed by Frank Gehry. (Forest City Ratner
was the development partner for the new Manhattan headquarters of The New York
But that financing plan for the arena, known as Barclays Center, is dependent
on a favorable ruling by the Treasury Department in the coming weeks
that would allow Mr. Ratner to use tax-exempt bonds and a final victory over court
challenges. If he is barred from using tax-exempt bonds, his costs will increase
substantially for what would already be the most expensive arena in the world.
Either way, bankers and real estate executives say it will be difficult
to sell bonds for an arena at a time when New York's real estate boom has quieted
and investors and lenders are wary of backing large-scale projects.
Indeed, Mr. Ratner has asked government officials recently for as much
as $100 million in additional cash for the project, citing rising costs and problems
in the bond markets, according to two officials who would speak only
on the condition of anonymity because they were not authorized to discuss the
negotiations. The city and the state have already agreed to provide $300 million
in subsidies and tens of millions in tax breaks.
Still, in a conference call with stock analysts on Tuesday, Charles Ratner, the
chief executive of Mr. Ratner's parent company, Forest City Enterprises,
said that Atlantic Yards was the biggest project in their development pipeline
and that he was confident that "we can make it happen" by the end
of the year.
Joseph DePlasco, a spokesman for Bruce Ratner, said his company had drawn up documents
for a tax-exempt bond offering that would enable them to move quickly after the
Treasury Department issued its ruling. But, he said, Forest City and Goldman Sachs
were also confident that they could obtain taxable financing, if needed.
"While it is a tough market, we have secured more than $1.5 billion in construction
loans this year so far," Mr. DePlasco said. "And this is the most
exciting project in the country and the most exciting arena in the world."
One reason Mr. Ratner may be forging ahead is his deal with Barclays Bank, which
officials say provides him with $20 million a year for naming the arena after
it. The naming rights contract requires Forest City to close on the land
and the financing by the end of November.
Mr. DePlasco declined to discuss the company's arrangement with Barclays.
But opponents, who object to the size of the project, its impact on the surrounding
neighborhood and the use of eminent domain by the state, said that Mr. Ratner
would fall short of his goal.
"There's no way they'll get control of the land they
need, get the financing, end the litigation and break ground by December,"
said Daniel Goldstein, a spokesman for Develop Don't Destroy Brooklyn, the
project's primary opponent. Andrew DeSouza, a spokesman for the Treasury
Department, declined to comment on whether a decision concerning tax-exempt financing
for stadiums and arenas was imminent. The Internal Revenue Service issued proposed
regulations in 2006 that would make it more difficult, if not impossible, for
tax-exempt bonds to be
used for private sports teams.
The Treasury Department has been soliciting comments ever since. Both the city
and the state have lobbied on behalf of the Atlantic Yards project, as well as
for the Yankees and the Mets, which are already building stadiums with tax-exempt
It is unlikely that Mr. Ratner will be able to get more cash from the
city or the state, but he is also negotiating for tax subsidies to ensure
that at least 30 percent of the 6,000 apartments in the complex would be affordable
for low- and moderate-income families. Talks are also continuing with the Metropolitan