Catching up: LIRR on service to arena; Forest City statement on Ratner succession; union leader contrasts City Point with B2

From the Metropolitan Transportation Authority, LIRR Grows in Brooklyn as Barclays Center Proves a Big Draw:Railroad Says Ridership at Atlantic Terminal Up 334% since Arena's Debut

MTA Long Island Rail Road reported today that ridership to and from Brooklyn has jumped 334 percent since the opening earlier this year of the Barclays Center at Atlantic Terminal with the commuter line carrying an average of 3,300 new customers on event nights.

The Barclays Center, basketball home of the Brooklyn Nets, future hockey home of the New York Islanders and showplace for such stars as JAY-Z, Barbra Streisand and Justin Bieber, has been a big hit with Long Islanders who have forsaken their cars to board the LIRR’s enhanced service to and from the new Atlantic Terminal in Downtown Brooklyn.

"Barclays Center has been every bit the draw we had anticipated it would be, creating a whole new customer stream for the LIRR," said LIRR President Helena Williams. "When Barclays Center opened in September, the LIRR was ready with the best possible service, including a special program including extra trains on event days and nights and a marketing campaign promoting travel via the LIRR to the new Atlantic Terminal across the street from the arena."

According to Williams, the biggest handle so far for was the 4,852 arriving customers and 5,377 departing customers served by the LIRR on December 11, the night the Nets hosted the New York Knicks for the first time.

On a typical Thursday evening prior to the Barclays Center opening, the LIRR would have averaged 990 arrivals and 430 departures at Atlantic Terminal. On Thursday, October 11, for the first of two Barbra Streisand concerts, those numbers jumped by 3,135 and 3,835 respectively – meaning that ridership was up 358 percent and for departures an astounding 995 percent for that night alone. The LIRR study shows that more customers are taking the train home to Long Island from Downtown Brooklyn after a game or show, an indication that many fans head to Barclays directly from jobs in Manhattan and elsewhere.

Unmentioned is the issue of cost. If the riders are using existing service, then the revenues represent a bonus for the MTA. On some nights, however, the MTA adds trains; how does that change the numbers?

And while having Long Island fans take transit rather than drive surely saves on externalities (pollution, congestion) from driving, it does not necessarily represent new revenue for the state; arenas and stadiums generally mean a re-orientation of entertainment spending, not net new spending.

Ratner's succession by Gilmartin

From Forest City Enterprises, Statement concerning media reports of leadership succession at Forest City Ratner Companies:

CLEVELAND, Jan. 31, 2013 /PRNewswire/ -- In response to recent media reports concerning leadership succession at Forest City Ratner Companies (FCRC), parent company Forest City Enterprises, Inc. (NYSE: FCEA and FCEB), issued the following statement:: "At this time, the company has no definitive announcement to make concerning potential leadership succession at FCRC. The company emphasizes that any such announcement and change in leadership, when appropriate, would be the result of ongoing succession planning that the company undertakes continuously and as a matter of course. Moreover, under any potential leadership succession for FCRC, the company expects that Bruce C. Ratner, FCRC chairman and CEO, will remain deeply engaged and involved in the business that he founded and built into one of New York City's preeminent real estate concerns."

In other words, reports were pretty much accurate; it's just they were supposed to emerge so soon.

Union leader makes contrast

From Real Estate Weekly, Gary LaBarbara of Building Trades Thrashes City Point Developers as Community Groups Rally for Changes:

New York City’s building trades unions have made big strides in the last year to move major commercial and residential projects off the post-recession drawing board and into development.

In 2012, we entered into agreements to deliver cost and other efficiencies that were instrumental in advancing more than 50 private projects representing billions of dollars of investment and thousands of jobs.

...We also recently joined Forest City Ratner to break ground at B2 BKLYN, which will bring housing for middle and lower income families to Atlantic Yards following the opening of the already iconic Barclays Center.

An innovative partnership on this project will wed modular housing units that are built in the Brooklyn Navy Yard to traditional on-site construction, with both types of work employing unionized building trades and achieving efficiencies needed to go forward.

Many of these important projects involve public support of some kind. And that is fine, because these projects are contributing to the betterment of our city’s economy by spurring investment and growth, providing office space and facilities to meet the demands of modern business and adding much needed housing that is affordable to working families.

These projects have something else in common that is essential to the betterment of our city: They are being built by workers who are paid good wages with health insurance and pensions.

What LaBarbara does not mention is how much the compensation for workers on B2 differs from the compensation promised during the Atlantic Yards approval process. In other words, the public support was contingent on certain promises--which are no longer being kept.

Nor does he mention how certain skilled trades, like plumbers, have charged that the city Department of Buildings and the developer have collaborated on a way to avoid using such skilled labor.

LaBarbera on City Point

He writes:

Case in point is City Point, the 1.6 million square foot development of one of the most valuable land parcels in downtown Brooklyn.

There, property owned by taxpayers is being leased to a private development team that includes Acadia Realty Trust. In addition to using public property, City Point is receiving vast amounts of public subsidies ranging from tax exempt bond financing to property tax abatements.

But on a score central to responsible economic development for everyday New Yorkers — creating good jobs that strengthen local communities — City Point is failing.

Here's a response from the developer; neither source specifies the gap between union and non-union compensation.

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Brooklyn’s vaunted, tainted Barclays Center: focus on plaza obscures missing (revenue-producing) office tower; also, remember RPA's request for public benefits in exchange for concessions

My Reuters Opinion essay last Friday, Brooklyn’s vaunted, tainted Barclays Center, was illustrated, unsurprisingly, with a portrayal of the arena looking east from the arena plaza.

That's a common perspective, but that photo, as with nearly all discussion of the arena, omits a key part of the project: the revenue-producing flagship office tower, aka B1.

As I wrote 10/1/12 in The Atlantic Cities:

[New York magazine critic Justin] Davidson, like the other critics, ignores a glaring absence in current renderings of the three-tower arena block: Atlantic Yards was approved with a fourth tower, a flagship office building at the intersection of Flatbush and Atlantic, some 50 stories high, covering what's now the arena plaza, with the subway entrance enclosed in an atrium Gehry dubbed an "Urban Room."
However visitors embrace the oculus, the arena was never supposed to stand alone. That flagship tower--long on hold, Ratner admitted nearly three years ago--was key to the portrayal of Atlantic Yards, as it would have delivered both permanent jobs and promised tax revenues.

Remember how the loss of projected office space in 2006 helped trigger a severe drop in revenue estimates?

The RPA role

My Reuters essay was necessarily brief. Still, one of the most illustrative examples was Forest City Ratner's renegotiation of the deal for Vanderbilt Yard development rights, achieved in June 2009 with the Metropolitan Transportation Authority.

As I wrote:

The MTA’s current spokesman declined to comment on decisions made in a previous administration, which disregarded a call from the mainstream Regional Plan Association to request more public oversight and potential future revenue in return for concessions. The then-MTA chairman declared, vaguely, “I think, in this economy, jobs and an arena in Brooklyn is a public good.”

The RPA is a mainstream planning group, not a radical one. Check out the endorsements from area elected officials and its blue-chip board made of business and civic leaders. Even the RPA was ignored.

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Mayoral candidate Allon: sell naming rights to MTA stations; after all, "nobody seems outraged" by "Barclays Center" (really?)

Longshot mayoral candidate Tom Allon writes, in a Daily News op-ed headlined The next station is Google 14th St.: Sell naming rights, MTA, that's it's an easy call to sell naming rights, "especially since our transit system is already covered in ads."

But shouldn't there be a real geographic connection?

He writes:

Moreover, we routinely sell naming rights in the private sector to stadiums (Citi Field in Queens, Barclays Center in Brooklyn), hospital wings (NYU’s Langone Medical Center), university buildings (the Arthur L. Carter Journalism Institute, also at NYU) and other institutions.

Actually, the Barclays Center is a very clever hand-off: the arena is nominally owned by the state, for the purposes of issuing tax-exempt bonds, but naming rights were given away to the developer.

No objection to Barclays Center naming?

Allon writes:

For that matter, now that the Barclays Center is open, the subway station beneath it has been renamed “Atlantic Avenue – Barclays Center.” Nobody seems outraged by the change so far.

He hasn't done much research. What about Deb Goldstein's "I'm still calling it Pacific St." t-shirt, as reported widely, even in the Daily News?

What about Michael D.D. White's ongoing criticisms of the deal, especially in light of the association of Barclays with scandal?

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Flashback: at MTA board meeting and in affidavit, agency officials misleadingly suggested that platform over railyard was prerequisite to Forest City reaping revenue

Forest City Ratner's plan to build four towers on the southeast block of the Atlantic Yards site before constructing a platform for construction over the Vanderbilt Yard not only raises questions about whether the project would remove blight in a timely fashion, as I wrote 10/23/12, it also places litigation over the railyard in a new light.

After all, one justification for a revised 2009 deal for the railyard, as detailed in an affidavit from the then-Chairman of the Metropolitan Transportation Authority (MTA) Dale Hemmerdinger, was that the platform must be built before Forest City could start earning revenue.

That was misleading then, because there were other places for Forest City to build. And it's even more misleading now.

Current plans

As I reported last month, one investment analyst asked if, given the rents today, whether building a platform for towers over the railyard works. (The far western segment of the railyard, perhaps one-fourth of the 8.5 acres, has already been used for part of the arena block.)

Platform designs, executive MaryAnne Gilmartin said, "have become quite sophisticated and simplified at the same time," given other developers' plans to build on the West Side Yards in Manhattan and other projects.

While Forest City has planned scenarios "where we build the platform at certain estimated costs," she said, "certainly the focus of the day is the arena block... There's a second block, 1129, which is terra firma... These four buildings here... we have seven buildings that we we will build before we commence construction on any platform buildings. And so, we're working on it, but I can tell you that the focus today is on the arena block."

The MTA lawsuit: platform crucial?

Several groups, led by Develop Don't Destroy Brooklyn, sued unsuccessfully to annul the 2009 revision of the Vanderbilt Yard deal, in which Forest City, instead of paying $100 million for railyard development rights up front, would put $20 million down and have up to 21 years to pay the rest, at a gentle interest rate. It also could build a smaller permanent replacement railyard than originally approved.

In an affidavit, Hemmerdinger stated: "The board also took into consideration the 'tremendous up front investment by the buyer to actually build the platform' over the VD [Vanderbilt] Yard, which must be made before the developer can build the revenue generating portions of the proposal."

His statement pointed to page 4 of the transcript, which referred to comments by board member Mark Page

So, what we are selling is the space above [the rail yard] and to have an opportunity to actually realize value for the space above our land requires a tremendous up front investment by the buyer to actually build the platform which comes in up front expensive major investment before the buyer can then move on to building whatever they are going to build which would ultimately enable them to realize revenue to pay for all of this."

Misleading statements

The statements from both Hemmerdinger and Page, though not quite the same, are misleading. But both leave the impression that, only only after building the platform could Forest City realize value from its investment.

Not so.

Yes, only the platform would produce revenue from the air rights directly above it.

However, the MTA deal unlocked the revenue-generating potential for the entire project, including the arena; the towers around it on the arena block; and towers on the rest of the project site outside the Vanderbilt Yard.

Those latter towers include the southeast block; Site 5 (on the west side of Flatbush Avenue); and even the site just east of Sixth Avenue between Dean and Pacific streets.

What's different now?

What's different between then and now?

Now we know for sure that Forest City plans to build on the southeast block before building a platform, rather than proceeding--as once suggested--in a more methodical clockwise fashion, building on both the railyard and adjacent land.

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Is Islanders' move a vindication of Atlantic Yards? No, it vindicates the arena, and Brooklyn. And it suggests NYC/NYS should have driven a harder bargain.

Is the planned move of the New York Islanders to Brooklyn by 2015--or earlier, if Islanders' owner Charles Wang breaks a lease with the Nassau Coliseum, which he didn't rule out--a vindication of the Atlantic Yards project?

No--not at all, when Atlantic Yards developer Forest City Ratner pushes plans to build over the "blighted" railyard further back and acknowledges the arena deal has nothing to do with promised public benefits like housing.

Is it a vindication of the Barclays Center arena? Surely.

Is it a vindication of Brooklyn as a brand and a home? Indeed. And that raises questions about whether the city and state should have tried to get a better deal, and whether the public deserves more.

The Times pronounces

In today's front-page (in the New York edition) article, Brooklyn Lures a Second Team to Barclays Center, the New York Times reported:

The announced move of the hockey franchise... was heralded by city leaders as an unexpectedly rapid vindication of the controversial development project that opened last month with the promise of transforming the heart of the borough.

The language there's a little vague--the "controversial development project" with transformative properties is the larger Atlantic Yards project, though only the arena opened last month. And, as indicated in the web site blurb excerpted below, the Times meant Atlantic Yards:


"A hockey team is getting Brooklyn"

The Daily News, sponsor of the Barclays Center plaza, also front-paged the news, albeit in a headline only, while the New York Post steered clear, promoting its Mitt Romney endorsement on the front and announcing the hockey news in a small banner on the back (below right). In an editorial, the Daily News was thrilled, stating "Bruce Ratner’s splendid Barclays Center is now an electromagnet." (No mention of the business relationship, of course.)

The Wall Street Journal's Jason Gay suggested, in
Here Comes Hipster Hockey, that the New York Islanders, despite promises to retain their name, consider the example of the Nets and the "great potential in a Brooklyn rechristening."

He wrote:

There is an undeniable marketing and merchandising opportunity with a Brooklyn re-branding, especially for a once-dominant hockey franchise that won its last Stanley Cup in 1983, when Jay-Z was 14.... Brooklyn may be getting a hockey team, but that's not really the story. The story is that a hockey team is getting Brooklyn.

In Newsday, marketing experts cautioned that a hockey re-branding would be challenging,  given that the Nets came first, basketball's more popular than hockey, and the Islanders won't change their name. But a marketing campaign to expose hockey to new audiences could work. (Looks like they need to fix the logo to add Queens and Brooklyn, though, as noted by Deadspin.)

In the Daily News, columnist Filip Bondy noted that the hockey relocation trend is now "anti-suburban" and found a few ironies:

And even on Wednesday, as seven officials from the club, league and city spoke with political correctness about the diversity of Brooklyn, it was hard not to notice that none of them was a woman, black or Hispanic.
Still, the Isles are coming to Brooklyn and do not sound particularly afraid about whether their fans will come with them.

Dodgers redux and public vote? Not quite

Times Sports columnist George Vecsey enthused:

Every time I go past the new arena, I cannot help thinking that the Brooklyn Dodgers could have been playing atop the Atlantic Avenue station. Now the borough is scooping up the Islanders from farther out on the Island. At least the taxpayers got to vote on this move.

Actually, the Dodgers wanted to move to what is now the site of the Atlantic Center mall. And the only taxpayers to vote were in Nassau County, turning down a new, subsidized arena for the Islanders. Taxpayers in Brooklyn and New York City didn't get to vote, nor did they see how the Atlantic Yards deal got revised.

The NYC exception and the Brooklyn bonus

Yesterday, in Islanders announce 25-year “ironclad” lease in Brooklyn, starting in 2015, Neil deMause of Field of Schemes observed:

So, obviously I was dead wrong when I said that an Islanders-to-Brooklyn move was unlikely, and any concerns over capacity and the Islanders being tenants in someone else’s building paled in comparison to being able to tap into what’s looking like a lucrative Brooklyn market. If there’s a lesson here, it’s that while most stadiums and arenas aren’t cash cows once you take construction costs into account, and most team owners’ goal is to be the primary tenant in their own arena, not all buildings — and markets — are created equal, and things can work very differently when a market the size of New York City is involved.

Which, of course, raises the question of whether New York City and state should have driven a harder bargain about getting the Barclays Center built in the first place, now that it turns out that teams need Brooklyn more than Brooklyn needs teams. I’d ask Mayor Bloomberg, but he’s already left the building…

Bloomberg of course would say no, projecting $175 million in vaguely described "economic activity" (not government revenues) from the new tenant. By contrast, deMause was cautious:

As for the city making more in tax revenue, unless a ton of Long Islanders start heading to games in Brooklyn rather than Nassau (which is always possible...), this won’t help city tax revenues much, since people from Brooklyn going to games would just be reshuffling Brooklyn money.

Where it does get interesting is that assuming they can squeeze in 40 nights of hockey without displacing any concert dates — not at all a sure thing — then they’re looking at 250+ nights a year when the place is busy. At that point, it actually starts to make a little bit of sense to locate a restaurant or whatever near there just to cater to arena patrons, where it doesn’t if it’s dark most of the year. So maybe you get a little bit of extra spinoff effects, though it’s not like there were many vacant storefronts around there before the arena.

Also note that the New York Post, citing unnamed sources, reports that the Islanders will pay $6 million a year in rent, which deMause considers--well, he thought $14 million a year was a "mild coup," so this is something less. But it likely will help on the annual arena debt service.
Protecting the public interest

Consider that, in 2009, both the Empire State Development Corporation (ESDC) and the  Metropolitan Transportation Authority (MTA) agreed to revise settled deals at the request of Forest City Ratner, offering concessions without anything in return.

It didn't have to happen that way. As I wrote 6/25/09, when the MTA agreed to accept a diminished deal for railyard development rights,  Neysa Pranger, public affairs director for the mainstream Regional Plan Association (which had backed Atlantic Yards, though with reservation), suggested that the proposal for a slower payment schedule and smaller railyard meant “greatly diminished” public benefits.

“Does this new agreement retain enough benefits for the MTA and the city to proceed with a scaled-back plan?” she asked. “Based on the information available, the answer is no."

Rather than open up the site to new bids, she made four recommendations, including granting the MTA more future project revenues, conducting a new cost-benefit analysis and creating a new ESDC subsidiary, with public representation, to oversee the project and review design elements.

None of that happened, even though, as I've argued, the MTA actually had leverage, given Forest City Ratner's desperation to move the money-losing Nets to a new arena in Brooklyn, with luxury suites and sponsorships, and the end-of-year deadline to get tax-exempt bonds issued.

Proposals even to allow a new governance entity have been stymied by Senate Republicans, including Brooklyn's Marty Golden, an ally of Forest City Ratner.

In 2009, when the ESDC agreed to re-approve the overall Atlantic Yards project, issuing a new General Project Plan to accommodate slower eminent domain process (and less expenditure for Forest City), the agency could have asked for more. Instead, it asked for nothing. Months later, it quietly signed a Development Agreement giving Forest City Ratner 25 years, not ten, to build the project.

What if the ESDC had included a clause that required, if the arena got a new major tenant, some new benefit would go to the public?

Also, in the construction and operation of the arena, the push to make things work for arena operators and event-goers has meant the sacrifice of neighbors' interests: regular violations of truck protocols, idling at "No Standing" signs outside residences, and failure to regulate noise and other issues.

As Peter Krashes of the Dean Street Block Association said in a comment that appeared in an early version of the New York Times article on the Islanders' move (before it was scrubbed and replaced), Atlantic Yards is marked by an absence of governance and oversight:

Talking honestly to the public

I was interviewed the other day by a Seattle TV reporter about lessons from the Brooklyn experience.

(Fun fact: they quoted me as saying that a feared "Carmageddon" hadn't happened, but excised my subsequent statement about all the rule-stretching--waving drivers through red lights, stopping traffic on Atlantic Avenue, letting livery cabs idle on residential streets--needed to make things work.)

One lesson, I said, was that deals are never set in stone, so all revisions deserve scrutiny, and the public interest needs representation.

Also, I suggested, project proponents typically issue rosy, best-case scenarios. However, cost-benefit analyses and scenario planning should come with a range of outcomes, from best-case to worst-case.

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A very quiet Barclays Center subway entrance, at least for morning commuters

Andrea Bernstein of Transportation Nation reports, in Barclays Center Subway Stop: Mornings, It’s Totally Dead

When the NY MTA agreed to sell the Atlantic Yards [note: not "the Atlantic Yards"] to Forest City Ratner to build the Barclays Arena and some 17 other buildings, the authority’s board waxed enthusiastic about how the city was getting a new subway entrance out of the deal.

But it's not being used, except by--natch--arena-goers. Bernstein observes:

The subway stop is set in a vast, uninviting plaza, with not much there to entice a morning subway rider, like newsstands or coffee-shops.
However, once you do cross Flatbush Avenue from Park Slope to get there, it is by far the cleanest and easiest way to enter the subway stop.

That's true: it's much easier for people coming from the east than going to the Atlantic Terminal complex.

That said, the subway station should get some more use when buildings around and beyond the arena get built. Some will use the plaza entrance, though others will be closer to the Bergen Street, Grand Army Plaza, and even Fulton Street stops.

The biggest contributor to the subway hub should be the office tower once slated right on top of it, but that building is perpetually delayed.

That MTA bid process

The closing paragraph:

Ratner, BTW, paid $76 million for the new subway entrance. But the whole deal with Ratner was heavily criticized at the time as a sweetheart deal for the developer, which was allowed to work with the MTA over a period of years to develop a bid. After much pressure, the MTA opened the bidding process for the rail yards to other developers, but then rejected the one other bid it got because it wasn’t as detailed as Ratner’s bid.

As I commented:

The one bid the MTA got wasn't as detailed because, understandably, the bidder had less time to develop it. That bidder, Extell, actually offered $150 million in cash, compared to Ratner's $50 million.

The MTA deemed Ratner's bid more valuable even then, given ancillary benefits (including the arena), and proceeded to negotiate solely with Ratner, rather than ask both bidders to increase their bids. Ratner then pledged $100 million.

Four years later, Ratner renegotiated, putting down $20 million, with 22 years to pay for the the rest (at a gentle interest rate), and building a smaller replacement railyard than promised.

The MTA, controlled by political appointees, agreed this was the best they could do. Actually, given Ratner's desperation to get tax-exempt bonds issued by the end of 2009, was in the weaker negotiating position.
More here:
http://atlanticyardsreport.blogspot.com/p/the-culture-of-cheating-forest-citys.html

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