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Slow Economy Likely to Stall Atlantic Yards

March 22, 2008

The slowing economy, weighed down by a widening credit crisis, is likely to delay the signature office tower and three residential buildings at the heart of the $4 billion Atlantic Yards project in Brooklyn, the developer said.

“It may hold up the office building,” the developer, Bruce C. Ratner, said in a recent interview. “And the bond market may slow the pace of the residential buildings.”

Mr. Ratner, chief executive of Forest City Ratner, did not specify the kinds of delays possible, but suggested that construction could be put off for years. His comments are his first public indication that the darkening economy has slowed the ambitious project, spanning 22 acres at the intersection of Flatbush and Atlantic Avenues.

The developer did say he was confident about starting construction on a $950 million basketball arena for the Nets by the end of the year. The arena was to be surrounded by the office tower, known as Miss Brooklyn, and three residential buildings in the first phase of the project.

But Mr. Ratner has yet to secure an anchor tenant for the Miss Brooklyn building, and now plans to phase in the residential buildings slowly.

Economic downturns have a history of delaying, and sometimes killing, large construction projects in New York.

The Riverwalk project, a plan to build five residential towers on a 30-acre platform over the East River, surfaced in 1980 but collapsed a decade later after the economy slowed. A developer for the redevelopment of Times Square was selected in 1984, but work did not begin for 12 years — with a different developer — largely because of a recession, as well as 47 lawsuits.

New York is not alone in seeing projects falter or even collapse in recent months. Ian Bruce Eichner’s $3.9 billion Cosmopolitan Resort Casino, a condo-hotel complex in Las Vegas, is facing foreclosure after he failed to finalize a deal for financing.

The once high-flying developer Cameron Kuhn has defaulted on loans related to projects in Orlando and Jacksonville, Fla. And in Los Angeles, a number of residential projects have been delayed or abandoned.

Mr. Ratner’s remarks were a far cry from the optimistic days of December 2006, when the state approved Atlantic Yards and Forest City indicated that it would build the first phase of the project within four years and complete the entire venture in a decade.

In another indication of the problems facing the project, Forest City recently sent a letter signed by the project’s celebrity architect, Frank Gehry, to chief executives of many of the city’s biggest corporations, inviting them to become a tenant in the “centerpiece of the project,” Miss Brooklyn. It was originally scheduled to be completed in July 2009.

Brokers said that developers usually home in on companies actively looking for new headquarters, rather than cast such a wide net. Forest City’s approach was more akin to cold-calling to solicit interest, a possible sign, they said, that the developer was struggling to find tenants.

Mr. Ratner insisted that the Brooklyn office market remained healthy, but he conceded that “until we get a tenant, we won’t start Miss Brooklyn.”

“It’s not going to happen in a nanosecond,” Mr. Ratner said during an interview across Atlantic Avenue from the railyard where he plans to build the arena. “I hope it’s not going to be drawn out. I’d hope that the first residential building will be done within six months of the opening of the arena, and a second one a year after that.”

Atlantic Yards has been the target of protests and lawsuits since Mr. Ratner proposed it more than four years ago. Some local residents say the project is oversized and will overwhelm the neighborhood, flooding it with new residents and heavy traffic. They also oppose the government’s use of eminent domain to condemn property on behalf of a private developer.

The courts have ruled in Mr. Ratner’s favor 18 times, but two cases are on appeal, or are expected to be shortly. Mr. Ratner said his project had been held up for nearly two years by lawsuits brought by one group, Develop Don’t Destroy Brooklyn, and its supporters.

Given the current environment, some critics worry that Mr. Ratner will negotiate for deeper subsidies, reduce the amount of low- and moderate-income housing included or eventually sell off portions of the site to other developers who could use their own, less expensive designs.

Source: NY Times Read the full story here

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Written by NY Politics · Filed Under Real-estate 

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