The Political Economy of Value Capture: How the Financialization of Hudson Yards Created a Private Rail Line for the Rich

Home , 10 Hudson Yards, 15 Hudson Yards, 1 New York Place, 200 Amsterdam, 30 Hudson Yards, 35 Hudson Yards

Danielle L. Petretta

Submitted in partial fulfillment of the requirements for the Degree of Doctor of Philosophy under the Executive Committee Of the Graduate School of Arts and Sciences

The Political Economy of Value Capture: How the Financialization of Hudson Yards Created a Private Rail Line for the Rich

Abstract: The theory of value capture is simple to understand and easy to sell, promising self-fulfilling virtuous cycles of value generation, capture, and redistribution. Countless studies document value creation attributable to public interventions, providing guidance on the type and extent of potential benefits. Scholars too have set forth parameters for optimal value capture conditions and caution against common pitfalls to keep in mind when designing value capture plans. But even when utilizing the best advice, equitable redistribution of benefits rarely occurs in neoliberal economies, leaving municipalities struggling to meet the myriad of social needs and provide basic services for all their inhabitants. Invariably, capitalistic real estate states seek to financialize public assets for private gain. Nowhere is this more apparent in New York City today than in the outcomes thus far of one of the largest public-private developments in New

York history at Hudson Yards.

This dissertation documents the failure of the value capture scheme put in place at

Hudson Yards which neither captured fair market value for the public, nor extracted much public benefit. The scheme aimed to leverage vast tracts of publicly-owned land above operational rail yards at the Far West Side of Manhattan. Instead, public action under the guise of public purpose catalyzed the private financialization of a finite public asset, through the seemingly benign but inherently complex public policy tool of value capture finance. In particular, this dissertation tells the detailed development story of Hudson Yards, where developers reap huge rewards for their risks while the public still waits for what was promised — an all too familiar story.

Table of Contents

List of Tables and Figures ...... iv CHAPTER 1 – VALUE CAPTURE AND THE LOSS OF VISION ...... 1 Research Methodology ...... 4 Defining Value Capture and Use ...... 6 Unrestrained Actions and Loss of Vision ...... 9 CHAPTER 2 - VALUE CAPTURE LITERATURE REVIEW ...... 11 Empirical Studies on Transit’s Added Value ...... 12 Value Capture Theory - Assumptions and Concerns: ...... 14 NYC Transit Premiums ...... 16 Debunking an Erroneous $6 Billion ...... 21 CHAPTER 3 - EVOLUTION OF THE FAR WEST SIDE ...... 24 The Early Railroad Years ...... 25 Plans for the Far West ...... 27 CHAPTER 4 - THE FAR WEST SIDE IN THE 21ST CENTURY ...... 33 Office Demand and the Group of 35 ...... 33 NYC2012 and a West Side Stadium ...... 37 Final Stadium Hurdle ...... 43 CHAPTER 5 - HUDSON YARDS REDEVELOPMENT PLAN MOVES AHEAD ...... 45 2001 Framework for the Far West ...... 45 Existing Conditions ...... 46 Hell’s Kitchen South ...... 47 2003 Preferred Direction ...... 48 Hudson Yards Redevelopment Plan: 2005 and 2009 Rezonings ...... 49 Crafting the Hudson Yards Value Capture Scheme ...... 52 MTA’s Second Round at Caemmerer Yards ...... 54 The 7-line Extension Lynchpin ...... 56 Plans for Open Space - Hudson Park and Boulevard ...... 59 CHAPTER 6 –TODAY’S HUDSON YARDS ...... 60 Residential Market and Affordable Housing ...... 61 Manhattan Office Market and Markets for Air ...... 68 Hotel Trends and Airbnb ...... 76 Related’s Hudson Yards ...... 81

i Branding Pre-packaged, Semi-gated Luxury Living ...... 81 Related’s Development Plan ...... 82 $19B? Related’s Estimated Economic Impact ...... 85 Steve Ross and Financing Related’s Hudson Yards ...... 86 EB-5 Investment at Related’s Hudson Yards ...... 87 Tax Incentives and Related ...... 89 Phase 2 ...... 90 Platforms ...... 91 Selected Critiques of Related’s Hudson Yards ...... 92 CHAPTER 7 - A HUDSON YARDS AUDIT ...... 94 REVENUE: Raising Capital ...... 94 Constructing the Hudson Yards Value Capture Plan ...... 99 EXPENDITURES: Debt Service ...... 107 Discussion ...... 108 CHAPTER 8 – Evaluating Outcomes: Transfers, Trade-Offs and Lost Opportunities ...... 110 Manhattan Community Board 4 and Broken Promises...... 111 Office Markets – Net Growth or Just Transfers? ...... 119 MTA’s Missed Opportunity ...... 121 Transit Trade-offs - What else could $3B buy? ...... 122 Park Trade-Offs and Where is the Waterfront Access? ...... 123 Extra Services for the Well-off/Some Community Building ...... 124 Jobs at Related’s Hudson Yards...... 125 Giving Back? Hudson Yards Slim on Community Benefits ...... 126 Hudson Yards Score Card ...... 127 CHAPTER 9 – SOME LESSONS LEARNED ...... 129 Findings ...... 130 New York City’s Real Estate Development Climate ...... 131 The Bloomberg Way ...... 131 Doctoroff’s Assembled Olympic Bid ...... 133 Structure of Tax Incentives ...... 133 Distracted Public Participation...... 135 Self-perpetuating Global Financialization of Real Estate Markets ...... 136 The Planner’s Role: Confronting the Inequitable Nature of Value Capture ...... 138 Can Hudson Yards Contribute to a Socially-Valued City? A How to Guide ...... 139

ii Leading with Affordability: Hudson Yards Informs Sunnyside Yard ...... 142 How to Improve on Poor Planning History ...... 144 BIBLIOGRAPHY ...... 148 APPENDIX ...... 194 Hudson Yards Abbreviated Chronology ...... 195 Chapter 1 – Exhibits ...... 196 Guiding Research Questions ...... 196 Chapter 2 – Exhibits ...... 201 Value Capture Literature Classification ...... 201 Chapter 6 – Exhibits ...... 206 Notable Developments at Hudson Yards District ...... 207 Development at Related’s Hudson Yards ...... 215 EB -5: A Primer ...... 231 Chapter 7 - Exhibits ...... 236 Chapter 8 – Exhibits ...... 249 Evaluating Hudson Yards Physical Planning Goals ...... 253 Evaluating the Hudson Yards Value Capture Plan ...... 254 Chapter 9 – Exhibits ...... 257 MCB 4 Pressing Community Needs ...... 257 HUDSON YARDS CHRONOLOGY ...... 261 Atlantic Yards/Pacific Park Score Card ...... 290 Atlantic Yards 21st Century Chronology...... 292

iii List of Tables and Figures

List of Tables

Table 1-HY Four Corners Subdistrict ...... 76 Table 2-Related PILOT Agreements ...... 90 Table 3-HY Value Capture Mechanisms ...... 99 Table 4-NYC Commuter Premiums - ...... 205 Table 5- NYC Transit Rental/Sale Premium: Second Avenue Extension ...... 205 Table 6-Value of Second Avenue Subway ...... 205 Table 7- Hudson Yards Commercial Tax Abatements ...... 206 Table 8-NYC New Housing Projects Near Train Tracks ...... 207 Table 9- Manhattan West Development Details ...... 208 Table 10-Related's Hudson Yards Phase 1 Specifications ...... 227 Table 11- Related’s EB-5 Financing ...... 229 Table 12- Estimated EB-5 Participation ...... 230 Table 13-EB-5 Petition Characteristics ...... 234 Table 14-Annual EB-5 Visas ...... 234 Table 15-EB-5 Petitions by State ...... 235 Table 16-HYIC Bond Offerings ...... 236 Table 17-HYIC Credit Ratings ...... 236 Table 18-HY Development by Property Type ...... 237 Table 19-Cushman & Wakefield HY Total Revenue Forecasts ...... 237 Table 20-Optimism Bias in Transportation Mega-Projects "Survival of the Unfitttest” ...... 239 Table 21-Value Capture Total Revenue ...... 240 Table 22- NYC Interest Support Payments Expected v Actual ...... 241 Table 23 - HYIC Collected Value Capture Revenue by Type ...... 243 Table 24 ERY TDR Sales ...... 246 Table 25-HYIC Anticipated TEP and PILOT Revenue ...... 247 Table 26-HYIC Selected Budget Line Items ...... 247 Table 27-NYC Capital Spending at Hudson Yards ...... 247 Table 28-HYIC Actual and Forecasted Debt Service Payments 2006-2019 ...... 248 Table 29-HYIC Anticipated Debt Service Payments...... 248 Table 30-Affordable Housing Promised to Community District 4 ...... 249 Table 31-2005 POA- Affordable Housing Commitments ...... 249 Table 32-2009 POA Affordable Housing Commitments...... 250 Table 33-City Finally Delivers on Promised Affordable Housing ...... 251 Table 34-Office Leasing Relocations by Submarket 2013 through 2018 ...... 251 Table 35-Industry Share of Office Leasing at Hudson Yards ...... 252 Table 36-Subway Ridership-Weekday and Annual ...... 252 Table 37 - Evaluation of HY Physical Planning Goals ...... 253 Table 38-Evaluation of HY Value Capture Plan Design ...... 254

iv Table 39-Evaluation of Value Capture Plan Performance ...... 256 Table 40-Western Rail Yard Appraisal ...... 259

List of Figures

Figure 1-Hong Kong: Mass Transit Railway-Cash Rich ...... 200 Figure 2 - Value Capture Assumptions ...... 203 Figure 3-Map of Hudson Yards Finance District...... 206 Figure 4-Selected Related HY Finance Sources ...... 227 Figure 5-Controversy: Labor and Related ...... 228 Figure 6-HY EB-5 Targeted Employment Area ...... 230 Figure 7-Cushman & Wakefield’s Revenue Forecasts ...... 237 Figure 8-Forecast v. Actual Revenue ...... 240 Figure 9-Cumulative Revenue by Type ...... 241 Figure 10-Annual Revenue by Type ...... 242 Figure 11 - As of Right and Maximum FAR...... 244 Figure 12-Hudson Yards Zoning Subdistricts ...... 244 Figure 13-Generating and Receiving Sites for TDRs and DIB ...... 244 Figure 14-TDR Receiving Sites 4 – 14 ...... 245 Figure 15- HY Finance District Boundaries ...... 246 Figure 16-Atlantic Yard and NYC’s First Community Benefits Agreement ...... 258 Figure 17-London: Crossrail’s a Multi-tiered Approach ...... 259

v CHAPTER 1 – VALUE CAPTURE AND THE LOSS OF VISION

In an age of municipal fiscal uncertainty brought about by declining federal aid to cities, volatile tax revenues, mismatched city-state tax recovery ratios, and interagency competition for fixed funds, cities and their public servants are hard-pressed to find resources needed to deliver basic public services. More and more cities seek ‘creative’ financial solutions, attempting to leverage any assets they control to support themselves. Whether revitalizing outdated industrial- zoned areas or incentivizing denser development in existing urban cores, cities use their regulatory tools to financialize assets often creating local, and, increasingly global, private markets for public goods – crafting economic opportunities literally out of thin air. When pursued, these municipally-manufactured air rights can then be monetized through value capture mechanisms such as bonus incentives, tax improvement districts, or the sale and transfer of air rights made available above publicly or privately-owned property, essentially constructing buildable and valuable invisible land.

Capturing this newly created value then becomes a prime objective for planners and policy makers who are typically instructed to devise a plan or program which will reap the most financial rewards. This approach to finance, anchored in the theory of highest and best use, is frequently championed by transient elected officials as a low-risk, low-cost means to retrieve previously untapped, vast streams of privately-sourced revenue. This holds true especially when attached to the perceived value potential of new or improved transit, with stakeholders banking on its ability to ‘unlock’ development. Moreover, value capture policies, while possibly well- intentioned, are routinely misunderstood as an equitable means of redistribution. In theory, value capture is straightforward; in practice, it’s not. Instead, value capture plans and outcomes are a

1 product of multifaceted economic, political and social dynamics, which are then operationalized through urban planning and real estate development dogma of the time.

At Hudson Yards, the political ideology of the Bloomberg Administration found its physical manifestation in a large swath of underdeveloped, sparsely-populated land, ready to be exploited. It was the perfect place to virtually hang the Administration’s swing sign: ‘New York is Open for Business.’ But it was not open for all. With its transactional mentality, the

Administration built on the numerous historical plans for the last significant development opportunity in Manhattan. The Far West provided ample room for the Midtown CBD to expand without any direct displacement over the MTA-owned Caemmerer Yards, and, minimal direct displacement of area residents, particularly west of Tenth Avenue.1 The Administration co-opted the space above the rail yards for the crown jewel of their Summer Olympic 2012 Bid, which provided the urgency and momentum lacking in previous plans for the Far West. But, even after

New York lost its BID to London and the possibility of a West Side sports stadium for the Jets was quashed, the Administration still neglected to attend to community needs through its rezoning plan, incentivizing luxury residential and Class A office development, instead of mandating moderate to middle-income housing, real parks, contextual density or even transit access for all.

Neglect of public needs while financializing public assets does not only apply to Hudson

Yards. Lack of community assurances is also evidenced through the development process of

Atlantic Yards, Brooklyn, another large-scale, long-term NYC development contingent on

1 According to the rezoning’s DEIS, 139 residents lived in two buildings which were to be demolished, to make way for Hudson Boulevard (Halle and Tiso 2014).

2 control of publicly-owned, below grade rail yards. Atlantic Yards was conceived of and shepherded through approval by elected officials and intended for one particular local private developer. Here, the availability of land over the MTA-owned Vanderbilt Yards, coupled with a controversial urban renewal designation which permitted site acquisitions through eminent domain, created an inequitable development which initially promised widespread community benefits. Public land assemblage was meant to lure development post 9/11, at a time when it was thought that private sector investment could only be induced in this Brooklyn area by dangling significant carrots to focus investment in the a not-yet-gentrified neighborhood. The city’s first Community Benefits Agreement was crafted and signed, but has not come to fruition still and surely never will, unable to be enforced without any accountability or consequential penalties. In fact, the original developer who capitalized on initial public incentives and investments, has long since sold his majority stake in the development, privately profiting from the windfalls created from previous public actions.

Development at Sunnyside Yard offers yet another opportunity to capitalize on public control of a large development site over rail yards, this time in Queens. Primarily owned by

Amtrak, plans for the 160-acre site have evoked significant opposition, with Sunnyside Yard bearing the brunt of criticism and inequities at the two previous rail yard-contingent megaprojects mentioned above. In some acknowledgement of failed opportunities at Atlantic and

Hudson Yards, the Sunnyside Yard plan at least leads with the hopeful tag line: ‘12,000 affordable housing units.’ In addition, it seems more effort was made by the public to engage the community early on, even if imperfect in some stakeholders’ eyes. The plan reportedly evolved

3 over a 20-month public participation process where stakeholders were invited to participate and many did.

At first glance, plans at Sunnyside Yard seem to acknowledge socially-valuable priorities, potentially quelling self-serving market forces, trained to produce only the financially highest and best use of land. Careful and purposeful equity-based development at Sunnyside

Yard can begin to rectify missed opportunities for diversity and social inclusion at Atlantic and

Hudson Yards.

Research Methodology

This dissertation is designed as a qualitative case study, supported by quantitative data where available and appropriate. Because of its systematic and thorough approach to unearthing unique, context-dependent findings, the case study method emerged as the most suitable and fruitful to address the overarching research question of this study:

• How did the public policy tool of value capture, catalyze the private

financialization of Hudson Yards?2

Evidence and data were collected and corroborated through multiple sources including, public documents, meeting records, maps, plans, site visits and tours, budgets and bond offerings, press releases, blight and market studies, environmental impact statements, local, national and international periodicals, academic journal articles, law briefs, memoirs, etc. These data provided a sturdy foundation from which to build the case and worked to distill bias necessary to fairly and objectively present findings. This type of comprehensive triangulation --

2 Additional research questions which guided this study are presented in the Appendix, along with the study’s interview guide and recruitment script.

4 checking, cross checking and verifying data across sources provided corroboration and validity.

The intent and value of such triangulation "lies in providing evidence – whether convergent, inconsistent or contradictory – such that the researcher can construct good explanations of the social phenomenona from which they arise” (Mathison 1988, p. 13).

Interviews were key to this study. Multiple semi-structured interviews were conducted with stakeholders having direct experience and/or knowledge of the redevelopment of the Far

West. Experts well-versed in value capture, municipal finance, urban development and transit provision were also interviewed. The semi-structured design, through its tendency to elicit opinions, perceptions and emotions, allowed space for dialogue on issues which were truly important to each individual. All interviewees were asked a few standard questions, followed by questions specific to the background of the interviewee. Open-ended discussion followed which stimulated discourse pertinent to the interviewee’s passions and struggles, while also offering the opportunity to be heard.

Stories collected through the use of narrative gained through these interviews supported and provided rich, thick description and, more importantly, subtle, sensitive testimony essential for the deep understanding of the case; evidence which cannot be found in written materials

(Geertz 1973). This type of research protocol is validated through the research design and evidence collection employed by the Omega Centre’s multi-year, multi-case analysis of large, international transportation projects. They contend that:

“an important underlying assumption, namely that knowledge about the planning, appraisal and delivery of MTPs (mega-transport projects) resides not only in the academic and professional literature about accomplishments and practices in the field, plus government and consultancy reports produced for MTP developments, but also very much in the narratives (story-telling) of key stakeholders involved in such projects… This kind of investigation highlights the benefits of obtaining and analyzing contextually rich

5 experiences in the form of anecdotes or ‘stories’ provided by those actually involved in project planning, appraisal and delivery’ (Omega Centre 2012, p. 10).

After conducting rigorous and transparent research, results were analyzed and an evaluation was conducted which assessed the design and performance of the value capture scheme put in place at Hudson Yards, utilizing the value capture literature as its theoretical framework. This exercise determined how and to what extent the Hudson Yards Value Capture

Plan adhered to value capture best principles mined from a large body of literature on the subject.3

But, in doing so it became apparent that this was no longer a practical study of value capture, but more a story of people and the choices that were made which directly led to the inequitable outcomes we see today in the Far West, with repercussions citywide. The analysis then was recalibrated to discern the extent and degree to which causal relationships not only influenced, but directly led to unjust outcomes operationalized through the multi-billion-dollar construction of a 1.5-mile rail line constructed primarily for the privileged. The result of this case-based research which follows was gathered and presented without the goal of proving something, “but rather in the hope of learning something! (Flyvbjerg 2006, p. 224).

Defining Value Capture and Use

The concept of value capture is simple. Those who benefit from public action should contribute to its cost if able. Value capture attempts to link a wider range of beneficiaries with

3 See Chapter 2 and Appendix for Value Capture Literature Classification, Value Capture Assumptions, and Evaluation of the Hudson Yards Value Capture Plan - Design and Performance.

6 costs, beyond typical subsidies and user fees. Whether capitalized to land, property, local or citywide economic activity, value capture targets the unearned incremental increase in value attributed to public sector actions and investments. Value capture schemes can target not only land and property owners, but also employers, customers, workers, retailers, advertisers, residents, etc. In the case of transit improvements, value capture promises dedicated funding which can then be redistributed to capital improvements, maintenance or operations.

Implementable value capture mechanisms can take the form of tax increment financing, impact fees, joint development, or sales and transfers of development rights (See Value Capture

Mechanisms by Beneficiary).

Variations of value capture finance can be traced back to cities as early as the 19th century. Haussmann leveraged increases in land value along the grand boulevards of Paris to finance their costs. In the US, Congress instituted a special assessment in the 1890’s charging landowners 50% of road pavement costs in Washington, DC. Both acknowledged the increase in value of easily-accessible fronted properties which were able to command higher rents and sale prices because of the improvements.

Leveraging value created by rail access can also be found in history as early as the 20th century in cities such as New York and London. In fact, new development was often spearheaded by early railroad owners who doubled as real estate speculators, developing land adjacent to their routes and stations to augment fares and guarantee a steady stream of transit customers.4 Metro-land in northwest London was marketed as such, successfully meeting its purpose particularly during the interwar period of the 1920s (Green 2004).

4 Once real estate value was extracted, however, routes were relinquished to the public as transit on its own could not sustain profits.

7 One of the earliest value capture schemes in New York involved the area north of Grand

Central Terminal. Amid pressure from area residents for safety, the city required the New York

Central Railroad to sink its tracks below grade in the 1870’s. The city put up half the funds for the project expecting to recoup their investment through increased property taxes based on the anticipated increases in real estate value.5 The tracks were later covered creating Park Avenue, now home to some of NYC’s most expensive real estate and sought-after addresses.

Numerous cities have since implemented value capture plans and techniques to support investments for new roads, transit lines, stations, parks and public space, all with varying degrees of success and structures. Many Latin American nations, especially in Brazil and Colombia, have had systems put in place for decades where contribución de valorización generates substantial sums. In Bogotá, Colombia, for instance, value capture collections can reach nearly

$1 B per year (Walters 2012).

The most notable transit system supported by value capture mechanisms is found in Hong

Kong. Here, the Mass Transit Railway Corporation (MTR) gains control of government land as in-kind transfers or long- term leases on properties adjacent to its stations or along its routes at pre-development prices. The MTR then develops market-rate residential and commercial improvements themselves, or, flips land to private developers for market-rate prices. This

Rail+Property model is not always directly transferrable however, especially to other cities with different land use structures and cultures of land rights and tenure (See Figure 1 - MTR Cash

Rich in Appendix).

5 This was matched by then owner and real estate magnate, Cornelius Vanderbilt.

8 Unrestrained Actions and Loss of Vision

The concept of highest and best use epitomized throughout the Hudson Yards District, and, in particular at Related’s Hudson Yards development,6 has worked to further polarize the strained dichotomy between New York’s real estate elite and its everyday citizens. 7 Ada Louise

Huxtable, NY’s Pulitzer-prize winning urban critic, lamented the rise and fall of NY’s vision to create just urban places. According to Huxtable, gone are the city’s ambitions to prioritize moral values like those set out in RPA’s 1929 First Regional Plan. The plan, she wrote, favored public benefit where the highest and best use was not just financial but rather “consistent with true social purpose, restraining the actions of owners who obtain profit for themselves to the injury of other owners and the community” (1987). Hudson Yards is the product of such unrestrained actions, where its skyscrapers were erected only as personal “shimmering money-making machines,” constructed without regard for the public at large.

The study which follows explores the complex political and economic negotiations and decision-making which occurred at Hudson Yards, where the seemingly benign value capture plan was designed to spur large-scale urban development. By documenting the history and development process associated with one of the largest developments in NYC, it is hoped that the lessons learned here will inform planners, cities and stakeholders as they design and enact value capture schemes purportedly for public purpose. The opportunity exists for planners to

6 Related Companies, along with Oxford Properties are developing a 28-acre mixed-use enclave on the Far West Side of Manhattan. For full details and analysis see Chapter 6. 7 Henceforth, the 28-acre development site above the MTA’s railyards between 10th and 12th Avenues and 30th to 34th Streets will be referred to as ‘Related’s Hudson Yards’. Discussion of the 45-block aggregate, mixed-use, rezoned Special Purpose District will be referred to as the ‘Hudson Yards District.’

9 improve on poor planning history so that we may create future equitable, socially-valued cities; to not only guide development, but to also definitively exercise the planner’s obligation to equity by explicitly inserting ethical protections from actors driven only by private profit. The nature of value capture, through its drive to maximize monetary returns blind to social needs, demands it.

10 CHAPTER 2 - VALUE CAPTURE LITERATURE REVIEW

The purpose of value capture is to extract and redistribute a portion of any private windfalls, created by and attributed to public interventions (Hagman and Miscyzynski 1977,

Bourassa 2009, Booth 2012). Value capture promises to unlock new, dedicated revenue streams where investment leads to access, access leads to value, and value can then be extracted and reinvested in a continuous, iterative, financially-sustainable “virtuous circle” (Levinson and

Istrate 2011). The greater the access, the greater the demand, the greater the value. That value then emerges through increased land prices, physical assets, adjacent economic activities and/or through boosts to the overall local economy (Salon, Sclar and Barone 2017). Techniques to capture value are numerous and include tax increment financing, land value taxes, betterment taxes, joint development, impact fees, and special assessments

Value capture is particularly attractive to transit agencies where funds for capital improvements, operations and maintenance are constantly dwindling or cut all together, resulting in hazardous conditions, overcrowding or unreliable service. Many US transit agencies are in acute and chronic funding crises in both their capital and operating budgets, especially when fare box revenues typically contribute only about 40% of costs. With federal funding for transit maintenance virtually eliminated in the late 1990’s (Taylor and Samples 2002), transit agencies have been unable to secure reliable, long-term revenue sources, needed to not only expand services to meet increased demand, but also to provide affordable, efficient, safe operations and to even maintain a state of good repair. In their 2005 study, Hess and Lombardi reported that no two states in the US had the same combination of funding sources for capital, operations or maintenance costs, revealing how creative institutions must be as they try to maintain balance on

11 increasingly financially-precarious positions. As Salon, Sclar and Barone found in their 2017 study, crisis was often the catalyst for enacting value capture schemes.

The MTA is a case in point. In the late 1970’s, federal subsidies accounted for nearly three-quarters of the regional transportation authority’s program funding. By 2011, federal subsidies dropped to just 25%, forcing the MTA to increase its debt when the city and state were unable or unwilling to cover shortfalls. Debt service today is a severe burden at $2.7 billion annually, 16% of the agency’s total expenses.

Empirical Studies on Transit’s Added Value

A large body of literature affirms and measures value linked to transportation improvements and transit service. Studies prove that value triggered by public action can capitalize to land and/or physical assets; to economic activities surrounding the public intervention and/or the overall economic productivity of neighborhoods and cities. The degree of value increase is dependent on mode of transit, by the quality of transit service and the access it provides based on available networked connections. Value is also determined by land use and by property type. Most studies reveal positive increases in value and taken together work to create a transit value hierarchy where commercial properties gain more value than residential

(Debrezioni et. al 2007, Mohammad et al 2013), and commuter rail generates greater value than light rail (Cervero and Duncan 2002, Gomez-Ibanez 1985, Mohammad et al 2013). Studies also find greater premiums for properties nearest to transit stations (Salon and Shewmake 2011), with rents of US transit-served Class A office space nearly double those not served by transit at all

(Jones Lang LaSalle IP, Inc. 2017). In contrast, there has been some evidence that details neutral and even negative impact to value when additional investments do not lead to significantly

12 enhanced access, particularly in already-developed economies (Fischer and Sclar 2016 citing

Banister and Berechman), or when costs outweigh benefits (Wagner et. al. 2016). Selected studies providing specific evidence are discussed below (See also Classification of Value

Capture Literature and Figure 2 – Value Capture Assumptions in Appendix).

Value to Land: An empirical example of increasing land value triggered by public infrastructure investment can be found in Batt’s 2001 study of the I-87 Northway in New York

State. Batt concludes that if value capture was utilized to pay for the roadway’s capital costs,

“fairer sharing” of the cost burden would have occurred. Batt looked at 30,500 acres within 2 miles of each side of the new roadway. He found that value increased by a startling 831%, with increases double that for land within one mile of the new roadway.

Economic Productivity: Bhatt and Drennan find positive relationships in their 2003 study between economic benefits and public investment in transportation. The authors conclude that a

1% increase in the stock of infrastructure leads to a reduction of annual production costs of -.05 to -0.21%. Although they admit that it is difficult to sort out causality in aggregate after their review of more than 40 studies, they could not reject the hypothesis that “public sector investment in transportation infrastructure results in long-term economic benefits on production”

(Bhatt and Drennan 2003, p. 295).

Modal Impacts: Cervero and Duncan’s 2002 study of nearly 1,200 real estate transactions in Southern California found that benefits were greatest to those properties surrounding heavy rail stations. Parcels close to heavy rail stations sold for a $25/psf premium over non-adjacent parcels. The same analysis conducted on proximity to light rail stations revealed a lesser $4/psf premium.

Distance: Salon and Shewmake (2011), found that the closer a property is to a metro transit stop, the higher its value. After synthesizing 20 studies on land value impacts of metro and bus lines primarily in East Asia, they concluded that property values decrease by 1% for every 10% decrease in distance from a transit stop. They found that value gains were

“remarkably consistent across cities and studies” (2011, p. 2).

Institutional Issues: Based on a study of six transit agencies chosen specifically for their use and leadership in applying value capture mechanisms, Salon, Sclar and Barone (2017) found that there were five institutional concerns to value capture implementation: public support was critical; implementation across multiple jurisdictions was difficult; local government support for land –use coordination was necessary; public agencies benefit from real estate expertise; and, implementation was hampered when an agency’s mission explicitly excluded land development.

Value Capture Theory - Assumptions and Concerns: These findings, and findings from other studies cited below, demonstrate the challenges in devising and implementing effective value capture schemes. Difficulty lies in not only addressing these conditions simultaneously, but also skillfully. Conditions necessary for effective location value capture schemes are presented below:

1. Transport improvements add value. (Arnott and Stigliz 1979 –public expenditures, Batt

2001, Cervero 2002, Smith and Gihring 2006, Debrezion et al. 2007, Salon and Shewmake

2011, Mohammad et al 2013, etc.)

2. Institutions have the authority to tax/charge fees. Does the institution involved have the

legal ability to tax or are they constrained by hierarchical legal structures and/or by existing

14 legislation requiring public vote to raise bonds for instance? What about regional and local

conflicts? Cities may engage in fiscal zoning, hoping to maximize earnings by zoning land

around stations for commercial and retail uses. Commercial activities generate more value

and therefore more tax revenue without requiring expensive local services such as schools.

Pushing residential uses further from stations may conflict with regional transport plans and

sustainable development goals (Boarnet and Crane 1998, Cervero 2002, GAO 2010, Zhao

and Larson 2011, Mathur and Smith 2012, Salon, Sclar and Barone 2017).

3. Institutions have the capacity to accurately appraise value. Are assessors skilled/competent?

Do they have real estate expertise (GAO 2010, Marthur and Smith 2012, Salon, Sclar and

Barone 2017). Is there optimism bias (Flyvjberg 2009)? Are there” errors and manipulation”

regarding value estimates (Fischer and Sclar 2016)? Do faulty assessments bolster tax averse

opposition (Bourassa 2009)?

4. Institutions can competently measure the unearned incremental value increase, keeping all

other factors constant. The difficulty is isolating the value caused by the intervention.

Factors such as school quality, tenant mix, amenities, age, location, etc., could also enhance

value as attractiveness increases to potential buyers, renters, and users. Hedonic price models

have been used to measure transport’s impact on price, holding all other variables constant

(Rosen 1974, Zhao et. al. 2012).

5. Institutions have the capacity to extract a portion of that value and devise financial

instruments to administer a scheme, collect and redirect/redistribute funds. Can institutions

charge appropriately? How quickly can instruments be constructed and/or adjusted to

correspond with volatile real estate markets (Bourassa 2009)? Are they nimble? How much

should be captured/redistributed? If too much, then no development incentive (Salon, Sclar

15 and Barone 2017). Can they incentivize to get the outcome they seek? In the case of

TDR’,s does the entity have the standing and competence to negotiate in their best interests

and secure favorable terms? What about risk? What about the influence and power of the

real estate state? (Angotti 2011, Stein 2019)

6. Landowners/tenants/businesses/users have the ability and willingness to pay. Value capture

schemes “obscure ability to pay” (Bourassa 2009, Fainstein 2011, Istrate and Levinson

2011). Value increases are not necessarily liquid or aligned with easily accessible revenue

streams. Are the right beneficiaries targeted? Are increased taxes or fees just passed through

to tenants/employees/customers? Who should pay - commercial vs. residential? Workers or

employers? Is there public support (Rybeck 2004, Rolan 2008, GAO 2010, Zhao and Larson

2011)?

7. There are real estate market conditions susceptible to exploitation, able to be unlocked

through manipulations including upzoning. (Cervero 2002, GAO 2010, Mathur and Smith

2012, Salon, Sclar and Barone 2017, Sclar 2020). Or does value capture by its nature cause

and/or accelerate gentrification and displacement?

NYC Transit Premiums

Value of the MTA’s Capital Program: In 2011, the MTA conducted an economic impact study of its capital program. Using standard APTA multipliers, the MTA estimated that its 5- year, $14.7B capital program supported about 325,000 jobs and spurred $44 B in direct, indirect

16 and induced economic activity statewide. 8 The Permanent Citizens Advisory Committee to the

MTA (PCAC) criticized the study for falling far short of measuring transit’s full value. They asserted that while taking into account travel time and costs savings, reliability and safety improvements, the APTA model that was applied did not account for the value of access and mobility that networked transit provides in terms of agglomeration benefits, increased productivity, access to skilled labor markets, employers, and customers. PCAC later released a study highlighting transit’s impact on regional and neighborhood economic growth, plus transit’s positive impact on social equity and tourism (PCAC 2015).9

Value to Residential Properties: NJ Transit, ARC and East Side Access: Another series of studies measured the value of regional transit service improvements on properties served by

NJ Transit and the Long Island Rail Road. These studies measured positive value increases on residential properties in NJ, Long Island, Brooklyn and Queens.10 The first found that value increases were dependent on distance from stations and minutes of commute time saved.

Findings in 2004 showed that NJ Transit improvements which decreased commute times to

Midtown Manhattan by 20 minutes each way had an average residential home value increase of

$23k or 5% growth within 2 miles of affected stations. For homes withing ½ mile of a station, the premium was even greater at $34k or an increase of 7.5% (Michaelson 2004). 11

8 The MTA relied on APTA standard multipliers at the time such that for every $1 billion spent on “public transportation capital investment”, 24,000 total jobs are created yielding $3billion of economic impact. 9The MTA expects its current $39.3B 2020 -2024 Capital Plan will yield $62B in total economic impacts.

10 The 2004 study analyzed 45,000 home sales before and after the transit improvements were put in place. 11 The improvements studied included Midtown Direct Service on the Morris & Essex Line, the Montclair Connection on the Montclair-Boonton Line and Secaucus Junction on the Packsack Valley and Main/Bergen/Port Jervis Lines.

17 Building on these findings, the RPA measured the “ARC Effect” in 2010 and its impact on home values and property tax increases resulting from the then proposed new commuter rail tunnel commonly referred to as “Access to the Region’s Core” (ARC). As planned, ARC would have doubled the number of NY and NJ residents within a 50-minute commute to Manhattan

(RPA 2010). This would have translated to an average home value increase of $19k for homes within two miles of affected stations and a $29k average increase on homes within one-half mile of stations served. Broken down by minutes of commuting time saved, RPA reported housing value “gains of $3k per minute if the home was within walking distance, and, $2k per minute if the home was within a short drive to the station” (RPA 2010, p.5).

RPA then applied these per-minute premiums to properties impacted by East Side

Access, the $10 billion project to create a new terminal and facilitate direct travel to Grand

Central Terminal via the LIRR. With an 18-minute decrease in commute time each way, RPA estimated an average increase of $7,300 per home within two miles of a station, and an $11,000 increase for homes within one-half mile of a LIRR station (See Table 4 in Appendix - NYC

Commuter Premiums).

Value of New Service: Second Avenue Subway: On January 1, 2017, New Yorkers finally rode the Second Avenue Subway, a trip promised to them for nearly a century.12 Plagued by depression, war, recession, and city-state conflicts, the 2-mile, $6B extension of the Q-line south along Second Avenue is now operational. Three new stations are up and running at East

12 In fact, when the NYC Board of Transportation initially approved the project’s budget in 1929, the NY Times headline announced, “Second Avenue Subway Project Causes 50% Rise in Prices” (Thenhaus 2016).

18 96th, E86th and E72nd Streets. Once considered a transit desert, the Yorkville neighborhood experienced increased home sales and prices due to its new increased accessibility.

According to a 2016 StreetEasy study, average rental rates along Second Avenue grew by

27% over the last five years in anticipation of subway service. StreetEasy applied its own researched price premiums, and found that commuters likely to use the E96th and E72nd stations will save 14 minutes on their commutes equating to a rent increase of $462 per month.13

Premiums for properties nearest the 86th station were expected to be slightly lower at $33 per month per minute or a sale price increase of $22k per minute saved. StreetEasy estimated that commuters utilizing this station will only shave 10 minutes of their commute time due to the benefit of previously existing transit access via the 86th Street Lexington Station (See Table 5 in

Appendix – NYC Transit Premiums).

Following this logic, renters and potential owners may be priced out of this once affordable neighborhood, forced to find homes further away from employment centers, not able to meet sale or rent hikes. Increases in home value are not easily captured or equitably redistributed to those in-need of housing or even back to the MTA. Without any policies put in place, the MTA loses its ability to extract any unearned gains which could help fund future expansions or could at least provide some financial support for the chronically underfunded agency.14

13 This citywide study revealed rental premiums of $33/month per minute saved and a $22k median home premium per every minute of commuting time saved. 14 Governor Cuomo breached the idea of value capture to recoup some of the cost of the new line, but was met with significant opposition and city-state conflicts.

Value to Capture Citywide

Mobility: In a 2017 study, researchers Falcocchio, Malik, and Kontokosta utilized spatial data to examine the confluence of NYC commuting patterns, location of employers, and transit availability. They concluded that commercial property owners located below 60th Street in

Manhattan and within ¼ mile of a transit station, benefit from an estimated annual implicit subsidy of $4.58 psf. This unreciprocated support is based on citywide access and mobility provided via transit’s convenient location and extensive infrastructure linking workers and employees. The amount is equivalent to expected lost wages and reduced output which would result from delays caused by deferred transit maintenance. The authors suggest that a special assessment to those property owners of just $0.50 to $1.00 psf could raise between $332m to

$664m annually, potentially offsetting fare increases (Falcocchio, Malik, and Kontokosta 2017).

Second Avenue Subway: A subsequent study released February 2020 by Gupta, Van

Nieuwerburgh and Kontokosta, estimated a $7.2B rise in private property value on the Upper

East Side attributed to the Second Avenue Subway. Researchers estimated that the city will gain about $2.1B in increased real estate taxes, but suggest more value could be retrieved to help cover the $4.5B cost for the Q-line extension and its three new stations (See Table 6 in Appendix

– Value of Second Avenue Subway).

20 Plenty of NYC Property Value: Total property value citywide climbed to $1.38 trillion in

FY2021, an annual rise of 4.7% and $62B more than the previous year. This includes $14B increase from annual new construction, according to the NYC Dept of Finance’s tentative assessment roll released January 2020. Class 2 properties-residential co-ops, condos and rentals account for about $350B of the total. Class 4 commercial properties account for about $333 B citywide. Manhattan claims the most property value of any borough, nearing $515B. Value capture opportunities clearly exist evidenced by citywide growth and scale of property value.

Though there is seemingly enough incremental dollar value to extract in parts of NYC, political will, city-state infighting, community opposition and fear of rising taxes or gentrification remain significant barriers to implementation of any value capture plans.

Nevertheless, the city and state are considering the use of value capture mechanisms including

PILOT programs to help pay for transit improvements including for the BQX light rail line and the Empire Station Complex.

Debunking an Erroneous $6 Billion

In 2017, the results of a New School study on the public costs at Hudson Yards reported that the development received a total of $6B in public subsidies. Many news outlets ran the headline-grabbing salacious figure offered by the study without conducting any proper due diligence which would have revealed the study’s erroneous information and opaque findings.

The stories which ran were wildly misleading. For instance, the study offered inaccurate information on a number of issues including what the city had actually paid out-of-pocket. Media outlets including the New York Times printed that developers/owners were receiving 40% tax

21 breaks on property. But the 40% discount only applied to the first 5 msf 15of development and has been fully subscribed and unavailable since 2017. Also, costs for the $2.4B 7-line extension have been paid by private and institutional investors so far, with the exception of the NYC IBO verified Interest Support Payments totaling $369m, which at the time of the study was already reduced by $100m payment from the Hudson Yards Infrastructure Corporation (HYIC) to the city. The cost to the taxpayer for the rail line should not be currently categorized as subsidy, notwithstanding whether or not it is just to use the city’s borrowing power and creditworthiness to raise funds for a private rail line for the rich (See Chapters 8 and 9).

The study also does not include the funds raised through the sale of air rights which have now raised more than $300m to the MTA and about $100m in profit to the HYIC (See Chapter

7). In fact, HYIC’s initial $200m to the MTA for a stake in the Eastern Rail Yard air rights was actually funded through the HYIC’s original bond offering, among other inconsistencies throughout the New School Report.

The authors have subsequently pulled back from the $6B figure, highlighting now a somewhat more defensible $2.2B estimate of potential public costs, most of which is counted as foregone commercial and residential property tax breaks of $1.4B which represents the cumulative total commercial property tax abatement over 25 years (which equates to $56m per year. See Table 7 – HY Tax Abatement by Property0. To be fully transparent, this type of accounting should include a review of benefits and revenue generated so far, including for affordable housing built in exchange for the residential tax incentives, similar to incentives used for the same purpose all around the city.

15 Msf = millions of square feet

22 Moreover, tax abatements for both commercial and residential properties are presented as a reduction of city tax revenue, a cost that is absorbed by individual tax payers. But there is an argument being made by some proponents that these developments would not have occurred without public investments and therefore would not have existed at all.

23 CHAPTER 3 - EVOLUTION OF THE FAR WEST SIDE

Once home to commercial shipping and distribution activities now long abandoned, the

Far West Side remained largely unchanged since the mid 1900’s becoming the reluctant depository of an array of disjointed infrastructure. Lincoln Tunnel access lanes, the Port

Authority Bus Terminal, Pennsylvania Station, tire and auto repair shops, parking lots, and more, all impeded development creating physical barriers to urban density and vibrant street life.

Chief among West Side obstacles were the 28 acres of active, open-cut, below-grade rail yards straddling Eleventh Avenue between 30th and 33rd Streets. The cost and complexity of addressing the rail yards prevented many plans from taking root. Investment was critical to its future and was particularly needed to provide mobility and access to and within the area, as mass transit was limited west of Eighth Avenue.

Manhattan’s last frontier was finally conquered when the rail yards, now known as

Hudson Yards, became publicly-owned and their potential value was targeted as a means to generate funds to bring the No. 7 Subway line west, while also providing sorely needed revenue for the chronically cash-strapped MTA (Metropolitan Transportation Authority). The value capture scheme conceived by powerful city servants at the time -- able to rally a heightened sense of urgency lacking in previous Far West development efforts, was billed as self-financing and as an economic boom for the entire city. The following chapters trace the development history of the Far West from its early years through today, providing details and stories in an effort to understand how the public policy tool of value capture launched the private financialization of Hudson Yards.

24 The Early Railroad Years

The Hudson River flowed freely on the Far West Side in the 1700s, its shores reaching all the way east to Tenth Avenue south of 34th Street, making what we now refer to as Hudson

Yards, completely submerged at the time (Williams 2016). The British took advantage of the strategic river location, erecting a defense fortification at 34th Street and the Hudson. Tenements appeared by the early 1800’s, and later, factories and warehouses to serve the industrial area. By the mid- 1800s, the Far West bustled with working-class Irish immigrants supporting the lively shipping and distribution industry prospering at the Piers. Soon, the Industrial Revolution and commercialization of the steam locomotive brought the Hudson River Railroad to the West Side in 1849, where it remained in operation for nearly one hundred years.

The Hudson River Railroad ran along Tenth and Eleventh Avenues to its freight depot at

33rd Street. Goods were then transferred for downtown destinations as steam-powered trains prone to explosions were banned in lower Manhattan’s exceedingly congested streets — a mix of people, horses, carriages, then trucks and cars. In 1864, Cornelius Vanderbilt purchased the line and merged it with his New York Central Railroad. The line became known as the NY Central

Freight line.16 Its depot grew into a major freight terminal and by 1879 the Yard’s tracks had already “assumed the configuration of a lopsided wine glass,” the same shape the rails still retain today (Voboril 2005). 17

The Railroad transported millions of tons of goods per year including meat, dairy and produce, necessitating lengthy trains with a long line of cars, sometimes several blocks long.

Pedestrians, including children, were often killed and maimed trying to traverse the active tracks,

16 The same year, Vanderbilt also acquired the New York and Harlem Railroads (Williams 2016). 17 The stem of the glass is known as a rail yard’s throat, where lines come together before being dispersed to platforms or storage.

25 making Tenth Avenue known as Death Avenue, and, the train’s engine, the Butcher (Gray

2011).18 In response to public protests, an 1850s city ordinance required railroads with street level tracks to not exceed six miles per hour and to provide ample warning to pedestrians, prompting the rise of “urban cowboys.” The West Side Cowboys rode ahead of trains on horseback, waving red flags and lanterns. Often enough, they themselves were sometimes injured or killed too as were other railroad watchmen. Subsequently, the city banned street-level freight operations in 1929, as part of its West Side Improvement Project. The Railroad replaced the tracks with elevated rail lines, 30 feet above street level, to serve area manufacturers, sometimes running elevated lines directly through or along the upper floors of businesses.19

This West Side Elevated Line began operations in 1934. But with the rise of interstate trucking, the rail line fell into disuse and neglect, halting all service by the 1980s. Some of its tracks were demolished. A similar scenario played out nationwide. In response, the US Trails

System Act was passed in 1983 which allowed old rail lines to be transferred to local governments and non-profits, to be repurposed for recreational uses. This legislation was applied to the West Side where the Friends of the High Line, with support and legislation from the Bloomberg Administration20, repurposed the New York Central Railroad’s elevated tracks as a new linear park. The tracks themselves were donated from CSX Transportation, the final owner. The High Line is now a 1.45-mile elevated linear park, stretching from Gansevoort to

18 Park Avenue earned the same moniker north of Grand Central Terminal. Tony brownstone owners used their clout to pressure the railroad to sink the rail lines below grade beginning in the 1870s. The Hell’s Kitchen tenement dwellers weren’t afforded the same privilege. 19 Such as the National Biscuit Company (Nabisco) which is now home to the Chelsea Market (Friends of the Highline, History). 20 Many saw the line as an “eyesore.” Mayor Giuliani signed a demolition order before leaving office which the Bloomberg Administration ignored. On June 23, 2005 The Special West Chelsea District was enacted to protect the park’s light, air and views. Affected property owners are able to sell and transfer their development rights as compensation for the regulatory action.

26 34th Street, directly linked to the Hudson Yards District. The High Line is one of the few area features free and open to the public. Proximity to the High Line is prominently featured in all of

Related’s marketing materials for its 28-acre development– a prime selling point to attract businesses and residents.21 Ironically, Stephen Ross, Related’s Chairman and founder, advocated for its destruction but Hell’s Kitchen residents and Friends of the High Line prevailed.

Reportedly, Related and Oxford Properties donated $27.8 million towards Phase 3 of the High

Line’s construction and will contribute annually to its maintenance and operation, according to the NY Post. The High Line abuts 10 and 15 Hudson Yards and circumvents the entire Related project to the south and west.

Plans for the Far West

Irresistible, with its vast tract of underutilized acreage and sparsely populated surrounding streets, the Far West has been the object of visionaries for decades. Numerous plans have been hatched over the years in the hopes of finally annexing the territory. Here is a look at a few.

Palace of Progress: In 1954, William Zeckendorf, then president of the real estate firm

Webb and Knapp, entered into an agreement with the Pennsylvania Railroad to purchase the air rights over its rail yards. Plans were drawn to develop the “Palace of Progress,” covering a huge site, between 7th and 8th Avenues and 31st to 33rd Streets, where the current Madison Square

Garden sits. The $100 million, 40-story building was to house an International Merchandise Mart and a permanent structure for the 1964 World’s Fair, built atop a newly constructed underground

21 Throughout this report, the 28-acre site above the MTA’s railyards between 10th and 12th Avenues and 30th to 34th Streets being developed by Related Company and Oxford Properties will be referred to as Related’s Hudson Yards. Discussion of the aggregate 45-block area which was rezoned in 2005 will be referred to as the Hudson Yards District.

27 station. Reportedly, the sale price was set at $30 million with $13 million going towards the new station. Plans called for the westward extension of the Broadway-7th Ave IRT line to Eleventh

Avenue, along 33rd Streets connecting to a large parking garage at the western end. Even then, fear of losing jobs and businesses legitimized massive, probably not needed and certainly inequitable, developments. By expanding the CBD, Zeckendorf pitches the project’s “potential role in reversing the flight of business from New York” (Kihss June 8, 1955).

By 1956, plans grew even more sensational with Zeckendorf eyeing the air rights of multiple West Side rail yards from W 30th to W 38th Streets and Ninth Avenue all the way to

Twelfth. Eventually, Webb & Knapp acquire leaseholds for most of the air rights including those where Hudson Yards now sits (Bedingfield 1964). The New York Central Railroad was now onboard agreeing to invest, making “some of its real estate available for the project.” The now

50-acre site was to support 12.5 msf of mixed-use development with costs between $300 to $500 million (Crowell 1956). Driving commuters would benefit from a 20,000-vehicle parking lot linking the western railyards to Penn Station via “a passenger conveyor belt system like the one planned to replace the Times Square-Grand Central subway shuttle.”

Zeckendorf crowed that the city “will not lose a penny by use of its condemnation power to help carry out the new plan,” boasting that no tax incentives would be needed. In fact, he promised that the city would gain “$16 million in taxes because of this development” (Crowell

1956). Plans, though, are never realized. Webb & Knapp eventually declare bankruptcy and are forced to liquidate its assets. The New York Times reported that Webb & Knapp’s financial loss at the time was “one of the greatest deficits incurred by any corporate enterprise in history.”

US Steel: Next, US Steel purchases the air rights from Webb & Knapp in 1964 over

New York Central’s freight yard between West 30th and West 37th Streets between 10th to 12th

28 Avenues. They plan a $100 million housing and industrial mixed-use complex to include nine apartment buildings for 12,000 middle -income families with rents of just $30 per room. US

Steel’s plan is not entirely altruistic though. Their ulterior motive was to prove steel as a cost- effective construction material for housing. These plans also never materialize.

Mayors’ Proposals: In the 1960’s two NYC Mayors propose sweeping plans for the West

Side. In 1963, Mayor Wagner’s west side waterfront plan targeted the area along the Hudson from Battery Park to 72nd Street. In this plan, the yards would retain their industrial use, supported by “cargo-handling structures, reaching as far inland as 10th Avenue.” Other segments included a new convention center, ocean liner terminal, heliport, and observation tower.

Hydrofoil ferries, an expressway across 30th Street and additional maritime, residential and commercial development were also planned. The $670-million plan to unfold over four decades was also billed as self-financing through new tax revenues. In an early attempt to financialize the

West Side, the Mayor added, “if the city itself is not in a position to provide capital, we will approach private investors to do so” (Horne 1963).

Just five years later, the City Planning Commission under Mayor Lindsay releases a comprehensive plan for all of New York City, revealing investment needs over $1.6B. The

1969-1970 Plan for New York City included West Side proposals such as a convention center, a super cruise line terminal and a new subway along 48th Street. It also sought to densify the low- scale character of Hell’s Kitchen by constructing “two to three thousand hotel rooms, 25,000 apartments, and 30 million sq. ft. of mixed-use development” (Rausher 2018). The community strongly opposed such invasive large-scale development and the neighborhood disruption a new convention center on the West Side would cause. As a concession, the Special Clinton District

29 was enacted in 1974 as a buffer from midtown development pressure and to protect the area’s affordable, low-rise, character between W 41st and W 59th west of Eighth Avenue.

Jacob K. Javits Center: Hoping to spur commercial development westward, the city sited its new convention center on the Far West Side, even though there were limited neighborhood amenities for attendees including a dearth of nearby accommodations and inadequate transit options.22 The community successfully lobbied to have the facility located atop the Penn Rail Yards between 34th to 39th Streets and 11th and 12th Avenues, where it now sits. After years of planning, debate, and the intervening NYC fiscal crisis, construction of the

1.2 msf, IM Pei-designed Jacob K. Javits Center began in 1980 and finally opened in 1986.23

New development never arrived, however. In fact, it was not until four years later in 1990, that any rezoning even occurred to allow mixed-use development in the former manufacturing district. Surprisingly, only a few blocks were rezoned along just 450 feet east of 11th Avenue from 34th to 39th Streets. David Dinkins, the mayor at the time, opposed this spot zoning technique which established the Special Jacob K. Javits Convention Center District, favoring a more comprehensive approach, though this does not happen either for nearly another fifteen years.

Governor Andrew Cuomo restarted plans to expand the Javits Center as part of his 2016

State of the State Agenda.24 In April 2016, three teams were selected to submit full proposals. In

January of 2017, the team of LendLease, Turner Construction and TVS Design was selected, breaking ground in March of the same year. The long-sought-after expansion scheduled to be

22 The city, state and PANYNJ had considered Battery Park City. 23 The Javits Center succeeds the NY Coliseum Convention Center which was demolished and replaced with Related’s 1.1 msf Time Warner Center. 24 His plans to move the Convention Center to Aqueduct Racetrack in Queens in 2012 never materialized.

30 completed by 2021 at a cost of $1.5 B will add 1.2 msf, a 500,000 sq. ft. exhibition hall, a huge

55,000 sq. ft. ballroom, an indoor truck marshaling area and outdoor rooftop event space and farm. The ESDC estimates expansion will support 6,000 jobs and boost the city’s hotel industry.

MTA Acquires Penn Rail Yards: The John D. Caemmerer West Side Storage Yard opened in 1986. The yards were named after the New York State Senator who served from 1966 to 1982. As Chairman of the Transportation Committee, Caemmerer pressed for funds to purchase and update the yards as part of the MTA Capital Budget. The yards had fallen into disrepair following Penn Central’s bankruptcy. Originally estimated at $100 million, total renovation costs were nearly doubled at $195 million. The 28-acre site is located between 30th and 33rd Streets from 10th to 12th Avenue and is bifurcated by 11th Avenue, creating the

Eastern Rail Yards (ERY) and the Western Rail Yards (WRY).

Relying on his extensive experience as a developer of moderate-income housing, Richard

Ravitch, MTA Chairman at the time, sought to make the property viable for high-rise construction. He guided reconfiguration, making sure to leave enough space between tracks to drive caissons which would support skyscrapers above. The renovations immediately increased capacity to Penn Station.

The MTA-owned rail yards still operate as a 24/7 storage, maintenance, inspection and cleaning facility for the LIRR. Commuter trains are stored here after the morning rush. The

Yards are also utilized by NJ Transit and Amtrak’s Empire Line with space set aside for the planned Gateway Tunnel project. The ERY was rezoned in 2005 to allow for 6.6 msf and 7 acres of public space. The WRY was rezoned in 2009 to allow 6 msf, including 265 affordable housing units, plus another 166 on either yard for a total 431 units (HYDC).

31 Yankees to the West Side: Later in the1990s, NYC Mayor Rudolph Giuliani attempted to attract the Yankees to the Far West with the promise of a new stadium atop the West Side Rail

Yards.25 NY Yankee owner at the time, George M. Steinbrenner, threatened to move out of the

Bronx and maybe the city altogether, when their lease expired in 2002. Believing that the stadium would have a catalytic effect on the underutilized Far West, the Mayor devised a financing scheme to cover stadium costs estimated to be between $850 million to $1.1 B at the time (Bagli April 1998). Plans don’t move forward again for the Far West, with many public officials preferring to keep the team in the Bronx including Governor George Pataki, City

Council speaker Peter Vallone and Manhattan Borough President C. Virginia Fields. The community strongly opposed the plan as well, concerned about congestion and other adverse impacts to the neighborhood a stadium would bring, especially during the more than 80 home games per season.

25 The Yankees considered the Far West in the 1920s. But ended up building a new stadium in the Bronx which opened in 1923 after leaving the Polo Grounds.

32 CHAPTER 4 - THE FAR WEST SIDE IN THE 21ST CENTURY

Without comprehensive, coordinated interventions, either by the public or private sectors, the Far West evolved organically. Communities flourished all around the Far West: Clinton to the north, Chelsea to the south, and Hell’s Kitchen and Midtown to the east; never quite connecting, though, bisected by a huge hole in the ground offering limited vehicular or pedestrian thoroughfares. Major transportation infrastructure sprouted up without much resistance in the sparsely inhabited area, now home to the Lincoln Tunnel, the Port Authority

Bus Terminal, Greyhound’s Bus Parking Depot, Amtrak’s Empire Line rails, and the West Side

Highway. In fact, according to the NYC DCP there were only 150 residences West of 10th

Avenue between 28th and 42nd Streets in 2001, keeping the area attractive for additional rounds of development efforts.

Office Demand and the Group of 35

Commercial development pressure began to creep closer to the Far West as available sites for new construction dwindled east of the Midtown CBD, blocked by already densely developed residential neighborhoods with affluent, influential residents. It wasn’t until the redevelopment of Times Square in the 1980’s that commercial development was even a real consideration west of Eighth Avenue, evidenced by the opening of Worldwide Plaza on Eighth between 49th and 50th Streets later in the decade.26

This pressure coupled with headline-grabbing corporate defections to NJ and elsewhere, brought the Far West’s development opportunities into focus once again. NY’s US Senator

26 The mixed-use development occupies the site left by the Madison Square Garden which moved to new facilities on Seventh Avenue.

33 Charles Schumer formed a task force to evaluate demand for the amount and type of office space needed to ensure NYC’s place as a leading global city. The Group of 35, consisting of public officials, business leaders, academics and other experts, called for the construction of 60 msf of new office space to accommodate an estimated increase of 300,000 office jobs through 2020.

To retain growth, quell corporate defections and entice new businesses with modern collaborative workspaces fit with requisite open- floor plates, the Group identified three target areas for high-rise commercial development: Downtown Brooklyn, Long Island City, and the

Far West Side. They argued that a newly created and incentivized Far West Side Central

Business District could accommodate at least 20 msf of new office space, plus had additional capacity for new retail, hotels and housing. They envisioned a 24/7 mixed-use, mixed-density, pedestrian-friendly West Side neighborhood, complete with entertainment, parks, open space, and a 3-5 million sq. ft. Urban Business Campus.27

Employers would benefit, they claimed, from the Far West’s excellent access to the region’s substantial labor pool with its concentration of regional transportation hubs including the Port Authority Bus Terminal and Pennsylvania Station serviced by NJ Transit, Long Island

Rail Road, and Amtrak.28 Vehicular access was provided via the Lincoln Tunnel and the West

Side Highway. New ferry service from NJ was proposed to handle 60,000 trips per day.

The biggest impediment to the Far West’s development, however, was the lack of public transit west of Eighth Avenue. The Group subsequently called on the city and state to make subway access a top priority. A 7-line extension would provide access from Times Square and

27 The Group released their report, “Preparing for the Future: A Commercial Development Strategy for New York City,” in June 2001- pre 9/11. Post 9/11, the perceived need for new office space became even more amplified. 28 Once Metro-North connects to Penn Station possibly by 2024, an even larger employment shed can be accessed.

34 connections to Grand Central Terminal. Acknowledging value capture theory, they supported tax increment financing of the 7-line extension stating that “subway access would enhance the value of property in the area which would generate increased real estate tax revenues that could be pledged to support bonds for the project” (Group of 35 2001, p. 57 ). If all went well, they also suggested construction of a new north-south subway line along 11th Avenue.

The Group did concede, at the time, the need for additional public sector interventions to induce development. They urged the public sector to take action to rezone the area to increase

FAR, use their eminent domain powers to assemble sites, engage developers, map new streets to break through superblocks, expand the Javits Center north and/or south, and to build a platform over Caemmerer Yards.

Even with these improvements, the Group still believed private sector development would not occur without additional tax incentives to bridge anticipated gaps between construction costs and achievable market rents.29 They recommended short-term incentives that would “induce development while still leaving adequate additional tax revenue to allow for tax increment financing” (Group of 35 2001, p. 59). Clearly, the Report solved the “but for” argument.

By August 2004, however, the NYC Independent Budget Office questioned whether or not NYC could absorb the projected supply. In their report, “Supply & Demand: City and State

May Be Planning Too Much Office Space,” they deduce that the planned supply at just three sites: the World Trade Center (10 msf), Downtown Brooklyn (4.5 msf) and Hudson Yards (28

29 In 2001, construction costs in midtown of $505/psf were nearly $200 more than Jersey City at $320/psf and more than Downtown at $438/psf. At the time, due to land availability and lower costs, over 6.7msf of office space was under construction in Hudson County, NJ (Halle and Tiso 2014).

35 msf), may already exceed projected demand. This was even more likely when considering other large -scale construction projects underway and planned around the City, such as Related’s Time

Warner Center at Columbus Circle (1.1 msf). Office needs are even more overstated, they pointed out, given the rise of collaborative workspaces requiring less than the typical standard of

250 sq. ft. per worker.

Years later, in response to the Bloomberg Administration’s proposed East Midtown

Rezoning Plan,30 the IBO updated its 2004 forecasts of office employment growth and demand.31

Here again they question the need for new supply and refute other estimates. Even in their most robust calculations assuming 250 sq. ft. per worker and 0.75% annual office employment growth, they measure demand at 87 msf citywide over the next twenty years. Their more likely midrange demand forecast called for a need of 51.9 msf through 2040, based on 0.5% office employment growth with 200 sq. ft. per worker. Cushman & Wakefield’s demand forecast, on the other hand, greatly exceeded either IBO scenario with a projected demand for 92 million sq. ft. needed in Manhattan alone. IBO concluded that the current construction pipeline once built out at Hudson Yards, the World Trade Center, Downtown Brooklyn and other construction starts throughout the city, would satisfy demand. Despite these other forecasts, Cushman &

Wakefield’s estimate was the figure used to support the Hudson Yards bond offering.

30 This was the only rezoning proposal rejected during the Bloomberg Administration. 122 others many were approved. East Midtown rezoning was later enacted under de Blasio. 31“Is the City Making Way for More Office Space Than Needed Over the Next 30 Years?” was released September of 2013.

36 NYC2012 and a West Side Stadium

Daniel Doctoroff is widely credited with the drive and determination which resulted in

NYC’s Olympic bid. The investment banker and eventual Deputy Mayor for Economic

Development and Rebuilding under Michael Bloomberg, amassed the financial and intellectual resources needed to develop NYC’s comprehensive, but ultimately failed, bid to host the 2012

Summer Olympics. 32 33

In 1996, Doctoroff formed the NYC2012 organization and hired Alex Garvin and Jay

Kriegel,34 both former Lindsay Administration public officials, as Lead Planner and Executive

Director respectively, providing some West Side continuity and legitimacy. The plan was to host

28 Olympic sports, while providing housing, athletic facilities, transportation and other infrastructure to support the games, athletes and spectators. Venues were to be connected via north-south and east-west corridors linking the five boroughs and New Jersey. The two axes would have formed an “X” with the Olympic Village planned at its intersection.35 As a selling point, the plan was to be self-financed through ticket sales, corporate sponsorships and television rights. The budget also included costs for the 7-line extension.

32 The story starts in 1994 when Doctoroff claims to have been inspired by a World Cup Game at Giants Stadium, NJ he attended. Doctoroff first spearheaded NYC’s hastily arranged 2008 Olympic bid submitted in 1997 which was backed by Mayor Giuliani who had met with Doctoroff and assembled a task force. But the NY bid was not accepted then by the USOC which decided not to elect any US candidate at all that term, partly (or primarily) because of the bribery scandal associated with the Salt Lake City 2002 Winter Olympics. 33 Criticism of Doctoroff from WNYC Bernstein and Village Voice Tom Robbins reported “builders and financiers with interests in Hudson Yards and other development zones have attempted to curry favor with Doctoroff by making financial contributions to NYC 2012”. For instance, ‘family foundation controlled by Woody Johnson gave more than a million…banks that have been hired to help finance Hudson Yards, Goldman Sachs, JP Morgan and Bear Stearns – have also made sizable donations…developers who have contributed, include Douglas Durst, Steven Roth and Stephen Ross-Doctoroff’s friend (Cassidy 2005). 34 In 2007 Jay Kriegel joined Related as Senior Advisor where he served up until his December 2019 passing. 35 Olympic Village was planned for a 61-acre site, along the East River waterfront in Queens. The Village would have housed 16,000 athletes and coaches in 4,400 apartments to be developed by private developers who could then sell them at market prices once the games concluded.

37 NYC’s bid was submitted to the US Olympic Committee in June of 2001. By November of 2002, NYC was elected as the US city to compete internationally, edging out San Francisco.

Ultimately, in July of 2005, London won the right to host. But the NYC 2012 bid revived numerous development discussions across multiple public agencies throughout the five boroughs, many which were long debated but remained dormant including those for the Far West

Side. Civic pride coupled with the rigid deadlines of the IOC bidding structure, provided the urgency needed to mobilize elected officials, bureaucrats, business leaders, and non-profits to rally around collective goals.36 Yet, as Richard Ravitch noted at the time, the plan subjected the

City to significant financial risk if funds raised couldn’t cover costs. “There’s massive exposure for the city here and no legislative review. People are worried, but no one wants to be accused of killing the Olympics” (Horowitz 2004).

One of the most controversial elements of NYC’s Olympic bid was where to site the main facility. For years, Doctoroff and Bloomberg (and others), insisted that the Olympic

Stadium be located on the Far West Side, atop the MTA’s Western Rail Yards at 11th Ave between 30st and 33rd Streets. Nearby residents vehemently opposed the plan, as did other neighborhood groups including NY’s Broadway theater owners. Nevertheless, city and state officials backed a plan with the NFL Jets to make the West Side Stadium their new home once the Olympics concluded.37 The scheme’s anticipated cost of $1.4 B was to be shared, with the

36 A November 2004 Quinnipiac poll showed that 64% of NYC voters supported “the city’s bid for the Olympics.” But, 77% of New Yorkers opposed construction of the West Side Stadium. If the city and state didn’t have to subsidize the stadium, 54% would support its construction. Notably, voters overwhelmingly supported the individual components of the West Side Redevelopment as 57% supported the expanded Javits Center; 72% were for the 7-line extension; and 58% agreed with the rezoning to commercial and residential uses. Plus, 47% disagreed with Mayor Bloomberg’s assertion that NY couldn’t win the Olympic bid without the new west side stadium. 37The Jets lease was up in 2008 at the Meadowlands where they played since leaving Shea Stadium in 1984.

38 Jets contributing $800 million and the city and state providing $600 million, about $300 million each – Bloomberg promising to help the team that helps themselves. The Jets insisted on an open-air stadium. But, to capitalize on maximum potential cash flow, economic activity, and therefore tax revenue, the stadium needed to operate year-round, not just 10 home games per year. The city agreed to finance a retractable roof and build the platform which would have made the stadium an all-weather facility.38

The idea of a 75,000-seat arena in the middle of Manhattan raised considerable and widespread ire. The community board, local elected officials, non-profits, residents, etc. rallied against the stadium plan, filing lawsuits and developing their own alternatives.39 The RPA released their own alternative plan in December 2004, claiming that a mix of commercial and residential uses would generate $510 million a year in tax revenue, more than 5 times the city’s estimate of $74 million per year for a stadium. They envisioned a more contextual commercial corridor along 34th Street connecting to the waterfront (RPA 2004).

Cablevision, owners of Madison Square Garden, devised their own plan as well, while simultaneously mounting negative, self-serving ad campaigns against the Stadium.40

Cablevision unveiled their plan for the Hudson Gardens on February 4, 2005 at Radio City

Music Hall (which they owned). Cablevision alleged that they did not require any public subsidies and that the primarily residential development would be more in-line with the surrounding neighborhoods. They planned about 5,900 apartments, 800 moderate to low income,

38 Public monies were to go for a $225 million retractable roof and a $375 million platform. 39 The Straphangers Campaign and the Tri-State Transportation Campaign filed a lawsuit disputing the Jets claim that 70% of fans would take public transit (a figure derived from a survey of season ticket holders). In comparison, only about 40% of MSG fans traveled by transit on the weekend, even with substantial transit access (Horowitz). 40 Rivalry between Woody Johnson and Charles Dolan can be traced back to at least January 2002, when Johnson outbids Dolan to buy the Jets for $635 m from then owner Leon Hess.

39 a 750-room hotel, a public school, park and a performing arts center. Bloomberg dismisses the fanfare as just a “publicity stunt.” Doctoroff quipped that a Friday afternoon press release couldn’t compete with years of planning. (Bagli March 22 & 29, 2005).

The Jets, possibly in response, later revise their design. They scrap plans for an arena- sized space which would have competed directly with nearby MSG by attracting smaller events such as concerts, ice shows, circuses, etc. Kohn Pedersen Fox revises the design and incorporated an expanded Javits Center, transforming the Stadium into the more useful New

York Sports and Convention Center. The stadium and convention space would be linked underground. The closed-roof stadium was to double as an unobstructed 200,000 sq. ft. flexible exhibit hall, finally providing the space able to meet the demands of the largest national trade shows and conventions. 41 The Jets claimed the changes were not concessions, but rather sound business practice designed to generate maximum cashflow. Jay Cross, president of the Jets mused,42 “If our neighbors are happier too, it’s a bonus” (Bagli January 2004). Plans for the 2.1 msf New York Sports and Convention Center were finalized with 75,000 seats, convertible to

85,000 seats, perfect for opening and closing Olympic ceremonies and other venerated national sporting events.

Amid this controversy, the NYC IBO refutes the economic benefits put forth by the

Jets.43 In their baseline scenario, IBO finds that the economic impact of a stadium could generate just enough tax revenue to cover annual debt service of $22m on the city’s planned

$300m investment, but that operations would generate only about half as many jobs (3,600 v

6,700) and about $7million less in tax revenue ($28.4m v $35.2m) than found by the Ernst &

41 up from 110,000 sq. ft. previously. 42 Jay Cross is now President of Related Hudson Yards, joining the firm in 2008. 43 “West Side Stadium: Touchdown for the City?” 2004.

40 Young study commissioned by the Jets and heralded by the Bloomberg Administration. IBO further cautions that this lower margin of economic and fiscal benefits is particularly precarious given that two-thirds of projected economic activity would be generated from convention center uses. IBO calls the Jet’s estimate of events too optimistic given that prime convention season coincides with the Jets regular season causing conflicts.44 Moreover, they point to the most troublesome risk to the city in the current scenario: If the convention center business proves futile for the Jets, they “have little incentive – or agreements compelling them – to continue these operations and provide the city with a chance to at least break even,” (NYC IBO 2004).

Furthermore, IBO views the deal as detrimental to the MTA. Echoing the claims of other civic and transit advocacy groups, IBO agrees that the MTA’s air rights are more valuable than what is offered, especially after a viable platform and area-wide rezoning are put in place. By contracting with the Jets, the MTA cannot realize the maximum revenue potential of their rail yards -- contradicting value capture theory and causing a consequential loss to transit riders and other beneficiaries.

Caving under criticism over competition and transparency, the MTA does finally open a public bidding process, albeit with an unusually short turnaround time. The limited time frame seemingly designed to favor existing, fleshed out proposals such as for an Olympic Stadium, would also allow for resolution on the stadium in time for the IOC’s site visit in June 2005.

Reportedly, many developers were reluctant to even throw their hats into the ring, fearing retribution from the stadium-focused Bloomberg Administration (Bagli April 19, 2005).

44 The Jets anticipated 35 expositions, while IBO estimate 20 in their optimistic scenario.

41 The MTA receives three formal bids, plus two without the required $25K deposit on

March 21, 2005. By this point, the Jets increased their initial bid of $100 million to the MTA to

$720 million; $440 million to come from a hastily put together team of six developers promising to purchase air rights if and when the entire yards and neighboring area is rezoned to allow for residential and commercial development. Cablevision also submits a bid of $760 million for their “Hudson Gardens,” which includes platform costs. The third bid of $1 billion is received from TransGas Energy but is contingent on siting a new power plant in the East River along with a contractual 40-year guarantee that the MTA purchase their power from this new plant. The

MTA dismissed the TransGas bid outright because of incompatible goals and contingencies.

Subsequently, on March 31, 2005, the MTA unanimously votes to accept the Jets bid for a stadium, retaining the ability to sell its air rights over the Western Rail Yard for up to $1B, based on the MTA’s own appraisal of $923 million.45

Lawsuits are filed challenging the MTA’s decision, reviving a procurement statute that the agency accept the highest dollar bid.46 Peter Kalikow, MTA Chairman at the time, claims the stadium is more economically valuable to the city, contradicting his previously acknowledged obligation to maximize value to the MTA. James Simpson, chairman of the MTA planning and real estate committee, defended the vote claiming that the Cablevision offer would be worth taking if the transit system were desperate for cash and about to default on its bonds, adding “but that’s not the case. I think we need to take the longer-term view…We can’t think of ourselves

45 As presented in the following chapter, the MTA still does not leverage its true market-rate value f its air rights, eventually accepting a $1B 99-year ground lease for both the Eastern and Western Rail Yards. A 2017 Jones Lang LaSalle appraisal concluded that the development rights over the Western Rail Yard alone were worth more than $3B. 46The Jets bid actually amounted to only $210 million in cash and included the need for $600 million in public subsidies versus Cablevision’s bid of $400 million cash according to the NY Times analysis.

42 strictly as a transportation company…we are part, the most important part of the economic engine of the City of NY” (Bagli March 29, 2005, Chan and Bagli April 1, 2005).

Others maintained that New Yorkers shouldn’t have to pay for something they don’t need and don’t want. The MTA’s Bloomberg-pressured reluctance to appreciate its true value, ultimately adds to the polarization between NY’s real estate elite and the other 99%. Gene

Russianoff, staunch transit advocate, attorney and spokesman of the NYC Straphangers

Campaign, points out why, “We want top dollar. If we don’t get a fair price for the yards, the loss will be taken out on the riding public in fewer new cars and buses, less repairs and eventually higher fares and poorer service” (Bagli, April 19, 2005).

On June 2, 2005 the court upholds the MTA’s decision, arguing that the MTA acted rationally in basing their decision on factors other than price.

Final Stadium Hurdle

The West Side Stadium plan still had one final hurdle to clear. Since the project was to be built on state owned land with state subsidies, the plan had to be approved by the Public

Authorities Control Board (PACB). The PACB, established in 1976 to provide fiscal oversight of state authorities and their borrowing activities, consists of just three-members, the Governor, then George Pataki, the State Assembly Speaker, then Sheldon Silver, and State Senate Majority leader, then Joseph Bruno.47 To move forward, state projects must have unanimous approval,

47 Both politicians are later indicted for fraud and corruption over the course of their public careers involving multiple scams and millions of dollars. Silver was first convicted in 2015, found guilty then was overturned on appeal. He was convicted again on May 11, 2018 and sentenced to 7 years in prison but remains out collecting his $6,600 monthly pension. Bruno was convicted of fraud and sentenced to two years in 2009, but was overturned in 2010. He was retried and acquitted in 2014.

43 giving veto power to any one member. Silver and Bruno delayed the vote on the West Side

Stadium twice and finally abstained with only the Governor in favor. The June 6th, 2005 meeting which unequivocally defeated the West Side Stadium, turned so confrontational with vocal opponents and proponents including union members, public officials had to be escorted out by state troopers. Later, Silver voiced his concerns questioning, “Am I supposed to turn my back on

Lower Manhattan as it struggles to recover…For what? A Stadium? For the hope of bringing the

Olympics to New York City?” (Bagli June 6, 2005). Reportedly, backroom negotiations which promised Silver steeper tax incentives for downtown companies plus fines for companies leaving downtown for the Hudson Yards District, were not enough to change his view. Similarly, promise of support for several upstate projects was not enough to convince Bruno either. 48

Mayor Bloomberg was outraged and called on State Assembly Speaker Silver to “explain why (he was) against jobs and economic growth” adding that “rejection of the stadium will seriously damage our chances at winning the 2012 Games” (NY Times June 6, 2005)—and it possibly did. 49

48 During ongoing negotiations Joseph Bruno actually meets with Jim Dolan of Cablevision for lunch and golf on April 28th, 2005. The meeting was set up by his son, a lobbyist working for Cablevision to “defeat the stadium plan”. Bruno had claimed that the son did not lobby his father on “matters before the state”. But documents which became public during Bruno’s corruption trial in 2009, revealed that staff wrote to Bruno directly stating the impropriety. “I wouldn’t want someone to see you, Ken and Jim Dolan on the golf course and question the ethics of the situation” (NY Post 2009). 49 IOC officials did express concern over the main facility’s uncertainty.

44 CHAPTER 5 - HUDSON YARDS REDEVELOPMENT PLAN MOVES AHEAD

Regardless of the ongoing tumultuous negotiations for a West Side Stadium, the NYC

Department of City Planning moved ahead with its redevelopment plan for the Far West. Key comprehensive components brought the plan to fruition. These included the 2005 and 2009 rezonings, the 7-line extension, a viable platform over Caemmerer Yards, and the value capture scheme put in place to finance the public improvements. These components are discussed below.

2001 Framework for the Far West

In December 2001, the NYC Department of City Planning led by Joseph Rose, released a land use and transportation study backed by Mayor Giuliani and supported by the FHA.50 The plan, entitled “Far West Midtown: A Framework for Development,” laid out guiding principles for revitalization of the area. These included: office space able to accommodate large, open floor plates; pedestrian-friendly and transit-oriented development; new housing stock; and, additional parks and open space. To meet these goals, the plan called for updated zoning,51 pedestrian and traffic improvements and infrastructure investment, including the most critical component to unlock development and value, the No 7-line extension west and south from Times Square.

To fund improvements without competition from other city-wide capital budget needs, thus shielding the project from a transparent public approval process, the Framework suggested a quasi-tax increment financing scheme. This TIF-like value capture plan would generate its own funds based on estimated tax revenue increases within the proposed Hudson Yards District (See

Figure 3– Map of Hudson Yards Finance District in Appendix). The NYC DCP establishes the

50 Bloomberg takes office the following month, January1, 2002. 51 The area was mostly zoned for manufacturing and warehouse uses to accommodate the area’s past purpose as a freight and distribution center.

45 “but for” TIF argument, maintaining private development would not occur without public subsidies. According to DCP, “improvements necessary for the redevelopment of the area, would not be implemented in a timely and coordinated manner” without public support and assistance (DCP 2001, p. 61).

Existing Conditions

The Far West study area stretched from 24th to 42nd Streets and from Eighth Avenue to the Hudson River. Two corridors within the study area, 34th and 42nd Streets, were densely developed with commercial and residential uses. Mid-block areas were somewhat isolated with no transit or pedestrian flows, the street grid disrupted by superblocks and rail yards. DCP counted 6,300 residences east of 10th Avenue at the time, but only a meager 150 residences south of 41st and west of Tenth Avenue. Twenty – nine percent of the land was used for transportation or utility functions west of Ninth Avenue (2.5 msf), versus just 9% east of Ninth Avenue (301K).

Only 1% of land qualified as open space in the entire study area. Overall, 70% of land was zoned manufacturing, 27% commercial and just 3% residential. Under existing zoning, only 7 msf of new development was projected over a 20-year period. If rezoned for denser commercial and residential uses, the area could accommodate another 25 to 49 msf, providing much needed housing, hotels, open space and access to the waterfront, according to the study. The opportunity existed, the report claimed, to create a vibrant neighborhood able to generate increased tax revenue and economic activity where little to none existed before.

Several special zoning and historic districts surround the study area, furthering its fragmentation while also heightening and directing development pressure to the Far West.

46 These include the Chelsea Historic District (1970), the Special Clinton District (1974), the

Chelsea Historic District Extension (1981), the Special Midtown District (1982), the Special

Garment Center District (1987), the Special Jacob K. Javits District (1990), the Special West

Chelsea District (2005) and later the West Chelsea Historic District (2008).

Hell’s Kitchen South

While the Far West study area included the Hell’s Kitchen neighborhood, residents and local groups such as the Hell’s Kitchen Neighborhood Association (HKNA) were not actively recruited, consulted or engaged during the planning process. No local needs assessment occurred

(Angotti 2008). Frustrated, the HKNA partnered with the Design Trust for Public Space to prepare their own community plan. After a multi-year process with extensive community involvement of businesses and residents, HKNA released their plan for Hell’s Kitchen South in

June of 2002 as an alternative to city and state plans.

The HKNA sought a proactive approach offering alternatives to plans imposed on them by NY’s elite instead of involving them. Their underlying ideology for their future was guided by preservation and continuity of neighborhood character, especially between the Far West and established neighborhoods such as Chelsea to the south and Clinton to the north. Principal among them was that “the community refuses to accept gentrification and displacement as inevitable results of urban change and instead insists that a mixed-income, mixed-uses urban neighborhood is possible and desirable.” They were sound in their beliefs that they did not

“need to be cleaned-up, filled-in, covered-over or replaced.”

47 Their plan addressed concerns for affordable housing, traffic and air quality, open space, and sustainable development and highlighted appropriate land uses, pedestrian connectivity, and waterfront access. The plan called for a Javits expansion south over the Western Rail Yards with a 10-acre rooftop public park. They practically steered commercial development and the highest densities to 30th to 35th Streets. They included permanent affordable housing built north of 35th

Street, and, atop the Eastern Rail Yard (ERY), a multi-level pedestrian-oriented public plaza.

2003 Preferred Direction

After release of the 2001 Framework, the DCP and EDC held public forums to enhance plans for the Hudson Yards District. The agencies also enlisted a multi-disciplined urban design team to create a master plan for the area’s transformation led by Cooper Robertson & Partners.

The team’s mission was “to develop a comprehensive, integrated urban design plan for a vibrant new central business district and mixed-use community.” By February 2003, the DCP and EDC presented the “Far West Side Master Plan: Preferred Direction.” This plan included most of the ideas presented in the 2001 Framework, but offered further refinement. For instance, a more detailed open space plan was added, denser development was directed to the 34th Street and 42nd

Street corridors and across from the Javits Center. The plan sought to preserve the warehouse district south of 30th Street with residential lofts close to the High Line. Zoning recommendations would allow 28 msf of commercial development. The plan included the 7-line extension with two new stations. Overall, recommendations were compatible with a West Side Stadium and the

2012 Olympic bid, though weren’t reliant on them.

48 To assess development potential of the Far West, the city engaged Economics Research

Associates and Cushman & Wakefield. The team forecasted demand for all property types and modeled a low, base, and high demand forecast based on historical and recent trends and accepted industry standards at the time. According to their mid-range demand forecast, the Far

West could absorb 28 msf of office, 12.5 msf of residential, 1.5 msf hotel and 0.7 msf of retail between 2005-2035 (ERA 2003).

Concurrently, the DCP and the MTA guided the EIS necessary for the plan to meet

SEQRA and CEQR requirements. A Draft Generic EIS (DGEIS) was released on June 21, 2004 which analyzed the impact of the area-wide rezoning and evaluated alternative routes for the 7- line extension. Responses to public comments were addressed and included in the Final DGEIS which successfully moved through the ULURP52 process.53

Hudson Yards Redevelopment Plan: 2005 and 2009 Rezonings

The Hudson Yards Redevelopment Plan consisted of 10 ULURP actions. As required by the NYC Charter, the plan was reviewed by Community Board 4, the Manhattan Borough

President’s Office and the City Planning Commission which approved the actions on November

23, 2004. Prior to its vote in the City Council, then Deputy Mayor Doctoroff signed a Points of

Agreement Memo to City Council Speaker Gifford Miller on January 10th, the day before the full

Council vote. These included the following concessions: 1) restrictions on the use of District

Improvement Bonus payments (none could go towards any stadium); 2) guarantees that surplus

52 NYC’s Uniform Land Use Review Procedure. 53 The full document contained over 6,000 pages, one of the most voluminous in US history.

49 revenue from the value capture scheme go directly back to the City’s general fund; 3) a density decrease on Hell’s Kitchen mid-blocks from 7.5 to 6 FAR; 4) an overall decrease of total office space from 28 msf to 24 msf; and, 5) at least 25% of new housing units be affordable, nearly

4,000 units. In addition, the deal designated specific sites for affordable housing (Points of

Agreement Memo January 10, 2005). 54 55 The City Council voted in favor of the Special

Hudson Yards District 46 to 1.56

The 2005 Rezoning did not include the Western Rail Yard site as it was still being considered for a West Side Stadium. In his 2017 memoir, Doctoroff recalls that the rezoning approval process went ‘surprisingly smooth’ since critics were distracted by their intense opposition of the West Side Stadium plan. Decoupling the WRY from the Special District, worked to ease the approval process for the Special District as a whole.

The rezoning covered 48 blocks, 360 acres (33 below-grade) generally bounded by West

42nd and 43rd Streets, 7th and 8th Avenues, West 28th and 30th Streets, and Eleventh Avenue.

The rezoning allowed for an expanded Javits Center, 24 msf of new office space, 13,500 housing units, one msf of retail and 2 msf of new hotel space. This included 6.6 msf of mixed-use development over the ERY. It eliminated the Special Jacob K. Javits Convention Center District and created two new public institutions to oversee redevelopment and financing, the Hudson

Yards Development Corporation (HYDC) and the Hudson Yards Infrastructure Corporation

(HYIC) (See descriptions below).

54 They were 150 units at site M at 10th Ave between 40-41st; 155 units at NYCHA Harborview Site at 56th West of 11th; and, 600 units at Studio City between 44th and 45th between 10th and 11th . 55All agreed to also “coordinate large-scale hiring initiatives linking NYC job seekers to employment opportunities in the Hudson Yards district and…be based at the Workforce Career Center in each of the five boroughs…with outreach to economically disadvantaged job seekers and/or communities.” 56 City Council Speaker, Gifford Miller, voted against. Miller had agreed to back the plan but then told Doctoroff that since he wanted to run for mayor, he had to vote with his constituency (Doctoroff 2017 p. 169).

50 HYDC: The Hudson Yards Development Corporation (HYDC) was created with the explicit purpose of implementing the Hudson Yards Redevelopment Plan. It acts as the intermediary between all components of the redevelopment including coordination with city and state agencies, the MTA, developers, the NYC IDA, HYIC, the Javits Center, parks, housing, transportation and infrastructure actions.57

HYIC: The Hudson Yards Infrastructure Corporation (HYIC) acts as the fiscal conduit between the city, state, private investors and developers. The HYIC is authorized to issue debt for infrastructure projects, to acquire property, to buy and sell TDRs, and to process all monetary collections, payments and disbursements within the Hudson Yards Financing District (HYFD). 58

The Corporation currently holds $2.72 billion in bonds. Administrative costs for both

Corporations are paid through HYIC funds.

After the West Side Stadium plan was defeated and NYC lost its bid for the Olympics, the Western Rail Yard (WRY) was targeted for rezoning and integrated into the Hudson Yards

Redevelopment Plan. In December of 2009, the City Council approved the 13- acre WRY rezoning to allow up to 6 msf of new construction with 5,000 apartments, office, hotel, and retail space, plus a community facility and over 5 acres of open space. In addition, a minimum of 265 permanent affordable units were required on the WRY site, plus an additional 166 permanent affordable units integrated at either the WRY or ERY for a total of 431 affordable units over the rail yards.

57 The Board consists of the Deputy Mayor for Economic Development (chair), Commissioners of NYC DCP, HPD, Parks, Small Business Services, Director of OMB, President of NYCEDC, NYC Comptroller, City Council Speaker, Manhattan Borough President, District 3 City Councilperson and Chair of Manhattan’s Community Board 4.

58 The HYFD boundaries are about the same as the rezoning district, roughly 7th and 8th Avenue to 12th and from 42nd to 29th Streets with the exception of the Javits Center.

51 Crafting the Hudson Yards Value Capture Scheme

As recounted above, Bloomberg and Doctoroff (and others) are convinced that private sector development on the Far West will not occur without bringing the 7-line to Hudson Yards.

The MTA is already over-committed, financially embroiled in two large-scale capital projects,

East Side Access and the Second Avenue Subway, both of which were behind schedule and over budget. It’s also obvious that the MTA is deeply in debt, already one of the largest public debt holders in the US.59 Furthermore, the MTA had not prioritized the 7-line extension which did not appear in any previous capital budget plans. The Bloomberg Administration then looked for ways to jumpstart development and designed what is billed as a self-financed redevelopment plan.

Mayor Michael Bloomberg defends his economic ideology and the legitimacy of the value capture plan, reminding that the $3billion cost to open the West Side:

“won’t affect other city projects…because it will be financed OUTSIDE the regular budget…You can’t go borrow to give the teachers a salary raise. You can borrow to build something that is going to employ a lot of people and generate a lot of tax revenues…Forty percent of the debt service for the city’s and state’s part of this project is already paid for by the Jets. In business, nobody ever gets a chance to start a project where 40% of the revenue needs are guaranteed” (Cassidy 2005). In July of 2004, OMB presented the $3B Hudson Yards financing plan to the City

Planning Commission which included the 7-line extension with two subway stations, a linear park and boulevard, and, at this point, construction of the ERY platform at an estimated cost of

$351m. Through a mix of value capture mechanisms, including one-time payments plus reoccurring revenue, Hudson Yards redevelopment was expected to generate more than $16 B in

59In FY2020, for instance, 17% of the MTA’s budgets- a staggering $2.8B, is earmarked for debt service on $43 billion outstanding with the payment steadily rising for the next few years.

52 revenue by 2035, seemingly more than enough to pay back bondholders (NYC OMB 2004) (See

Chapter 7 for details of the Hudson Yards Value Capture Plan).

Assemblyman Dick Gottfried, founder of the Hell’s Kitchen -Hudson Yards Coalition, questioned aspects of the plan which, as designed, would bypass the New York City Council calling the plan “an extraordinary departure from democratic government” (Bagli February 12,

2004).

Later that summer, the NYC IBO releases “West Side Financing’s Complex, $1.3 Billion

Story” at the request of Public Advocate Betsy Gotbaum. The report emphasized the significant risks of the value capture scheme. For instance, if forecasted absorption rates fell short of expectations, the city was obligated to bridge any gaps, diverting funds meant for basic services.

Plus, since the financing scheme was designed to operate outside the usual budget process, it would not have to compete with other budgetary line items and therefore would escape public scrutiny and input.

As a former MTA and UDC Chairman, Richard Ravitch questioned the scheme as “eerily reminiscent of what happened a generation ago” pointing to the troubled history of the NYS

UDC, a public benefit corporation able to raise bonds and acquire properties for development purposes. He recounted how the UDC:

“borrowed heavily (and) when tax revenues came in lower than expected, they didn’t have enough money to service their debts and they had to be bailed out…I spent ten years of my life cleaning up the mess that people of good will and integrity created in the sixties and seventies. I saw in the West Side plan all of the things that had led to the crisis in the seventies, and I thought, if I don’t speak out, why should I expect anybody else to?” He was vocal about his objections, but as to the mayor compromising, Ravitch said “he doesn’t welcome counsel - at least, that was my impression” (Cassidy 2005).

53 MTA’s Second Round at Caemmerer Yards

Once the West Side Stadium was defeated and their deal with the Jets collapsed,60 the

MTA has a second chance to capture full value for their development rights over the Caemmerer

Yards. In July of 2007, the MTA released two RFPs for sale or lease of its Eastern Rail Yard

(ERY) and Western Rail Yard (WRY), seeking one developer for both sites. The developer would be responsible for building both platforms over the yards without any interruptions of rail operations. The RFP set out objectives and design guidelines “to promote excellence in architecture, urban design, and sustainability” (NY Mayors Office 2008). Construction on the

Eastern Rail Yard (ERY) could begin once a contract was executed. Development over the

Western Rail Yard (WRY) still needed ULURP approval.

By October 2007, five teams responded. The process is more transparent this time around with plans publicly- exhibited and widely presented to community and civic groups. By

March of the following year, Mayor Bloomberg and Governor Pataki announced Tishman

Speyer the winner. The deal as agreed would have been structured as a 99-year lease with options to purchase and consisted of 12 msf of mixed-use development for both the ERY and

WRY. The official press release claimed that Tishman offered the highest net present value

(NPV) to the MTA at $1B which would support the MTA’s capital budget.

Here again Richard Ravitch criticized the deal, believing the MTA should not have tried to sell their air rights in a depressed market for “the promise of building towers and paying rent at some point in the future…Jerry Speyer is an eminently responsible developer, but I don’t yet

60 The Jets then partner with the NFL Giants. Together, they build a new stadium in the NJ Meadowlands.

54 understand how this helps the MTA meet its capital needs. They sold an illiquid investment for another illiquid investment” (Bagli March 27, 2008).

By May of 2008, negotiations collapse as Tishman Speyer’s financial partner and anchor tenant Morgan Stanley drops out. 61 This prompted Tishman to renegotiate terms of the agreement including delaying any rent payments until after the WRY received ULURP approval.

The MTA was not agreeable and within weeks selects Related Companies to develop the 28-acre site under the original terms.

The MTA Board approves Related’s bid at its May 22nd meeting. By this time, however,

Related’s, original anchor tenant, News Corp. had dropped out, though, Related’s investment partner, Goldman Sachs, is still in.

That fall, however, progress is stalled again. NY is in the midst of a recession, as is the rest of the country. The real estate industry is especially depressed with traditional lending extremely tight to non-existent. Related ends up delaying payment to the MTA anyway until

May 26, 2010 when a contact is finally signed. Related agrees to pay for and construct platforms over the ERY and WRY and execute their development plan over the decks. By this time,

Related has partnered with Oxford Properties, the deep-pocketed Canadian pension fund, brought in by Jay Cross, former President of the Jets and current President of Related Hudson

Yards.

61 They claimed then the timing wouldn’t work as they needed to be in new headquarters by 2013 (Bagli March 27,2008). It’s possible the economic downturn scared them off.

55 Related and the MTA agree to a 99-year ground lease with options to purchase and payments over the course of the lease equivalent to $1B. At signing, Related agrees to pay

$21.75 m deposit with additional deposits in six and twelve months of about $11 m each.

The MTA Chairman and CEO at the time, Jay Walder, sounds relieved. “We were able to maximize value for the MTA and provide a new revenue stream to support many of our vital capital projects” (MTA 2010). But the MTA did not receive the desperately needed cash infusion. In fact, by 2016 the MTA went so far as to monetize its lease, issuing bonds backed by future payments, raising the $1B in cash they needed to help cover perennial gaps in their capital budget.

The 7-line Extension Lynchpin

As previously noted, most historical plans for the Far West included improved transit access and tended to favor a heavy rail option.62 In fact, hopes for a westward expansion of the

7-line began as soon as it opened in 1927 (NYC DCP 2001). A 7-line extension west was revived again during Javits Center plans in the 1970’s to no avail. Plans to extend the 7-line as far west as the NJ Meadowlands were even included in a 1993 CPC Report, “Shaping our

Future.”63 In 2001, NYC DCP suggests the 7-line extend south along 8th Avenue, this time, so as to connect with the Port Authority Bus Terminal then travel west along 33rd to 11th Ave. Other

62 In its 1989 Master Plan guidelines for the site, the MTA lays out the rationale for needed transit options, pointing out that the Yards are “about a 10-15 minute walk from the Eighth Avenue subway lines (A,C,E) and Pennsylvania Station and a 15 to 20 minute walk from the Port Authority Bus Terminal. The site’s distance from existing transit prompted the MTA to study the feasibility of constructing a transit link between the site and Pennsylvania Station.”

63 This option was apparently considered at one time. But, according to a former transit official, the administrative burden of interstate connections was a deterrent.

56 transit options, including bus routes and light rail lines resurfaced during the Hudson Yards planning process, but never gained traction (Angotti 2008).

Alternative 7-line extension routes were evaluated as part of the 2004 EIS. The preferred option is the current configuration with the 7-line extending west from Times Square along 41st

Street to 11th Avenue, then south to 33rd with storage south to 25th. Two stations were planned, one at 41st and 10th Avenue, and one at 34th and Hudson Boulevard. Costs quickly grew to nearly $3B as excavation bids came in higher than expected for the succinct 1.5-mile extension.

Consequently, one of the two stations planned was dropped for budgetary reasons.

Doctoroff recalls the decision. To keep escalating costs down, he claims to have picked ‘parks’ over the second station. To appease objections from Senator Schumer, they agreed to at least carving out a cavern, leaving room for a second station at some later date. This option was eventually dropped as well for lack of funds. Here, improvements prioritized a new population versus a more equitable distribution of benefits – in this case transit access – to the already existing, transit-starved neighborhood residents. Doctoroff’s later quote reveals decisions made in favor of the real estate state versus society, “It’s not that there’s no need (for the second station), the development around it doesn’t contribute to paying back the bonds;” (Fisher 2015) thus financializing what is meant to be a public good -- privileging real estate wealth over access for all (Sclar 1980).64

64 A city which does not prioritize public transportation, becomes a city “divided into those with and those without access.” Here, Sclar is referring to the prioritization of private transportation, but the comparison of the access haves and have nots is apt here.

57 Construction began in 2007 and the 7-line extension opened for passengers in 2015 at a cost of $2.1 billion. 65 66 A ride along the 7-line from Main-Street Flushing to Hudson Yards will take only about 34 minutes end to end according to the MTA. The 34th Street-Hudson Yards

Station is NYC Transit’s 469th, the first new station since 1989.67 The new station serves the

Javits Center, the High Line, Hudson Yards and Hudson River Park and can handle 25,000 riders per hour at peak. Before leaving office, Michael Bloomberg and other officials take an inaugural ride on the 7-line extension from Times Square to Hudson Yards on December 20, 2013.

Senator Schumer jokes, “the Far West Side is not so far away anymore.” (MTA December 20,

2013).

Although the MTA didn’t fund the project under traditional means with appropriations from their capital budget added to federal support, the MTA is still responsible for future

“construction, maintenance and operation.”

Gene Russianoff, of the Straphangers Campaign, when asked to comment on the extension, articulates the underlying social justice issue of redistribution. This new service “has more to do with real estate than it has to do with serving the riding public,” adding that East Side

Access and the Second Avenue Subway at least benefits the whole system and all subway riders.

“It’s not a bad thing…It’s just not the top priority.” (WABC 2015).

65 The original completion date was December 2013. 66 $2.4B is the figure that is typically cited. But that total includes “$2.1 B for subway work, $266m for other infrastructure, and $53 million paid by MTA local funds for environmental studies and preliminary engineering design” (MTA). 67 That year, NYC Transit opened stations at Lexington Ave-63rd St., Roosevelt Island, and 21 St – Queensbridge (MTA).

58 Plans for Open Space - Hudson Park and Boulevard

Another critical component of the redevelopment plan mandated the creation of open space, desperately needed in the Far West, with less than 1% of land qualified as open space according the DCP’s 2001 analysis. The plan called for a new linear park aligned with a new roadway to help break up the superblocks that were impeding pedestrian flows. The first phase of the Hudson Park and Boulevard system opened in 2015 between W 33rd and W 36th Streets.

The city map was amended in November 2006 to include the Boulevard between 10th and 11th

Avenue. Designed to be pedestrian friendly, the park is aligned with both 7-line station entrances.68 The recently renamed Bella Abzug Park is operated, maintained and programmed by the Hudson Yards/Hell’s Kitchen Alliance, the area’s BID.69

Phase 2 is currently under design by Michael Van Valkenburg Landscape Architects

(MVVA). Groundbreaking is scheduled for late 2020 with a projected opening date of winter

2023 (Gannon September 2018). To pay for the improvements, the NYC Council approved another $500 million in bonds to finance acquisition and construction costs of the park’s second phase which will extend the greenway to 39th Street. At an estimated cost of $374 million which equates to about $125 million per acre, this park section will be the most expensive ever in NYC, easily surpassing the previous record holders of $54 million per acre for Bushwick Inlet Park and

$36 million per acre for the High Line (Morley 2018). The high cost is attributed to land acquisition from private property owners and the cost of building a platform over the Amtrak rail cuts. HYDC will oversee construction and the land will be transferred to NYC Parks and DOT.

68Entrances are located in the Park area at West 33rd and West 34th Streets and at West 34th and 35th Streets. 69 The HY/HK Alliance has whole-heartedly embraced the park and made it their own, with the renaming as only the beginning. They host numerous all – season community events and most recently has installed improvements including additional trees along Tenth Avenue and ‘street seats.’

59 CHAPTER 6 –TODAY’S HUDSON YARDS

New development at Hudson Yards is astounding in terms of scale and speed. Over the past fifteen years since the 2005 rezoning, more than 70 structures have been built or are under construction with developers committing more than $11.4B throughout the Hudson Yards

District by 2017 (HYDC). This includes more than 14 msf of new office space and 4 msf of hotel space which added 9k rooms to the city’s supply. Twenty-one new residential buildings added 10,000 market rate housing units and 1,500 affordable units so far, but only half of the mandated 3,300 affordable units (Manhattan Community Board 4 2019, Official Bond Offering

2017, BJH Advisors 2019). The District remains an active construction site, not expecting full build out until 2047 (C & W 2017).70 The rendering on the following page visualizes the overwhelming, neighborhood-altering density anticipated of more than 52msf of mixed-uses.

The map on the next page depicts the location of office, hotel and residential construction and completions. As shown, hotel development is clustered close to Eighth Avenue and the Theatre

District, while new office space is occurring to the southwest. New residential development is scattered throughout, with many new buildings along the 42nd Street corridor.71

The following chapter provides brief analysis of supply and demand conditions influencing NYC’s real estate markets. It also highlights selected planning issues associated with each market to provide context for the significant new development occurring throughout the Hudson Yards District. This chapter also introduces Related’s Hudson Yards, the 28-acre development rising over the MTA’s Caemmerer Rail Yards, including its potential economic

70 Residential capacity expected to be reached by 2028, hotel by 2039 (C&W 2017). 71 The Hudson Yards District is generally bounded by 43rd street to the north, 28th and 30th Street to the south, Twelfth Avenue to the west and Seventh and Eighth Avenue to the east.

60 impact, its financing, and its current status. For stories of new development, please see Notable

Developments at Hudson Yards in the Appendix which details many individual projects including specifications, location, architects, major tenants and construction status.

Sources: Tishman Speyer Properties, Hudson Yards Official Bond Statement, 2017. 72

Residential Market and Affordable Housing

Derailed by the 2008 recession, NYC’s residential real estate market came to a standstill.

Typically, New York real estate markets are driven by the city’s steady increase in population since 1980 and its fixed land constraints. But demand for new construction plummeted with an immediate decrease in new residential building permits followed by a subsequent drop in new completions by 2010 in reaction to the nation’s economic struggles. By 2012, economic fears were a distant memory and residential construction resumed, buoyed by the start of one of the

72 Map Legend: Circles represent buildings complete as of 2017. Triangles represent buildings under construction. Green=office, blue=residential and orange = hotel (Official Bond Statement 2017).

61 city’s longest and largest phase of employment growth and historically low unemployment rates

(Office of the NYS Comptroller 2019).

The residential condominium market picked up in earnest around 2012 as well. Fueled by demand from global elite investors coupled with the possibility of sensational luxury condo sales, such as Michael Dell’s $100m penthouse purchase at Extell’s One57 in 2014, developers rushed to market to grab their fair share. Historically low borrowing rates supported the steep rise in construction of luxury units between 2012- 2017. By 2018, however, the market was flooded with new inventory and sales slowed significantly, leading to today’s glut of unsold luxury units especially at asking prices of $4m or more. One interviewed broker asked about the likelihood of high-end sales in today’s market, claimed that anything over $2.5 m is on a ‘case by case’ basis (2020). In fact, a recent StreetEasy analysis showed that one in every four units built since 2013 remained unsold by late summer 2019; a full 25% equal to more than 4,100 condo units listed for sale. 73 Soft market conditions are not expected to improve anytime soon with another 63 residential condominium buildings under construction, expected to offer an additional 5,600 new units (StreetEasy September 2019).74 Based on current rates, some brokers predict absorption could take up to 6 years.

Along Billionaire’s Row conditions are even more bleak. Home to multiple supertalls, super-luxury towers along Central Park South & 57th Street, nearly 40% of units built since 2013

73 StreetEasy found that of the 16,242 new condominiums built across 682 buildings, only 12,133 were sold with 4,109 available by the end of Summer 2019. Thirty percent of the unsold units were also listed for rent. Those that did sell brought in $32B and included some of the most expensive apartment sales in the city, particularly along Billionaire’s Row (2019). 74 The same study found that the Lower East Side had the largest neighborhood share of unsold condo units, 68% across seven buildings (NY Times September, 2019). This is primarily due to unsold units at Extell’s One Manhattan Square, the grossly out of scale project allowed to move forward as a minor modification to an outdated 1972 Large Scale Residential Development (LSRD) plan. In 2019 a judge ordered the rest of the project through ULURP.

62 remained unsold as of September 2019 (Chen 2019). Ken Griffin’s purchase of the country’s most expensive home, for $283 m at 220 Central Park South in 2019, kept hope alive for other developers holding out for a big pay day.75

New tax laws impacting high end residential sales will also keep activity down in the luxury condominium market. This includes the federal cap on SALT deductions and the 2019

“Mansion Tax” which raised the transfer tax from a flat 1% to up to 3.9% for sales over $25m.76

These, plus political uncertainty during an election year and the potential for an annual tax on pieds-a-terre, will keep sales slow and new condo construction down. To combat, developers have increased concessions rather than drop prices, including raising brokers’ fees, providing free rent, and instituting rent-to-own agreements as means to stay afloat.

The rental housing market, on the other hand, remains extremely tight with citywide vacancy of just 3.63% in 2017. Affordable units are even harder to come by, with a vacancy rate of less than 1.5% for units with monthly rent of $1,000 or less (Office of City Controller 2018,

HPD Housing and Vacancy Survey 2017).

Residential Rail Yard Development: With low vacancy rates and limited supply of land to accommodate new construction, developers and city officials are discovering the benefits of sites adjacent to or on top of train tracks, harkening turn of the century rail road speculation while also meeting current calls for TOD to support sustainability.77 In addition to development at Caemmerer Yards, construction near train tracks in NYC has skyrocketed. Building permits for new housing units near train tracks or elevated train lines grew from just about 2,000 in 45

75Reportedly 23k sq. ft over three floors. 76 The Trump administration capped the deduction of state and local property taxes. Caps were lifted recently due to economic hardships caused by the Covid 19 pandemic. 77 Also, reminiscent of Hong Kong’s Rail+ Property model.

63 buildings in 2016 to more than 16,000 units in 230 buildings in the first quarter of 2020 alone, according to a recent Localize.city study (Margolies March 27,2020). New housing units within

164 feet of tracks account for 76% of new units in Inwood, and one of every 5 new units in

Queens and the Bronx. Sites offer difficult to come by open, sunlit, airy views, while new technology in sound and vibration buffering materials makes these developments attractive enough to buyers and renters to warrant the higher-than-usual development costs (See Table 8 –

New Housing Projects Near Train Tracks in Appendix).

Affordable Housing Struggles

The solution to supply affordable housing for all New Yorkers has eluded public servants for over a century. From early housing laws meant to improve overcrowded and unsanitary tenement conditions to demolition in the name of urban renewal, the struggle to secure adequate, livable affordable housing continues to be one of the most polarizing issue in the city. Recent attempts to provide remedies by NYC Mayors Bloomberg and de Blasio again fell short on delivery. Bloomberg’s Voluntary Inclusionary Housing amendment did not stave off an increase in homelessness and de Blasio’s Mandatory Inclusionary Housing regulation proved ineffective without additional subsidies (Kobler 2020).

Voluntary Inclusionary Housing: Crafted under the Bloomberg Administration, the

Voluntary Inclusionary Housing program was made available as an incentive under each new rezoning proposal the Administration advanced. The program was widely criticized as just another give away from Bloomberg to his elite developer colleagues. The result was subsidized luxury residential development which often left neighborhoods with less affordable units overall

64 and new affordable units that were unaffordable for local residents. In many cases, more affordable housing was actually demolished and/or diminished, due to increased sales prices and rental rates as area property owners tried to capitalize on predictable increases in property value supported by demand generated by affluent new residents.

Factual studies have since shown increases in homelessness, citywide poverty rates and accelerated gentrification and displacement under Bloomberg, who left low-income city residents worse off by the end of his tenure. The NYC poverty rate grew by almost 21%, under

Bloomberg’s 12 years of leadership.78 In addition, the number of people sleeping in shelters nightly grew from about 28k in 2001 when Bloomberg took office, to nearly 50k in 2013, a rise of 21.6k individuals. Under Mayor de Blasio, the rise of homeless New Yorkers continued, but at a slower rate, standing over 49k when he took office, to a record-breaking high of 59.5k in 2019, an increase of 10,100 individuals or about 17% since de Blasio took office (NYC Rent

Guidelines Board April 2020).

One 2019 study by the Churches United for Fair Housing, analyzed the effect of two

Bloomberg rezonings in Brooklyn: the Greenpoint/Williamsburg waterfront rezoning in 2005 and the Park Slope/4th Avenue rezoning in 2003. They found that even though overall neighborhood population grew by the thousands, the same neighborhoods simultaneously lost black and Latino residents by the thousands as well. Both communities also saw their median rents rise by more than 50% between 2010 and 2018, from about $1,200 to $1,850 (Spivak Dec

15, 2019, Chen 2020).79

78 Mayor Bloomberg served three terms beginning January 1, 2002 through December 31,2013. 79 Specifically, the study showed that “between 2000 and 2015, Williamsburg and Greenpoint saw a population increase of more than 20,000, but simultaneously saw a decrease of about 15,000 Latino residents. In Park Slope,

65 Mandatory Inclusionary Housing: MIH, enacted under Mayor Bill de Blasio’s

Administration in 2016, has also missed the mark. This program took Bloomberg’s VIH policy one step further by mandating developers include affordable housing in newly rezoned neighborhoods or whenever a special housing permit is granted. The $41B “Housing New York, a Five-Borough Ten -Year Plan,” promised to preserve and build a total of 200,000 affordable housing units. In theory, the program adheres to value capture principles of capturing and redistributing the windfalls that typically occur in anticipation of and following an upzoning.

But the neighborhoods identified by the de Blasio Administration for upzoning – those with potential market conditions conducive to 25% affordable units and, in theory, would be able to reach density thresholds to guarantee worthwhile rates of return, have pushed back not ready to accept such increases in bulk. Residents concerned with gentrification, displacement and excessive density, have successfully stopped or overturned a number of de Blasio initiatives including in Inwood, Southern Boulevard and Bushwick. Their arguments have merit and are based on facts. According to the New York Times, speculators gobbled up properties spending more than $610 m since the Inwood rezoning was announced in 2013 (Chen 2020, Geiger 2020).

The Bushwick plan was thwarted after the Administration ignored the community’s plan and for its unwillingness to reach a consensus with local leaders. In Inwood, a court overturned the Administration’s approved rezoning, after the judge agreed with residents that the plan’s environmental impact review process did not adequately study the risk of racial disparity or the effect of speculative development on vulnerable local businesses, many of which end up more valuable to landlords as land sales than retail tenants.

there was a decrease of 5,000 black and Latino households between 2000 and 2013, even as the area’s population grew by more than 6,000 during that same period.”

66 Moreover, affordable housing incentives continued to subsidize luxury housing, even under a progressive elected official who campaigned on more inclusive promises but ended up maintaining the status quo. In Two Bridges, for instance, the four tower, 2.5 msf luxury housing project was allowed to proceed with the Administration ignoring the more contextual need-based community plan, “The Chinatown Plan to Preserve Affordability and Authenticity.” The first tower, One Manhattan Square was built over 800 feet tall, with nearly 1 msf and 815 units, went up unchecked, escaping the public approval process. The project was allowed to move forward as a ‘minor modification’ under the area’s outdated 1972 Large Scale Residential Development

Plan.80 Residents resorted to litigation and by 2019, the State Supreme Court agreed with the community that construction of 2.5 msf did not equate to a ‘minor’ modification. The remaining towers were then put on hold and the ‘modifications’ ordered through ULURP, where at least the community has a formal process for input (Chen 2020). The Extell property, completed in

2018, has fared terribly in the current depressed condominium market with only 20% of units sold by summer 2019 (Hall 2020).

Housing at Hudson Yards: Residential construction throughout the Hudson Yards

District commenced immediately following the 2005 rezoning. One Related-sponsored study stated that more than 10.8 msf of residential development has or will deliver about 10,300 new units throughout the District (BJH Advisors 2019). This includes ‘The Eugene’ at Brookfield’s

80 Extell utilized a 421-a property tax abatement to provide 204 affordable units at 229 Cherry Street, in exchange for increased density subsidizing luxury development. Extell also owns other troubled luxury condo developments, notably One57. Extell’s financial issues most likely led to the sale of their Hudson Yards property to Related.

67 Manhattan West and Rockrose’s 1.6 msf tower at 555 West 38th Street, across from the Javits

Center.81

Home prices have soared throughout the entire Far West, triggered not only by the

Hudson Yards upzoning, but also through development pressure created by adjacent rezonings and nearby historic districts including in and around West Chelsea, the High Line, and the

Meatpacking District.82 The median condominium price in the Hudson Yards subdistrict is $5 million, the highest than any other submarket according to Property Shark.

Promised affordable housing still has not been delivered. As per the Hudson Yards rezonings in 2005 and 2009, at least 3,300 affordable units were to be built. Yet, according to

Manhattan Community Board 4, only half of these have come on line fifteen years later and it is not just private developers to blame, but also the city who has not adhered to its commitments either (See Chapter 8-Manhattan Community Board 4 and Broken Promises).

Manhattan Office Market and Markets for Air

With more than 440 msf, NYC’s office market is the nation’s largest and among the biggest and most expensive in the world. Hundreds of the world’s top firms base their headquarters here, where they have ample access to a talented labor pool attracted to the city’s many cultural, education and entertainment offerings. Between 2009 and 2019, the city sustained one of the largest and longest employment expansions, adding more than 900k jobs over the

81 The Eugene has 844 units and169 affordable at a separate address, 401 West 31st. Rockrose’s development will have nearly 600 units with 150 affordable. 82 As evidence of the Clinton/Chelsea area transformation, an appraisal of the WRY had to use sales comps from transactions between 14th to 24th, as nothing to the north was deemed comparable (JLL 2017).

68 timeframe. Office using employment grew as well from 2.6m to 2.8m between 2010 to 2015, representing a 5-year average annual growth of 1.6% (NYS Comptroller 2020, Moody’s

Economic Outlook 2017).

Population expanded too with an influx of well-educated millennials, who make up about one third of Manhattan’s population (C&W 2017). This tracked with the city’s growth in the

TAMI industries (Technology, Advertising, Media, and Information). Since the advent of

Silicon Alley in the 1990’s, start-up firms began to cluster near the Flatiron District, and subsequently a new wave of technology and software firms made their way to the Far West, unafraid of the emerging market. Tenants such a Google, Amazon, Lyft and Facebook helped to boost demand, needing a place to house additional jobs. Demand for office space from the

TAMI industry rose sharply, with its share of leased space increasing nearly 10 basis points, from about 18% in 2006 to 27% by 2015 (C&W 2017). This came at the expense of the finance industry which saw its share of leasing drop from about 42% to just 30% over the same time period. The employment growth in this sector stoked demand for particular office product with state-of-the art technology, open floor plates for collaborating and plenty of light and air.

Previous new additions to the city’s office stock had come in waves, with the majority of new supply added in the 60’s and 70’s including the 10 msf added by the World Trade Center in

1972. The average building age in the East Midtown submarket stood at 70, according to the

NYC DCP. Older structures were unable to provide large unobstructed floor plates, which became the norm for traditional FIRE sector firms as well.

Development pressure to accommodate growth mounted. The city’s historically powerful business and real estate associations, including the Partnership for the City of New

York, the Real Estate Board of New York and a newly formed group of business leaders, the

69 Hudson Yards Coalition, lobbied for rezoning in the Far West. Fear of losing office market share and NY’s competitive edge over other cities, both locally and globally, galvanized the call for new supply in both East and West Midtown. The city’s developers complied. Over 27.6 msf of newly constructed office space has come on line between 2000 and 2017 which includes increases in both the East and West midtown submarkets. Westward activity leap-frogged over the Times Square and Sixth Avenue submarket to Hudson Yards, causing owners there to substantially renovate their assets as well, including those of the Durst organization (Bagli 2020).

But even with such substantial increases in space, overall Manhattan vacancy rates have not plummeted, absorption continued and average asking rents remained strong. Demand should continue as another 10msf of leased office space is set to expire in 2021 for leases of 100k sq. ft. or more (C&W 2017).

Air Markets and East Midtown Zoning

As commercial construction commenced in the Hudson Yards District, many firms chose to migrate from traditional midtown submarkets, attracted by the significant investment to the area and the generous tax incentives the District now offered (See Chapter 7). This flight to quality shined a spotlight on the inability of the East Midtown office submarket to meet modern tenant needs. Older buildings were not just out of date in need of some renovation. The structures themselves would never be able to offer the wide-open work spaces that were preferred. Eighty percent of East Midtown’s office buildings were more than 50 years old. The

NYC Department of City Planning deemed this a detriment to the area and justified their rationale accordingly. Without ‘proactive action’, they claimed, ‘the area’s premier business district could diminish along with the jobs and tax revenue for the city and region’. It suddenly

70 seemed “as if large open floorplates…were the key to global city economic development” (Sclar

2016).83

The Bloomberg Administration, with its ‘if you build it, they will come’ philosophy, hoped to set the stage for new private construction to flourish on the East Side, just as they had done on the West. But its rezoning plan was struck down, the only Bloomberg proposal to be rejected just at the very end of his tenure. Nevertheless, pressure from NYC’s ‘real estate growth machine’ continued and was redirected to the de Blasio Administration.84

One particular scenario illustrates the way in which NYC’s real estate elite steers urban development to meet its needs. In 1992, the city established the Grand Central Subdistrict which was created to facilitate the transfer of unused air rights from Grand Central Terminal to surrounding areas, acknowledging the development constraints on the Terminal resulting from its landmark status back in 1967. But only two transactions took place, leaving GCT with more than one million square feet of unused air rights (Been and Infranca 2012).

In 2006, TDR Ventures purchased Grand Central Terminal as an investment with the intent to profit from the sale of its 1.2 msf of unused air rights. These new owners expected to close on a deal with its neighbor across the street, now One Vanderbilt Place, where a group had assembled parcels construed to make up one full city block. But the parties involved could not come to an agreement over price, the GCT owners reportedly asking $880/psf, more than three times the typical $250, and talks shut down (Bagli 2015). Later, SL Greene, the developers for

83 According to NYC DCP, East Midtown holds “60 million square feet of office space, more than a quarter million jobs, and numerous Fortune 500 companies.” 84 Angotti portray this entity as a “hegemonic economic, social and political force (where) real estate drives the growth machine, government oils and repairs it, the building trades make the parts, and global and local capital deliver the fuel” (2011).

71 the Vanderbilt site. approached the city directly to request a special permit to increase its as – of- right zoning restrictions in exchange for a $200 m infrastructure commitment for pedestrian and transit improvements. True to the city’s reactionary decision-making in the absence of comprehensive planning, the Administration granted this spot-like zoning, engaging in “zoning for dollars,” formulating and selling invisible land, furthering the financialization of air rights

(Sclar 2016). One Vanderbilt was allowed the density increase to a height of 1,401 feet, now the tallest in midtown, without the need to purchase any privately owned air rights.85

TDR Ventures then brought suit against the city over what they felt was an unlawful taking. TDR Ventures later dropped their suit, pacified once the East Midtown District rezoning was enacted, allowing their air rights to float freely throughout the newly rezoned district.86

The larger the receiving area, the more fungible the air rights, the more attractive and valuable they become. (Sclar 2020). Once building rights can be detached from an actual tax lot, the easier the rights are monetized and tradeable in globally competitive air markets.

Honest development? Loopholes and Fake Floors

The purpose of municipally-manufactured air rights should be to illicit public benefit.

Carefully-crafted programs can incentivize their use to encourage public improvements to transit or infrastructure, to preserve landmarks or open space, or to encourage affordable housing. The

85The city established the Vanderbilt Corridor District in May 2015 which they stated was concurrent “with a private application for special permits to redevelop the block (known as) the ‘One Vanderbilt’ site.” The action included a few other sites which were also able to trade air rights within the 5-block zone. 86 The 78-block area allows for increases in density for contributions to a District Improvement Fund initially set at $250 psf, for pedestrian improvements or for improved transit access. Maximum FAR of 24 is set as of right in the vicinity closest to Grand Central Terminal. NYC DCP stated this will allow for an additional 6.8msf of new space and an additional 6.6msf to be updated as Class A space.

72 financialization of transferrable development rights is based on the notion that TDRs are a public good, a “community asset that government may allocate to enhance the general welfare” (Been and Infranca 2012). By offering increased development rights for a price, the public should be able to capitalize on the private value that they themselves create and sustain.

But these resources are often exploited by the private sector through loopholes, irregular and odd zoning lot mergers, unintended supertall buildings, erroneous building permits, and the acquisition of waivers post the public approval process – all of which lessen the opportunity to capture value and redirect it for public benefit.87 This includes 200 Amsterdam which assembled a Frankenstein-like zoning lot merger, and 60 West 66th Street, which built mechanical voids to increase its height and capitalize on higher floors with better views. Manhattan Borough

President Gale Brewer estimates that at least 16 buildings have used this dishonest technique by constructing unnecessarily tall mechanical floors that don’t count towards FAR as a ploy to add height (Chen 2020). Unobstructed views command higher prices.

In the case of Related’s Hudson Yards for instance, the project was approved for 12 msf.

But 18 msf are planned with Related taking advantage of density bonuses and TDR purchases, amounting to an increase of 6 msf of space. The public received no additional benefits for the significant increase in bulk.

87 Hudson Yards are home to four supertalls, typically with a height of 1,000 feet or more. Supertalls are sprouting up all around the city in the last few years, as new construction technology now allows for increased height via less lot coverage, an advancement not considered under as-of-right zoning but resulting in unintended consequences.

73 Hong Kong on the Hudson: Commercial Development at Hudson Yards

As described earlier in this study, the Hudson Yards District largely consisted of low -rise industrial facilities, parking lots and transportation infrastructure. Siting the Jacob Javits

Convention Center in the Far West and its subsequent 5-block rezoning did little to spark neighborhood vibrancy or induce new commercial or residential development. The area’s 2005 rezoning opened the possibility for large scale development, given the availability of large lots and the potential development rights over rail yards in the neighborhood. Once the MTA’s

Western Rail Yard was rezoned in 2009, forecasters predicted that the Special Hudson Yards

District could accommodate 56msf in office, hotel and residential space (C & W 2017) (See

Table 19 - HY Development by Property Type in Appendix). New office space will account for about 25 msf of total new development and is expected to generate $12B in value capture revenue through 2047. More than 14 msf have been completed or are currently under construction. The city’s most active developers have at least one project in the Hudson Yards

District including Brookfield’s Manhattan West, also built on a platform over operational rail yards will add 7 msf; Vornado is refurbishing One and Two Penn Plaza, along with another project with Related at the Farley Post Office; and Tishman Speyer’s two massive towers will add more than 4msf at 33 Hudson Boulevard, the Spire, and 66 Hudson Boulevard (See Notable

Developments at Hudson Yards and Table 9- Manhattan West Development Details in

Appendix).

The Hudson Yards District submarket has made a strong showing, exceeding other commercial areas in Manhattan when comparing performance indicators. According to Collier’s, the average office rental rate at Hudson Yards measured about $122/msf at the end of 2019, the highest of all Manhattan submarkets, while also exhibiting a vacancy rate of just 4.1%, the

74 lowest of all submarkets. Large lease transactions executed in the District have included tenants such as the NHL Skadden Arps, Milbank, Warner Media, Sidewalk Labs, BlackRock, KKR and

Coach, now part of Tapestry, which was the first tenant to move west to 10 Hudson Yards which opened in May of 2016.

More commercial development is on the way as per the Hudson Yards rezoning. The area was not just rezoned to allow mixed-use development, it was also primed to receive the densest development allowed in the city at 33 FAR for sites within the Four Corners Subarea.

Once built out, this corner at 34th Street and Hudson Boulevard, surrounding the 34th Street 7- line station will add 9 msf (MCB4) All four towers maximized available incentives and all purchased TDRs from the HYIC/MTA with a sale price ranging from $218/psf to $235/psf. (See

Table 1 below -HY Four Corers Subdistrict. See also Figure 11- As-of-Right and Maximum

FAR and Figure 12 – Hudson Yards Zoning Subdistricts, both in the Appendix).

It could have been worse. Originally, two blocks in the District between 33rd and 35th

Streets and 10th and 11th Avenues were proposed with unlimited FAR. The idea was scrapped, though, under pressure from the Community Board and the City Council’s Land Use Committee.

Still, some public officials were disappointed by giving up the “option of having the tallest building in the world.” Amanda Burden, Director of NYC DCP at the time, was a proponent of

“density to get vibrancy,” arguing that tall buildings are quintessentially New York. She justified such density by invoking Jane Jacobs teachings, pointing out the plan’s mixed zoning which protected the residential character of Hell’s Kitchen in the mid-blocks where there (at least) would be light and air (Halle and Tiso 2014, p. 296).

But even with all the planning, negotiating and compromises, developers managed to increase density even after the rezonings were approved, attained through loop holes, waivers

75 and additional land use applications. These post-project tactics often pass for NYC de facto planning, typically lacking avenues for adequate public participation, accountability or transparency. Additional density, which was not considered by the 2005 HY EIS was nevertheless built.88

Table 1-HY Four Corners Subdistrict Sq. Ft Property (millions) Developer Three Hudson Boulevard 1.85 Moinian 66 Hudson Boulevard 2.85 Tishman 50 Hudson Yards 2.9 Related 55 Hudson Yards 1.3 Related Total 8.9 Sources: Moinian Group, Related Companies, Tishman Speyer. Author.

Hotel Trends and Airbnb

NYC is one of the most popular destinations in the world and consequently has one of the largest, strongest and most diverse hotel markets in the country.89 Supported by the activities of over 66.2m visitors in 2019, New York typically enjoys the highest occupancy rates and average daily room rates in the nation. (NYC & Company 2020, OBS 2017). Business travel and tourism, both domestic and international, have grown steadily over the past ten years. Travelers visit to partake and interact with the city’s global and local businesses, its banking and finance

88 By Municipal Art Society calculations, increases to Related’s Hudson Yards and Brookfield’s Manhattan West amounted to about 2.9msf (MAS 2017). 89 Pre-Covid 19.

76 sector, as well as its world-renowned entertainment and cultural institutions. Visitors spent more than $46.4B in 2018, directly supporting 400k jobs and contributing $6.7B in local tax revenue, according to the city’s travel and tourism agency, NYC & Co. By the agency’s calculations, travel and tourism activities saved each NYC household an average of $2,100 on their 2018 tax returns.

Since the 2008 recession, the hotel industry has quickly rebounded experiencing growth in both supply and demand indicators over the past 10 years (NYC & Company 2020). In response, developers have chased opportunities, hoping to cash in on the market’s strength.

Unprecedented growth in travel though, led to ‘unprecedented construction,’ as NYC added more “new hotels rooms than any other market in North America” (NYC DCP 2017, p.5). This, unsurprisingly, has led to some oversupply, particularly in 2017 and 2018 causing slight decreases in room rates and negatively impacting RevPAR (revenue per available room).

Occupancy remained high, however, indicating that operators preferred to lower rates to stay in business. Because of the oversupply, credit tightened as well especially for new construction, with lenders waiting for an increase in absorption rates. (Hall January 2020, NYC DCP 2017).

The decrease in RevPAR was also attributed to the steep growth in the short-term home sharing market which continues to chip away at occupancy rates of the more traditional hotel stock. This is especially true for high compressions days when occupancy is usually guaranteed to be 95% or more, such as for the NYC Marathon. Operators can no longer rely on these event or holiday related stays to offset decreased demand other times of the year (Santana

August 27, 2019).

77 Hotel supply steadily grew annually from 64.8k in 2006 to nearly double adding 124k rooms citywide in 2019. In Manhattan, home to 80% of NYC’s hotel supply, available rooms increased from 67k in 2008 to more than 89k rooms in 2015, a rise of 33% (OBS 2017). Since

2015, another 88 hotels have opened in Manhattan with an additional 53 hotels in the pipeline by

2020, expected to add at least another 11k rooms (NYC & Co January 2020).

Reinforced by recent growth in tourism from domestic and international visitors, as well as increases in convention and business travel due to the steady rise in NYC total and office- using employment, demand remained strong over the past decade. Activity at the Javits Center, boosted overall economic activity citywide. In 2018, the Jacob K. Javits Center hosted 124 conventions, trade and public shows with 2.1 million attendees generating $2B in economic activity through sales, employment and taxes (Javits FY2020). In 2019, NYC hosted an additional 6.2 million convention delegates citywide who booked 331k nights in the year (NYC

& Co 2020).

According to NYC & Company, the city’s marketing and visitor’s bureau, room night demand rose to about 39 million nights sold in 2019, up 4 million from 2016. The average daily room rate (ADR) increased as well, growing from $279 in 2016 to $285 in 2019. As for the

Midtown West submarket, growth outpaced city averages in terms of occupancy, which stood at

92.2% in Q4 2019, and in terms of its average daily room rate of $307.75. (PwC 2019).

Nevertheless, the traditional hotel market citywide is facing significant competition from the steep rise of online short-term bookings through home sharing sites such as Airbnb. While many believed that short-term stays would not directly compete with traditional hotel use, the ease of booking and typically lower price, is especially attractive to millennials not interested in traditional hotel amenities. Airbnb listings have quickly multiplied, increasing from just “1,000

78 listings in 2010 to over 43,000 in 2015” (NYC Rent Guidelines Board 2019). Much of these reservations are illegal, however, under state and city law. The Multi- dwelling law enacted in

2011 specifically prohibits properties with 3 or more units from renting for less than 30 days.90

According to the New York Attorney General “72% of short-term rentals on Airbnb appeared to be illegal” (Office of the NYC Comptroller 2018). Another study found that 68% of revenue realized through Airbnb was attained through illegal listings (Wachsmuth et al 2019).91

With low entry barriers and the promise of rising revenues, the Airbnb industry in NYC is expected to offer 50, 000 listings in 2020, the largest of any other city in the nation. Many listings will be for long-weekends or holidays, directly competing with traditional NYC hotel stays (Hall 2020, NY RE Journal 2020).

The trend is especially prevalent in the Far West. The NY AG also found that the West

Chelsea, Clinton and Midtown West submarket was one of the “top three neighborhoods in the city with illegal hotel conversion” (MCB 4 2019). The NYC Comptroller’s Office confirmed, finding that the highest number of Airbnb listings citywide were hosted in the very same submarket.92 The Community has continually asked for increased enforcement of these illegal hotel conversions, particularly because of its tendency to decrease the supply of affordable housing. SRO’s and hostels rented on a nightly basis through online booking for short-term stays are then no longer available for permanent affordable housing.

90 Except if the owner remains as well. 91 The study measured a total of $711 m in NYC for the year ending Aug 31, 2018, up by 21% from the previous year. 92 According to a 2018 study conducted by the Office of the NYC Comptroller, the Chelsea, Clinton, Midtown Business District submarket had the highest number of Airbnb listings in 2016 at 4,486, representing more than 11% of total listings citywide. This was more than any other submarket and 1,700 more than the submarket with the second highest number of listings in Chinatown and Lower East Side with 2,746 listings (Office of the NYC Comptroller 2018).

79 In an effort to deter the loss of affordable housing and provide some transparency and oversight, the state enacted increased fines for illegal listings/uses to $7,500 in 2018. According to the Rent Guidelines Board “approximately 16,000 violations were issued to illegal rentals including private apartment, hostels and SROs” between 2011and 2019. To counter, the city passed legislation in July of 2018 requiring home sharing sites to disclose the listing information, transactions and reservation records of all hosts to the Mayor’s Office of Special Enforcement.

But by February 2019, a judge issued an injunction on constitutional grounds. Later, Airbnb agreed to share some of this information to the city (Hall January 15, 2020, Santana January

2020, RGB 2019).

Hotels at Hudson Yards: Since the 2005 rezoning, 4 msf of hotel space has added more than 9,100 new rooms throughout the Hudson Yards District, accounting for more than 26% of all Manhattan hotel completions over the same time period (OBS 2017). New supply has outpaced Cushman and Wakefield’s original forecasts for just 2 msf and only 5,900 rooms. New product was diversified with a wide range of service levels including luxury, upscale, midscale and independents, with brands ranging from Equinox, to Marriott to Las Quinta.93 Some of the largest hotels include Yotel New York @ Times Square, Doubletree Times Square West and

POD 42nd Street, all with more than 500 rooms each (OBS 2017). As a result, value capture revenue raised from hotel TEPs (Tax Equivalency Payments) at Hudson Yards will outperform original expectations.94

93 Hotel room numbers and completion dates include: Equinox (223 rooms 2019); Courtyard Marriott – Midtown South (399 rooms 2018); Times Square West (224 rooms 2013); Las Quinta Inns and Suites (79 rooms 2018); Yotel New York @ Times Square (713 rooms opened in 2011); Doubletree Times Square West (612 rooms 2017); and, POD 42nd Street (510 rooms 2017) (OBS 2017). 94 According to their forecast, hotel TEP were expected to total more than $4B between 2017 and 2047, originally forecasted to grow from an annual contribution of $35m per year to $195m by 2047.

Related’s Hudson Yards

Related Companies won the bid to develop over the 28-acre MTA-owned Eastern and

Western Rail Yards in the spring of 2008, though they were not the MTA’s first choice. One of five teams to respond to the MTA’s RFP, Tishman Speyer was originally selected to develop the site in March 2008. Within weeks, their deal collapsed when Tishman Speyer tried to renegotiate the already agreed to terms, prompted by the loss of their financial partner and anchor tenant, Morgan Stanley. By May 2008, the MTA worked out the original terms with

Related Companies instead, and the development process began. Related brought in Oxford

Properties Group, the deep-pocketed Canadian Pension Fund, to co-develop the site. Plans were soon put on hold, however, due to the national recession. Related and the MTA did not actually sign a contract until May of 2010. Construction finally commenced in 2012 with the groundbreaking of 10 Hudson Yards, the first office structure.

Branding Pre-packaged, Semi-gated Luxury Living

As the development process unfolded, Related seized the opportunity to brand their development as THE Hudson Yards, regardless of the fact that the Hudson Yards District spans

45 sq. blocks. Many now conflate the two. Related also includes the Shed and the High Line in

81 all its advertising material and promotions, even though these institutions are supposedly independent. Related uses these amenities as a carefully-crafted marketing ploy to sell its semi- gated luxury development as “an integrated, sustainable, state-of-the-art live-work-play environment where people can get everything they want and need right in their own neighborhood,” — if you can afford it (Chen 2020).

Related’s Development Plan

Guided by the principles and requirements outlined in the MTA’s RFP, most of which were hashed out in the MTA’s 1989 plan for the site, a master plan was developed by Kohn

Pederson Fox. At a cost of $25 B, Related’s Hudson Yards is set to include a total of more than

18 msf of new commercial and residential construction with 4,000 new housing units, one million sq. ft. of retail at the Shops at Hudson Yards, 14 acres of open space, the Vessel, the

Shed, an Equinox Hotel, and a 750-seat public school. There will be 20 structures with 12 towers; 5 office and 8 residential towers. The 1,300 foot-tall 30 Hudson Yards is one of the tallest skyscraper in NYC and includes a transparent, observation deck on the 100th Floor, the

Edge, the highest in the western hemisphere according to Related. Related’s Hudson Yards are billed as the largest ‘private’ development in US History. Related’s Stephen Ross calls the

82 development a city within a city, the Rockefeller Center of the 21st century (See Development at

Hudson Yards in Appendix for details and stories of each structure. See Table 10 for Related’s

Phase 1 Specifications in Appendix).

Phase 1 nears completion with nearly 12 msf of new construction, much of which is rising over a 35k ton, 10-acre platform covering the Eastern Rail Yard (ERY). Phase 2 to be built atop the Western Rail Yard (WRY) is scheduled for 6.3 msf of mostly residential space with some office, retail, park and a new public school.

Related’s Residential Development: Related has completed two condominium residential properties so far, 15 Hudson Yards and 35 Hudson Yards.95 As is the case in the NYC luxury condominium market, reportedly only half the units at both towers had been sold at the end of

2019. Prices are astronomical with penthouses priced at $35 m at the Dillard Scofidio + Renfro designed 15 Hudson Yards, and, $59 million a penthouse at the David Childs designed 35

Hudson Yards.96

Under its development agreement, Related is required to build at least 431 affordable units. So far, 107 units are completed at 535 West 30th Street located on seven floors of the super – luxury tower at 15 Hudson Yards, with its own separate entrance, also known as the

‘poor door,’ without access to the building’s luxury amenities. Its lottery began in October 2018 with studio, 1 and 2 bedrooms available for those making 50 -60% of the area’s median income

95 15 HY houses 285 unit and 143 units at 35HY which also houses a 212 – room Equinox Hotel, the first hotel for the fitness company which Ross is also a partner. 96 Ross is moving from his 8.3k sq. ft. Time Warner Center duplex penthouse listed at $75 m, to a new penthouse a top 35 Hudson Yards. Both buildings were designed by David Childs and both have access to luxury hotel amenities.

83 (AMI) or $31,303 to $62,580. Rental rates range from $858 to $1,350. Fifty percent of the affordable units are reserved for MCB 4 residents.

Office: Four towers have been built during Phase 1 of Related’s development which added a total of 8.6 msf to NYC’s office market. Three of the four towers are completed and fully leased. The Shops at Hudson Yards are “gracefully linked” between the first two towers,

10 and 30 Hudson Yards which were designed by Kohn Pedersen Fox Associates. The three structures were apparently designed as an “architectural triptych… in what could be described as a dance of sleek giants…designed to play off of each other,” with one tower turning towards the city and the other turned to the Hudson, according to Related. The Shops, contributing one million sq. ft. of retail space, however, clearly turn its back to the city with austere, uninviting frontage along 10th Avenue and no street level retail, even though street level retail was one of the conditions of the rezoning.

Hotel: 35 Hudson Yards hosts the country’s first Equinox hotel. Steve Ross purchased a partnership stake in the fitness company, also owned and operated by Harvey Spivek. The brand is also launching additional properties throughout the country. Its 212 luxury-rooms start at

84 $700/night, not exactly geared for the Convention Center crowd envisioned by the MTA’s 1989 plan for the Yards.

$19B? Related’s Estimated Economic Impact

In May of 2016, Related released its commissioned economic impact study conducted by

Appleseed which estimated the total direct, indirect and induced economic activity associated with Related’s development in terms of jobs, wages, value added and output expected. When fully built and operational, Appleseed estimates that HY “will directly employ 55,760 people, with earnings of $9.6 billion” (in 2018 dollars). They also estimate that “the operations of companies located at HY will directly contribute nearly $19 B annually to NYC’s GDP,” about

2.5% of the city’s total.97 Construction spending by Related between 2012 and 2025 is expected to directly support 23,000 construction jobs with $10.6 B in earnings and $25.6 B in economic output. Construction work at Related has already accounted for 16% of the NYC’s increase in construction jobs between 2011 and 2014, according to Appleseed.

Critics deemed the study negligent for not addressing the impact of ‘net’ gains to the city.

Some claimed net effects could be closer to $0 than $19B with more transfers than actual growth

(Putzier 2016). Others claim that the study “vastly overstates” gains, and offers “economic analysis malpractice, at best” (Orvino 2015). Others disagree. MTA’s Robert Paley points out that “of course most of the tenants will be local, it’s a local project,” adding that the development

97 In 2018 dollars.

85 has had a positive regional economic impact that hasn’t been fully addressed or accounted for

(Paley April 2020).

Steve Ross and Financing Related’s Hudson Yards

Steve Ross founded Related Companies in 1972 and began developing government financed affordable housing. Since that time, the company now holds a portfolio of international properties valued over $50B (Related, Sharf March 14, 2019). Still, this is Ross’s first development at this scale and complexity level. It is the largest development at Hudson Yards undertaken by a single developer and one of the largest in the country. Charles Bagli, veteran journalist who has covered real estate and politics for the New York Times for over 20 years, believes Related was the only real estate developer who could have pulled off such a massive undertaking (Bagli 2020).

Ross and his team took on this development at a time of economic uncertainty in 2008, relying on the cyclical boom bust cycles notorious in the real estate industry. Building the platform alone would be a $1B engineering feat, necessary to support some of the bulkiest, tallest and most expensive buildings ever to be built in Manhattan, all constructed over an active,

24/7 operational rail yard without any service interruptions. Costs quickly rose from $12B in

2012 to more than double at $25B today.

As a savvy and experienced developer with a tract record of financial success, Ross and team pieced together the debt and equity needed to finance construction. In 2015, Related raised

$5 billion, reportedly the largest investment raised in the US since the 2008 recession (Wall

Street Journal 2015). This included debt and equity from a varied mix of owner/investor tenants,

86 domestic and international banks, EB-5 investors (see below), hedge funds, sovereign wealth and other foreign capital. Tenant-owner arrangements offered tenants equity in their buildings and acted as additional front-loaded capital for Related, the arrangement having been successful at

Ross’s Time Warner Center. Coach, Time Warner and others opted in early and have already executed profitable lease-buybacks to lower their costs. By 2016, Related had creatively secured about $14B in debt and equity for its development, even in what many considered to be a tight credit market (Solomont 2016). (See Figure 4 for Selected Related HY Finance Sources in

Appendix).

Other costs savings and quality control ventures initiated by Ross and Related include constructing and operating its own manufacturing plant in China to produce curtain walls for its buildings, and establishing its own in-house hospitality branch (Brennan March 2012, Related).

Ross himself has bought partnership stakes in Equinox, Soul Cycle, and in Danny Meyers Union

Square Hospitality Group, which oversees the development of all catering and restaurants at

Related’s HY. Retail, restaurants and tenant partners were all hand selected by Ross calling selectees “people who have proven themselves able to attract capital,” and therefore have the potential for generating more wealth for Ross and friends. The rich can get richer, if privileged to be within Ross’s inner circle. Unfortunately, there was no thought given to creating any value for public capture, Forbes puts Ross’s wealth at $7.7B.

EB-5 Investment at Related’s Hudson Yards

Another strategy to secure low cost capital employed by Related at Hudson Yards was to tap into the EB-5 capital market. The Employment-Based Fifth Preference, or EB-5 program, is a

87 US immigration program designed to attract foreign investment to create jobs in distressed areas in the US. The program offers opportunities for permanent residency in exchange for a minimum investment contribution (See EB-5 Primer in Appendix). Most participating in the program are doing so primarily to take advantage of permanent residency options and are not seeking a short-term, high-yield return on their investment, making capital raised through EB-5 funds less expensive than other more traditional lenders.98

Related has raised $1.6 billion in EB-5 funds for their Hudson Yards development. They have offered multiple securities over multiple development phases. The first two tranches raised

$600 million each. The third seeks $380 million (See Tables 11 – Related’s EB-5 Financing and

Table 12 – Estimated EB-5 Participation in Appendix). To cut down on middleman fees commonly demanded by the numerous actors in the EB-5 industry, including migration agents, consultants, law firms, etc., Related formed its own regional center to process its deals, the

Related New York City Metro Regional Center LLC. This self-serving for-profit center is sanctioned to act as both lender and borrower, subject to minimal accountability or independent audits, creating a comfortable environment easily susceptible to conflicts of interest, fraud and embezzlement. 99 100

98 Reportedly, Related has stopped ‘contributing optional payments’ to their EB-5 investors due to financial hardship related to the COVID-19 pandemic. For instance, its anchor tenant at the Shops, Neiman Marcus, filed for bankruptcy in May 2020 and only about 40% of retail tenants paid their rent in April and May (Chen 2020). 99 Related is active in the EB-5 community and has reportedly spent $1.4 m lobbying Congress to maintain the program. (The Real Deal, June 9, 2017). Its booth at the “Invest in America” trade fair in Shanghai, the annual meeting introducing EB-5 projects to potential investors, was staffed with 8 employees and reportedly the best swag. 100 Conflicts of interest arise when former public officials move on to regional centers where they then lucratively promote the same projects they brought forward in their own administrations, such as Charles Gargano the former head of ESDC and promoter of the Atlantic Yards project, moving on to become the executive director of an EB-5 regional center.

88 As for the requisite number of jobs supported by EB-5 investors, Related’s Hudson Yards more than meets the minimum EB-5 job requirements for the creation of 10 US jobs per $500k in investment. Given that all jobs created by the EB-5’s ‘commercial enterprise’ can be used to meet requirements, even if the EB-5 investment is only a portion of the project’s total cost,

Hudson Yards easily reaches the threshold. For example, if each immigrant investor invested

$500,000 in Hudson Yards and the full ask of $1.6 billion was realized, 3,200 investors would have to prove the entire enterprise created at least 32,000 jobs. The expected 55,800 daily

Hudson Yards workers more than satisfies the EB-5 job requirement. 101

Related also managed to meet the EB-5 requirement of targeting investment to distressed

US communities. Its Targeted Employment Area (TEA) was approved through the gerrymandering of contiguous tracts which included Central Park and reached as far north in

Manhattan as public housing projects in East Harlem with the requisite high unemployment rates. This of course negates the intention of the policy to encourage capital investment and job creation in truly depressed areas, not to subsidize luxury development (See Figure 6 - HY EB-5

Target Employment Area in Appendix).102 By utilizing the low-cost financing through this

“greenbacks for green cards” program, Related reportedly saved at least $200 million when compared to the cost of capital obtained from more traditional sources (Elkind and Jones 2014).

Tax Incentives and Related

Tax incentives are typically controversial and those put in place at Hudson Yards are no exception. With the benefit of hindsight, critics agree that the incentives provided throughout the

101For every $500,000, 10 permanent US jobs must be created. Note that minimum investments thresholds rose in November 2019. See Figure 6.2 for details. 102 A TEA is defined as an area experiencing high unemployment of at least 150% of the national average.

89 District and to Related in particular were overly generous. Related’s commercial PILOT abatements total about $690m over a 25 year-period. This equates to a somewhat more palatable

$27.5 m per year for its four office towers and the Shops — not far off from tax abatements granted to other for-profit properties all across the city (See Table 2 – Related PILOT

Agreements below for PILOT Agreement by property. See also Chapter 7 for details of districtwide tax incentives).

Table 2-Related PILOT Agreements (millions) 25 Year Tax Annual Property Exemption Exemption 10 HY $106.2 $4.2 30 HY & Shops $327.8 $13.1 50 HY $176.7 $7.1 55 HY $76.5 $3.1 Total $687.2 $27.5 Source: Fisher and Leite, 2017, Author.

Phase 2

Construction for Phase 2 of Related’s development has been delayed as no agreement has been reached on the final WRY platform design. Given the soft NYC residential condominium market, the delay works in Related’s favor as Phase 2 includes 4 msf of residential properties.

As for vertical construction finance, one broker had this to say about the ease of securing both funds and tenants at the WRY, “That’s where the real gravy is…The Eastern side will be

90 hugely popular and that will cause the Western side to appreciate dramatically. The thought that you’re going to be alone or that it’s going to be quiet or empty – those days are long gone. It’s no longer pioneering.” (Solomont Aug 24, 2016). Ross himself only hoped to break even on office development, resolved to “make our money in residential and retail…we don’t need to make money in office space” (Brennan March 7, 2012). But they did, probably a pleasant surprise.

Platforms

In early iterations, plans for Hudson Yards assigned platform costs to the city and state, assuming development could not occur without these essential components. As plans for the

Yards first formulated in the early 2000’s, the cost of the platform was still to be assumed by the city and state. By the second iteration of the MTA’s RFP in 2008, private developers were now to bear the extensive costs. Cost estimates in 2003 of about $300 million rose drastically, with actual costs topping $1B for each platform today. Related is quick to counter equity-based criticism with astronomical platform costs; high-priced luxury product was necessary to recoup costs and to make the project financially-feasible, but more likely financially-profitable.

The ERY platform completed in 2016, rises above 30 active tracks and tunnels used not only by the LIRR, but also Amtrak (its Empire Line) and New Jersey Transit. Three hundred

91 caissons were driven between the tracks to support high-rise construction – space made possible through the predilection of Richard Ravitch, the MTA chairman overseeing renovations to the

Yards in the mid-1980s. Twenty-five tons of steel and 14,000 cubic yards of concrete were used in the platform’s construction which its developer calls “one of the most complex feats of urban engineering in history” (Related).

Specifications are still not finalized for the WRY platform. Related has reportedly submitted plans in 2018 but agreements have not been made. Because of the delay, the 2024 scheduled completion date of Phase 2 will be pushed back. For the WRY construction, Related is also coordinating with Amtrak, who is expected to contribute about $385 m to costs to allow access for its Gateway Tunnel project stretching under the Hudson River through Hudson Yards and on to Penn Station. Amtrak’s plans require concrete casings as well built into the WRY to allow for connections. In February of 2020, Related and Amtrak partnered to apply for a $1B low cost federal loan to help subsidize the substantial cost, with preliminary estimates topping

$1.4B (Rubenstein February 20, 2020, Politico 2020, Jones Lang LaSalle 2016).103

Selected Critiques of Related’s Hudson Yards

The Grand Opening of Related’s Hudson Yards public spaces was a grand spectacle on

March 15, 2019. Anderson Cooper emceed the main event along with Sesame Street’s Big Bird, both of whom are now shooting their shows at Hudson Yards. Senator Schumer, Congressman

Nadler, Steve Ross, Gary LaBarbera and more attended (See Figure 5 for Controversy: Labor and Related in Appendix). Notably, Gov. Cuomo and Mayor de Blasio did not attend, pointing out that the heavily criticized tax incentives and subsidies deals were made prior to either of

103 Costs include the deck, structural supports, mechanical, electrical, fire, life and safety improvements (Jones Lang LaSalle 2016).

92 them taking office. Bloomberg did not attend either. Mayor de Blasio on his weekly Morning

Joe segment that day reminded everyone of his position, “We're not here to continually empower the one percent. We're not here to have government policies that make the rich richer, while working people work harder than ever and get less, less and less back” (Jorgensen March 2019).

Since opening, Related’s Hudson Yards critics have panned the development, providing scathing critiques. A few are noted below.

New York Times: Michael Kimmelman: “A Gleaming Behemoth Rises, for Better or Worse.”: "It is, at heart, a supersized suburban-style office park, with a shopping mall and a quasi-gated condo community targeted at the 0.1 percent. Hudson Yards glorifies a kind of surface spectacle – as if the peak ambition of city life were consuming luxury goods and enjoying a smooth, seductive, mindless, materialism " Forbes: Ellis Talton and Remington Tonar: "A truly equitable space, one that honors the values of eclecticism and imperfection that have made New York great, would be less concerned about matching the grandeur of Dubai or Singapore and more focused on matching the dynamism of New York City culture…the architectural approach needs to be social not just structural." New York Magazine: Justin Davidson: I have a feeling were not in New York Anymore! “Hudson Yards is a billionaire’s fantasy city and you never have to leave – provided you can pay for it.” February 2019. Places: Shannon Mattern. “From the observation deck atop 30 Hudson Yards, projected to be the highest in the city, residents and visitors will look out upon a dream made manifest: a clean, efficient urban machine; a carefully curated cultural experience; a Keller-fed, Equinox- toned, Coach-clad populace.” April 2016. The Guardian. Hamilton Nolan. “Most of the city will never get to live, work, shop and play in the billionaire’s fantasy now grafted on to the side of Manhattan… Hudson Yards, the biggest private real estate development in US history, may be slightly less offensive to the memory of Jane Jacobs than a freeway running through Greenwich Village, but not by much.” May 13, 2019. Counter Point: NY Post: Steve Cuozzo, “Progressives have no legitimate reason to hate the project. Hudson Yards didn’t level charming old buildings or drive out poor people. No neighborhood was gentrified… no hobos were evicted…Maybe, Hudson Yards will prove as enduring and be one day as beloved as Rockefeller Center.” January 2020. “Yards shaming…Damning Hudson Yards is a favorite sport in the Big Apple.”

93 CHAPTER 7 - A HUDSON YARDS AUDIT

For the first time since its inception, the Hudson Yards Infrastructure Corporation

(HYIC) was able to make a $100m surplus payment to NYC. Last year, revenue from value capture mechanisms netted a profit of $318 m in FY 2019. Value capture receipts not only allowed HYIC to cover its debt service on its own, the Corporation also made headway towards repaying the $369m in Interest Support Payments (ISP) made by the city between 2010 and

2015. Though these explicit transactions put HYIC in the black for now, other indirect costs don’t appear on its balance sheet. The following chapter traces monetary flows associated with the Hudson Yards Finance District in the hopes of deciphering any tangible net outcomes.

REVENUE: Raising Capital

Created in 2005, HYIC’s immediate task was to raise the $3B needed to finance the 7- line extension, a mid-block park and open space, plus street, sewer and water infrastructure improvements. To do this, HYIC executed three separate trust agreements to date. Financing for the first indenture was split into two separate bond offerings, $2 B at the end of 2006 (FY

2007A) and $1B offered at the end of 2011 (FY 2012) (See Table 17 – HYIC Bond Offerings in

Appendix).

Subsequently, in FY2017, HYIC executed a $2.1B Second Trust Indenture which refinanced over two-thirds of its outstanding obligations, using the new bonds to retire the old.

The refinancing structure allowed HYIC to refund all of its FY 2007A Series and some of its of its FY 2012A bonds.104 Debt was restructured to provide predictable level payments and to

104 As testament to continual financialization of public assets, NY had the three largest transactions in the northeast in that same year, 2018. In addition to the HYIC $2.1B refinance, the MTA refunded $2B and the Empire

94 decrease costs, resulting in lower costs than anticipated (NYC IBO). The refinancing also finally established an amortization schedule, incorporating both principal and interest payments beginning in FY 2022.105 The remaining FY2012 debt of $609m was restructured as well, resulting in level debt service and a sinking fund for set asides. Enabled by these transactions,

HYIC also made a $112.8 million payment to the Transitional Finance Authority (TFA) in FY

2017, to defease its debt, lowering its fees (HYIC 2019).

To cover capital costs associated with Phase 2 of the Hudson Park and Boulevard, HYIC entered into a Third Supplemental Trust Indenture in 2019. This followed the NYC Council’s approval in August of 2018, authorizing an additional $500 million in bonds.106 This raised

HYIC’s legal borrowing capacity from $3B to $3.5B and ensured the city’s promise to provide interest support payments covering HYIC’s expanded borrowing capacity if necessary.107

All of HYIC bond offerings were fully subscribed, bolstered by enticing credit ratings, largely due to NYC’s strong commitment to cover all of HYIC debt service. Demand was so strong in 2017, HYIC received offerings from institutional investors totaling $7.6B — $5B more than available (HYIC May 23, 2017). HYIC’s Official Bond Statements caution would-be investors against risks including recession, less than expected revenues and/or unpredictable costs. Nonetheless, rating agencies citied confidence in the offering noting NYC’s substantial

GDP, its ‘extraordinary’ tax base, and minimal cost of HYIC debt service payments relative to

State Development Corporation refinanced $1.8B (Coen Feb. 26, 2018). NYC itself holds about $38 B in general obligation bonds. Could NY be over leveraged? 105 Principal payments were originally scheduled for 2020 for FY 2007A and 2022 for FY 2012A. 106 Subsequently, HYIC then entered into a Term Loan Agreement (Loan) to allow access to $350m of the total. As of June 2019, HYIC had not drawn upon the Loan (HYIC 2019). 107 When the plan was first presented in 2004, Phase 2 of the Park and Boulevard was estimated at $271m.

95 NYC’s $95B+ budget. HYIC’s risk was deemed low, a reflection of NYC’s own creditworthiness (See Table 18 – HYIC Credit Ratings). 108

Vertical Golden-Geese: Comparing Expectations with Actual Revenue

The political and economic attraction of the HY Finance Plan relied heavily on commissioned forecasts by Economics Research Associates (2004), and later by Cushman

&Wakefield and Moody’s Analytics (2006, 2011, 2017). Sensational statistics promised ever- increasing, cost-free value capture revenue which were presented to stakeholders as proof of an innocuous, self-financed project, meant to catalyze the first ‘new’ neighborhood in Manhattan since Battery Park City.109 Bonds sold would easily raise the money needed to fund public improvements so it seemed, while debt service payments could be generated from anticipated value increase created by public interventions, including upzoning, and street and transit improvements. Returns to private investors were to be created through the capture of colossal new property taxes and strategic sales of publicly manufactured air rights creating continuous revenue streams, sourced from a proliferation of new money-making towers rising in the air like vertical golden geese.

Robust forecasts put expected revenue at an astonishing $34 billion through 2050.

According to Cushman & Wakefield, annual revenue was expected to grow from just $13 m in

108 Moody’s upgraded NYC’s credit rating in 2019 to Aa1, up from Aa2 on its $38B GO bonds. It was “the best the city had ever received” based on the city’s economic diversity and expansion beyond the ‘unsteady’ financial sector (Moody’s, Crain’s 2019). 109 A neighborhood did exist in the Far West, but was largely ignored.

96 2007, to over $2B per year by 2050, more than enough to cover debt service many times over.110

Updates made by C&W in 2011, as partial due diligence for subsequent bond offerings, put total revenue even higher at $37B. By 2017’s update, estimates shrank somewhat to $28B, but still showed annual revenue topping $1B by 2036, just one additional year than the previous forecast

(See Table 20-C&W HY Total Revenue Forecast and Figure 7 in Appendix for comparison of all three forecasts). 111

Performance, however, did not align with predictions particularly during the early stages of the plan’s implementation. By 2013 the NYC IBO released a study detailing a revenue shortfall of over $100m between 2005 to 2012.112 Optimism bias most certainly was one culprit, but not achieving expectations early on was probably more likely the result of the unaccounted for national recession in 2008, which brought construction and traditional lending to a halt. 113 In a 2015 interview, Doctoroff comes close to admitting a flaw in the value capture plan stating, “the city’s projections for development on the West Side did not anticipate a severe recession in 2008…Our whole philosophy was to create the conditions for the private market to invest…You can never predict when markets will be favorable or not.” (Bagli June 19, 2015).

110 C&W cyclical forecast is utilized throughout this document which acknowledged multiple business cycles and is based on new construction totaling 40.9 msf. C&W’s base forecast adheres to a steady economic growth forecast and is based on 45 msf. 111 Note: This figure is based on projections from 2017-2047 (30 years), 13 less years less than the 2006 forecast which covered 2007-2050 (43 years). 112 By this point only $120 m were collected versus the $283m forecasted. 113 Optimism bias is a common flaw when planning and implementing large-scale transportation projects. The bias misrepresents benefits and risk, sometimes deliberately, which skews cost benefit analyses leading to the “underestimation of costs and overestimation of benefits” (Flyvbjerg 2009). In his analysis of 250 projects, spanning 70 years, across 20 countries and 5 continents, Flyvbjerg found that 45% of rail projects studied experienced cost overruns, and 51% of rail projects forecasted greater travel demand than what actually occurred. This confirms that the best projects on paper end up being the worst in reality with public taxpayers shouldering the underperformance and financial shortfalls – Flyvbjerg’s reverse Darwinism, “Survival of the Unfittest.” (See Table 21 – Optimism Bias in Mega Transport Projects in Appendix)

97 Real estate development notoriously operates along boom-bust cycles. Contingencies should have been written into the scheme. And while municipal finance policies designed to attract private sector investment are standard, the Hudson Yard scheme as designed did not adequately protect the public interest and most certainly did not contain any options for local redistribution of gains during development or even after all bonds are expected to retire. Given its sizable tax base, NYC was able to cover gaps in debt service with little disruption to other public services – a safety net which could prove elusive in other smaller to mid-sized cities when instituting value capture schemes of their own (See Table 22 and Figure 8 in Appendix for comparison of actual revenue collected vs. forecast).

Interest Support Payments (ISP)

Under the Support and Development Agreement between HYIC and NYC, the City

Council agreed to provide Interest Support Payments (ISP) if and when HYIC funds are insufficient to cover debt service. This planned strategy was meant to provide coverage in the early stages of development when several revenue streams from value capture mechanisms wouldn’t yet exist, but fell short of expectations. Between 2010-2015, the city paid $369 million in ISP to HYIC, $150m more than forecasted. To date, the last ISP was made in 2015 and no additional payments are currently anticipated by HYIC (See Table 23 for Forecast vs. Actual

ISPs).

Unaccounted revenue from investment income helped to cover costs and contributed to

HYIC’s ability to make the first $100m surplus payment to NYC in FY 2019. Similar payments from the HYIC to the city are planned annually through at least 2023 (See Table 27 - HYIC

FY2020 Budget in Appendix). According to the C & W 2006 forecast, a surplus payment was not expected until 2024.

98 Constructing the Hudson Yards Value Capture Plan

Value capture mechanisms employed at the Hudson Yards District include annual reoccurring revenue and one-time, non-reoccurring payments (See Table 3 below). Reoccurring revenue sources include Payments in Lieu of real property Taxes (PILOTs) for new or substantial rehabilitation of commercial properties, and, Tax Equivalency Payments (TEP) for new or substantial rehabilitation of residential, hotel and retail properties. Non-reoccurring generators include Payments in Lieu of Mortgage Recording Tax (PILOMRT), purchases of

District Improvement Bonuses (DIB), and the sale of Transferrable Development Rights (TDR).

Cumulatively, these mechanisms have yielded more than $1.5B in proceeds. On an annual basis, in FY 2019, HYIC collected a total of $318m from value capture mechanisms (See Table 24 and

Figures 9 and 10 in Appendix for annual and cumulative value capture revenue by year, by property type and by percent).

Table 3-HY Value Capture Mechanisms

Reoccurring Non-Reoccurring Payments in Lieu of Taxes (PILOT) District Improvement Bonus (DIB) Tax Equivalence Payments (TEP) For Affordable Housing For Park Construction Transfer of Development Rights (TDR) Payments in Lieu of Mortgage Tax (PILOTMRT) Source: NYC EDC, NYC DCP

99 Hudson Yards Finance Plan Performance

Tax Equivalency Payments (TEPs) provided a steady growth stream, rising from just

$5m in 2007 to $113m in 2019. TEPs raised the most value capture revenue so far, contributing about 34% or $528m. The relative speed of new residential and hotel construction, both pre- and post-recession, and, more specifically their contributing tax equivalency payments, at least provided some positive cashflow in the early years of the scheme as planned.

The second largest revenue stream came from payments made for District Improvement

Bonuses (DIBs). Over 35 properties paid more than $475 m into the District Improvement Fund in exchange for over 2.9 msf, with properties generally maximizing all incentive allowances

(Official Bond Statement 2017). 2015 measured the greatest annual DIB revenue of about

$197m, primarily from luxury rental buildings at The Eugene at Manhattan West and 555Ten at

555 Tenth Avenue.114 DIB payments represent 31% of the value captured to date. Sales of TDRs brought in nearly $300m or 19% of the total. PILOTMRT, paid on new mortgage filings for commercial buildings over 500k sq. ft. have contributed about $167m or 11% of the cumulative total.

PILOTs from commercial properties so far have only accounted for 5% of the total, not appearing on the ledger until 2015, three years after initial forecasts. Nearly all future revenue, however, is expected to come from PILOTs and TEPs which will contribute 96% of future value capture revenue through 2047, with just 4% coming from non-reoccurring payments. About half

114 These payments went towards large luxury buildings standing over 500 feet tall. Brookfield paid $93m for 740.3k sq. ft. (add total) at The Eugene, 3 Manhattan West, a 62-story rental with 844 units, 730 feet tall at 31st and 9th. Amenities include roof deck and cocktail bar, library lounge, rock climbing etc. Extell paid $30m for 243.4k sq. ft for ‘555TEN’, 555 Tenth Avenue at 41st, a 56-Story luxury rental, 610 feet tall, with 600 units, including 120 affordable. Amenities include pool, dog park and bowling alley. (C&W 2017, Brookfield, Extell). Both paid about $125/psf (MTA).

100 of this cash flow will be generated from office properties, followed by TEPs from residential properties making up about a third of the total, and, the remainder, about 15% will most likely be generated from future hotel development (C&W 2017) (See Table 26 for HYIC Budget

Projections of TEPs and PILOTs).115

Non-reoccurring revenue streams: The HY Finance Plan was purposefully structured with nonrecurring one-time payments to particularly cover costs in the early stages of development. Both District Improvement Bonus payments (DIB) and Transferable Development

Rights (TDRs) are usually paid to the HYIC when a property files for a building permit.

Payments in lieu of mortgage recording taxes are paid once upon filing. These value capture mechanisms are described below.

DIB: For a fee, developers can boost their density and increase FAR by making a one- time payment to the District Improvement Fund (DIF). The HYDC manages the District

Improvement Bonus (DIB) process, with NYC Planning setting an inaugural purchase price of

$100 psf. NYC Planning is required to make annual adjustments to the price based on CPI fluctuations. The DIB price per sq. ft. currently stands at $134.63, more than $100 less than the price set for DIB under East Midtown Zoning which was set at $250/psf (NYC Planning).

However, when seeking a DIB for a residential property, developers must first meet inclusionary housing bonus requirements before seeking an additional DIB. In these cases which combine DIB with affordable housing provision, the DIB per sq. ft. contribution is discounted such that “a smaller per square foot of bonus contribution, approximately 45%, is required, ”

115 Residential and hotel development is expected to reach capacity in the Hudson Yards District by 2029 and 2039 respectively, while build out of office development will occur over a longer timeframe, expected through 2047 (Cushman & Wakefield 2017).

101 another unnecessary giveaway where developers could easily pay full price per sq.ft. for DIB in addition to meeting the inclusionary housing requirements. (NYC Planning, Hudson Yards

District Improvement Bonus).

Maximum density permitted is dependent on subdistrict. As-of-right FAR of 6.5 for residential properties can increase to 15 FAR if adjacent to the north west side of Hudson Park and Boulevard, near the Javits Center. Some residential development occurring on mid-blocks are capped at 6 FAR. Commercial uses can be increased from 10 FAR to as much as 33 FAR when maximizing all layers of incentives along the east and west parcels at the southern end of

Hudson Boulevard. As structured, these incentives proactively steered the densest development to this Four Corners subdistrict, directly served by the 34th Street 7-line station. Here, four massive office buildings have been completed or are under way which will add 8.9 million sq. ft of new office space at the four corners of only one intersection, 34th & Hudson Boulevard (See

Figure 11 for as-of-right and maximum FAR and Figure 12 for subdistrict boundaries in

Appendix).

TDRs: The HYDC oversees TDR purchases associated with air rights over the Yards and those along the Hudson Park & Boulevard. Prices per sq. ft. are set at 65% of fair market value of the receiving parcel, based on appraised value commissioned by the HYDC.116 Market prices are determined in conjunction with required pricing study updates which were conducted in

2013, 2015, 2016, and 2017. According to the Eastern Rail Yard TDR Disposition and Pricing

116 Little rationale is offered on why /how 65% of fair market value is standard. According to NYC Planning’s 2015 study on air rights, prices of most TDRs are set by the market. But if “TDRs are held by governmental or quasi- governmental entities; the price is set by appraisal” as is the case at Hudson Yards.

102 Mechanism Policy, prices cannot go lower than $103 psf and should be equal to or higher than the DIB price psf.

TDRs and the MTA: On December 28, 2006, HYIC entered into an agreement with the

MTA to purchase 50% interest in its ERY & WRY air rights for $200m which were paid over four payments between 2007-2010. These rail yard TDRs could only be sold and transferred to specific receiving sites in new commercial buildings in zoning subareas A2, A3, A4 & A5 only, situated along the new Hudson Boulevard. Other restrictions preclude ERY TDRs from being sold “within the ERY or WRY” or to developers building over the Amtrak rail yards between the

ERY and the Farley Post Office (C&W 2017). A total of 4.56 msf were created over the MTA’s

Yards as per the rezoning (See Figures 13 and 14 for generating and receiving sites of DIBs and

TDRs in Appendix).

As part of their agreement, HYIC/HYDC were to market, price and sell the TDRs without needing any approval from the MTA (Official Bond Statement 2017). In addition, the

HYIC was first to receive all TDR sale proceeds until reaching its initial $200 m investment plus interest. Once this requirement was met, the MTA would have claim to any remaining sales. The

NYC IBO criticized this arrangement which meant that by 2013, “the threshold for the MTA to begin receiving proceeds has risen to $255 million and will increase by an additional $5 million every six months” at a 5% interest rate (NYC IBO 2013).

Since the rezoning, the MTA has recorded eight TDR transactions beginning in 2014.

Nearly three million sq. ft have been sold to office, residential and hotel developments for a total purchase price of about $671m, averaging about $227/psf to date. HYIC recouped their initial investment plus interest by 2018, leaving the MTA with revenue of about $300m. The MTA retains sole ownership of the remaining 1.56 msf of TDRs, still available for purchase. Related

103 had the largest TDR transaction, adding 1.04 msf to 50 Hudson Yards with a purchase price of

$225 million or $218/psf (MTA 2020). Other receiving sites are designated north from 33rd

Street along Hudson Boulevard to 41st Street (See Table 25 for details on each of the 8 TDR transactions in Appendix).

Payment in lieu of Mortgage Recording Tax (PILOTMRT): Within the Hudson Yards

Finance District, commercial properties over 500k sq. ft. may also apply to NYC IDA for a full or partial exemption from the Mortgage Recording Tax. Typically, the 2.8% fee is shared between the city and state at 1.75% and 1.05% respectively (2017). Any potential proceeds from transactions within the HY District are to be funneled to the HYIC instead. For mortgage transactions on MTA properties, the MTA also agreed to cede 75% of any proceeds to HYIC.

Most payments were generated from transactions at 10 and 30 Hudson Yards (Official Bond

Statement 2017). In total, revenue collected from PILOTMRT has contributed $167m or 11% overall as of 2019.

Reoccurring Revenue Sources: Reoccurring annual payments are expected to continue to support debt service through 2047. These include PILOTs, Railroad PILOTs and TEP which are explained below.

PILOTs: Payments in Lieu of real property Taxes, or PILOTs, is a widely applied economic development strategy administered through the NYC Industrial Development

Administration (NYC IDA). These tax incentives are designed to encourage development that may not otherwise occur ‘but for’ the tax abatement or discount, put in place in a certain geographic area.

104 To induce development and stimulate activity quickly, a Uniform Tax Exemption Policy

(UTEP) area was devised and adopted in August of 2006. The UTEP established three zones distinguished by distance from 8th Avenue.117 The further west, deemed riskier, the deeper the discount. The quicker construction started, the better the abatement. By encouraging development with hard-to-resist tax breaks, the city’s strategy was structured to ensure positive cash flow generated by PILOTs (See Figure 15 for HY Finance District Boundaries and UTEP

Zones in the Appendix).

To receive tax abatements, owners/developers apply to the NYC IDA which then conducts a cost-benefit analysis before awarding exemptions. At Hudson Yards, eligible properties must be at least 1 million sq. ft., 75% Class A office space, and claim at least 90% of the maximum density allowed, including bonuses and/or other available density incentives discussed above. Additionally, developers can also petition for sales tax exemption of all construction materials (OBS 2017, NYC IBO 2013). PILOT payments are forwarded to NYC

IDA then transferred to HYIC. Because of this arrangement, payments do not appear in the

NYC budget.

The UTEP is divided into three zones with varying degrees of incentives. Properties in all zones can receive tax incentives for 19 years post-construction. Between the fifth and fifteenth year, PILOTs are to increase 3% annually, after which the abatements are phased out over the next four years. Beginning in the 20th year after a project’s completion, taxes transition to 100% of real property taxes which will still be forwarded to HYIC. PILOT payments are expected for a total of 29 years or within 60 days of retired HYIC bonds. Once PILOTs expire, taxes then

117 The UTEP excludes the WRY, Javits Center and the PABT.

105 revert back to city coffers. But, the HYIC can request the NYC IDA “exercise any right to extend the term of each PILOT agreement they may have” beyond the 29 years (Official Bond

Statement 2017).

No discounts are awarded in Zone 1, home to MSG which is has been exempt from property taxes since 1982.118 Properties in Zone 2, roughly 8th Avenue to 10th Avenue, can receive a 25% property tax discount. Properties in Zone 3 are afforded the most generous incentive, offering a 40% property tax discount for the first 5 million sq. ft. of development.

These incentives encouraged development to the farthest Far West, to build in a budding new neighborhood which initially offered limited amenities and unestablished neighborhood services.

Developers obliged and by 2017, the 40% discount was fully subscribed (Cushman & Wakefield

2017). Remaining properties in Zone 3 can still receive discounts ranging from 25% to 15%, staggered by every 5 msf of development.

Railroad PILOTs: Properties developed atop the ERY and WRY are required to make

Railroad PILOTs to the MTA. The MTA agreed again to forward all of these proceeds to the

HYIC as well (Official Bond Statement 2017).

Tax Equivalency Payments (TEP): Since PILOT agreements only apply to commercial properties under state law, a Tax Equivalency Payment structure was devised and applied to new or substantially renovated hotel, residential and retail properties. TEP funds are calculated annually upon the OMB’s review of temporary and final Certificates of Occupancy received for developments constructed after January 2005, more than 45 buildings so far. TEPs are also collected from new or renovated commercial properties which are ineligible for discounted

118 MSG would have been liable for $41m in FY 2019 and cumulatively for $555m since the incentive designed to keep MSG in Manhattan was instituted 37 years ago (NYC IBO, Demause, January 22, 2020).

106 PILOTs. Estimates of Districtwide TEPs are sent to the NYC Council for appropriation which then is forwarded on to HYIC. For all other properties “including existing properties that are not new or rehabbed (or just new non-pilot), the City Council has agreed to appropriate an amount of money equal to the total (not discounted) real property taxes paid each year” (NYC IBO).

EXPENDITURES: Debt Service

To date, HYIC has dispersed more than $1.4B to bond holders. Actual debt service payments were lower than anticipated every year since 2008 and cumulatively nearly $700k less than forecasted. HYIC plans to disperse more than $5.3B to investors through 2047 with predictable payments of about $185m per year (See Table 29 and 30 for Annual Debt Service

Payments v. Forecasts and for Anticipated Debt Service Payments through 2047 in Appendix).

Additional Costs: Like most mega-transportation projects, the actual cost of the 7-line extension exceeded estimates. In a Memo of Understanding between the city and the MTA in

September of 2006, the city agreed to be responsible for cost overruns related to the7-line extension. Costs grew from $2.1B to $2.4 B (NYC IBO 2013). By 2011, plans to build at least a shell for a future Tenth Avenue station at 41st Street were dropped. No funds were available for other aspirations including providing direct subway access to the Javits Center, a condition put forth in the MTAs 1989 plan (Bata 2020). By 2016, the city had spent $51m from its capital budget for 7-line extension costs (NYC IBO 2017).

Other public costs also mounted, including a $75 million grant to the Shed and another

$53m from the MTA towards the EIS. As of 2017, NYC IBO measured $128 million in capital expenses, with another $139m planned (See Table 28 for NYC Capital Spending in

107 Appendix).119 In addition to infrastructure upgrades and transit improvements, the rapid increase in population will spur the need for increased basic services, including police and fire protection as well as for education and other social services, costs that are not yet on the books.

HYIC Revenue and Expenditures Short-Term Forecasts: According to its FY2020

Budget, HYIC expects to remain in the black, projecting reoccurring revenue between $223 and

$249 million annually from TEPs and PILOTs. They do not factor in any non-reoccurring revenue from PILOTMRTs or DIBs, citing their unpredictability. 120 As budgeted, revenue should more than cover debt service, barring any cost overruns. HYIC foresees a $100 million payment to the city annually for every year through 2023. As such, HYIC will be able to pay back the city’s ISPs by 2022 and in theory could then start to repay the city for some of its other hidden costs (See Table 27 – Selected HYIC Budget Line Items in Appendix). One New York

Times article reported that HYIC was set to forward a $350m payment to the city in June of

2020, exceeding expectations (Chen 2020).

Discussion

City policy makers across agencies crafted programs which worked to ensure financial success at Hudson Yards. Tax incentive policies, like the ones instituted at Hudson Yards are widely utilized in cities across the nation. Even so, these economic development strategies rarely incorporate any moral obligations to equity, seemingly only reliant on unproven trickle-down effects. This is apparent at Hudson Yards, particularly since nearly all benefits are enjoyed only

119 This IBO report shows $100m planned for 33rd Street reconstruction which some have argued should be considered a routine upgrade, a capital expense which the city would have had to fund regardless of the Special Hudson Yards rezoning. 120 Recall, even if one-time TDR transactions occur, HYIC has no claim to any proceeds which belong solely to the MTA and therefore, not included in its budget.

108 by NY’s highest-income earning workers and residents, making an average of $175k/year and buying apartments with a median asking price of $5 m.121

Nonetheless, the area did sit idle for decades with most modern NYC Mayors peddling some kind of initiative to unlock the Far West Side. Any potential projects did, in fact, carry significant risk. Convincing residents and businesses to move outside of established submarkets to a neighborhood that didn’t exist in an area which was, at best, difficult to access with no services, required bravery, imagination and, apparently, financial support. Public investment and incentives were essential to providing some certainty, while high-density, market-priced development made projects financially feasible. But because of the significant political and financial effort spent by the city and state to lure developers to the site, many more New Yorkers should have and still should be able to enjoy the Hudson Yards District in terms of its promise to live, work, dine, shop and play. Inclusion needed to be explicit. The principal-agent problem is glaringly obvious, with private developers over-achieving in their roles as self-serving profit- seekers. Clearly, regulations to protect the public interest and ensure equitable redistribution of value needed to be etched into the plan to meet a wider-range of economic and social goals.

Kimmelman, upon the opening of Related’s Hudson Yards, pinpoints its seemingly- deviant purpose, “Hudson Yards glorifies a kind of surface spectacle – as if the peak ambition of city life were consuming luxury goods and enjoying a smooth, seductive, mindless, materialism”

(March 15, 2019). This is not the kind of city life most New Yorkers live. Nor should it be a diverse city’s aspiration or the ambition of its public servants.

121 . The median residential sale price at Related’s Hudson Yards was $5 million in Q32019 (Property Shark 2019) and the average annual income of employees at Related’s Hudson Yards is estimated at $175k (Related),

109 CHAPTER 8 – Evaluating Outcomes: Transfers, Trade-Offs and Lost Opportunities122

Evaluation of a development plan is typically conducted prior to its implementation.

Costs and benefits are weighed, pros and cons discussed with all potential stakeholders, outcomes and externalities are measured. In the case of Hudson Yards, this did not thoroughly occur. The 2005 Hudson Yards Redevelopment Plan makes no mention of neighborhood preservation, contextual character, housing or open space needs. The planning process, or lack thereof, coupled with public subsidies and incentives geared only to attract private sector actors, essentially reaffirmed the power of NYC’s real estate elite by offering up parcels ready to be exploited for maximum profit. It was less a plan and more a typical NYC reactionary rezoning, leading to financialized land and development rights, subject to laissez-faire-defined highest and best use. Little protection was put in place to ensure much public benefit or to incentivize any socially-valuable or equitable use of neighborhood properties. The plan did little to redistribute wealth, with some critics claiming that the value derived from the upzoning only amounted to “a large welfare check to property owners and investors,” (Angotti 2011. P. 207).

The physical planning goals and financialized rezoning objectives were dictated down to the bureaucrats who obliged. NY’s Olympic BID created urgency and facilitated comradery in the NY business and financial industries, while simultaneously distracting and dividing some advocacy groups, elected-officials, and the community. Opponents ended up focusing all their resources on defeating a gratuitous sports facility, when they should have been paying more attention to the tremendous bulk permitted under the rezoning — the densest in the city at 33

FAR (MCB4). The community is now left with a vacuous, claustrophobic, mountain of glass-

122 See also Hudson Yards Value Capture Plan Design and Performance and Review of Physical Planning Goals in Appendix.

110 clad office towers, suburban-like retail, and luxury-priced residential out of reach for most, instead of a contextual, diverse, inclusive place.

Even the cultural facility originally meant for the community, the Shed, is governed by the rich and amounted to not much more than an ideological loss leader created to imply community inclusion and attract some elite to semi-gated luxury living. Its Board of Directors is made up of the network of mostly white males influential throughout the history of the project, and now in high-paying, privileged leadership positions at Hudson Yards. Redevelopment of the

Far West offered opportunities to supply affordable housing, real parks, community facilities, accessible inclusive culture, and local job-generating commercial space. But even the little social amenities which were promised, by the city and developers remain unfulfilled 15 years later.

Manhattan Community Board 4 and Broken Promises

Manhattan’s Community Board 4 is home to diverse neighborhoods with rich histories and strong identities including Clinton, Hell’s Kitchen, Chelsea, and, now Hudson Yards. 123 It is also home to some of the region’s most vital transportation infrastructure including the Lincoln

Tunnel, the Port Authority Bus Terminal, the West Side Highway and nearby Penn Station, all essential to the region’s mobility and economy but are nevertheless disruptive to residents. Over the past few decades, the Far West like many parts of the country has had to adjust to the post- industrial city, left with the loss of jobs and much of its land zoned for manufacturing uses, land

123 Manhattan’s Community District 4 is bounded by 14th to 59th Streets and the Hudson River to Eighth Avenue north of 26th Street and Sixth Avenue south of 26th Street. MCD4 was home to 104,000 residents in 2010 up from 87,000 in 2000, an increase of 19%. By 2017, population was estimated at 152,000 according to the NYU Furman Center, representing a 46% increase. With the influx of so many new residents, population is only expected to go up with the 2020 Census count.

111 now available for transformation. Urban professionals, public and private, now seek ways to capitalize on the previously productive but increasingly languishing land parcels, ripe for redevelopment.

MCB4’s underutilized waterfront and publicly–controlled transportation facilities, made the area particularly vulnerable to exploitation. In the 2000’s alone, the Far West Community has had to accommodate large-scale, community-altering rezonings including the Special Chelsea

District (2005), the Special Hudson Yards District (2005) and the Western Rail Yard rezoning

(2009). These rezonings were designed to induce new development through private-sector incentives including increased density via the purchase of publicly-manufactured TDRs. The

Community Board accepted this density to ensure affordability, negotiating for construction of affordable housing and other community necessities.

Exponential growth did indeed follow with an influx of new residents - primarily high- income people replacing lower income people, and also an increase of new commuters, tourists, and school-age children. The activities of these new groups are now overwhelming the area’s infrastructure and character, generating the need for additional basic and social services including for police, sanitation and mental health. Though Community Board 4 approved these rezonings, they did so with the expectation that their negotiated agreements would be honored.

To date, promises set out in Points of Agreements attached to the rezonings still have not been executed over a decade later. The Community has not been compensated for the massive disruption these rezonings have had on the quality of life in the District, nor for the displacement caused by a mushrooming new Central Business District shoe-horned between residential neighborhoods. This juxtaposition, plus the unmitigated growth of area distribution facilities,

112 including UPS, Amazon, FedEx, and the Farley Post Office Annex, makes for a neighborhood unsafe for pedestrians and unaffordable for existing residents.

As noted by MCB4, the rezonings clearly made the area ‘attractive and expensive,’ prompting increased land value which has led to displacement of residents, local retail, performance spaces and theater support services. Increased truck deliveries and for-hire vehicles have increased traffic, contributing to gridlock and to the area’s already poor air quality, overcrowded sidewalks and bike lanes, and impeded surface transit (MCB 4 2019b).124

In its Fiscal Year 2021 Statement of Needs, Manhattan’s Community Board 4 calls attention to the still unmet promises — promises which the community lobbied for and voted to approve the rezonings based on the agreed to concessions won through negotiation in 2005 and

2009. Without any mitigation measures, conditions have worsened. According to the

Community Board:

“The rapid increase in land value is accelerating the displacement of many long-time tenants and small business owners while the new benefits of development have yet to materialize and may not be available to all. Members of MCD4 have strived for balance between the redevelopment of these areas with the preservation and expansion of the district’s residential neighborhoods…Overall, the rezoning and subsequent construction has contributed to the deterioration of the quality of life of residents of MCD4 …exacerbated by development of large-scale proposals including Hudson Yards, Manhattan West, Port Authority Bus Terminal, Amtrak’s Gateway Tunnel proposal, and conversion of the Farley Post Office …MCB4 FY 2021 p. 7 Missing Affordable Housing

Taken together, the Special Hudson Yards District and the Special West Chelsea District should have created about 5,700 affordable housing units. Only half have been built, however,

124 As a result, MCB4’s top planning priorities are: 1) affordable housing, 2) neighborhood preservation and development trends, and 3) traffic and air quality.

113 according to MCB 4. At Hudson Yards, only about 42% of the promised units districtwide have come on line (1,400 of 3,300+).125 As per the 2009 Western Rail Yard rezoning, only about 12% of affordable units promised, 112 of 900, have been delivered over the last decade (MCB4

2019a) (See Table 31- Promised Affordable Housing in Appendix).

As part of the 2005 Points of Agreement, three specific sites were slated for affordable housing, but only one has been built. The POA for the 2009 WRY rezoning, promised about

20% affordable of the nearly 1,950 estimated units including two off-site properties Related agreed to keep affordable and two additional sites which the city agreed to develop as affordable.

A brief status check is offered below (See also Tables 32 and 33 for details of the 2005 and 2009

POAs in Appendix).

Studio City now Gotham West Completed: Formerly warehouses and stables, the site was acquired by the city in 1975 following its condemnation. In the early 2000s, after sitting dormant for decades, a plan to build Studio City was formulated but never materialized. As agreed in the 2005 Hudson Yards rezoning, the HPD-controlled site was sold to the Gotham

Organization for $35 m which was used to create an affordable housing fund. The four-acre, full block project includes four towers, a 670-seat elementary school, retail and provided 675 affordable units with 600 permanent.126 Now known as Gotham West, its mix of affordable and market rate apartments, was one of the first and largest 50-30-20 residential developments in the city (Gotham West, NYCHPD, MCB4). 127

125Two-thirds are the units were designated for low income residents with the remainder slated for moderate and middle-income. 126 The 31 story, 1,200+ unit building was constructed between 2011 - 2014. 127 50% market rate, 30% middle-income, 20% up to 50% AMI.

114 Harborview Terrace: This NYCHA managed public housing complex, built in 1977, currently houses 660 residents including 375 families and many seniors. At this site, the city promised to build another 200-250 new, 100% affordable units constructed atop Harborview’s parking lot. Remaining undelivered, the project was again included in de Blasio’s “Housing

New York” and “NextGeneration NYCHA” plans. Construction was to begin in 2019 and be completed in 2020 (NYCHA). 128 But the community still includes this project as a priority requesting that the city provide adequate capital costs and designate a developer from the most recent HPD RFP process. HPD responded to the Board, stating that further study is still needed.

Two other site-specific affordable housing commitments were made as part of the 2009

POA. Construction is finally moving forward nearly a decade later at the DEP-controlled 705

Tenth Avenue and the MTA-controlled 806 Ninth Avenue. Slow to come to fruition, HPD finally distributed RFPs for the sites in April 2018 and selected winners by Feb 2019. These sites will provide 260 affordable units plus desperately needed social services (REW, NYC HPD) (See

Table 34 - City Finally Delivers on Promise to Build Affordable Housing in Appendix.)

Upon release of the city’s RFPs in April 2018, the then HPD Commissioner Maria

Torres-Springer spoke with grandeur of some monumental occurrence even though the developments were promised in 2009 and the number of units to be built represented only a drop in the bucket compared to citywide need:

“Through this RFP, we are making good on the promise of the Hudson Yards development plan and looking to generate dynamic proposals that will add to the fabric of the neighborhood and respond to the needs and priorities of the community. I thank the many local elected officials for their support as well as my colleagues at MTA and DEP for their partnership

128Harborview Terrace was one of the original housing projects associated with the 1969 Clinton Urban Renewal Area. From 1979 to 1981 four major affordable housing developments were completed in the CURA including Harborview Terrace. (MCB3 2019)

115 in creating much-needed affordable housing opportunities for our city’s residents” (Real Estate Weekly, April 25, 2018).

As shown, private developers are not the only actors who need to be held accountable.

The city has to live up to its meager promises too. It took almost a decade for the city to even select developers to build housing that was promised in 2009. It is not just promised housing that hasn’t been delivered. Two other significant improvements agreed to through the POAs still have yet to materialize, including a Tenth Avenue 7-line station and a Charter Bus Garage.

Tenth Avenue Station: Community Board 4 (and the rest of the city) was originally promised a Tenth Avenue 7-line station, a long-awaited necessity for the transit-starved Far

West. But by 2010, the Tenth Avenue Station was dropped, supposedly due to rising costs. This decision was made without any public approval by those in power at the time who were unfamiliar with the needs of everyday New Yorkers. Why was this the choice that was made?

Why weren’t funds reallocated from elsewhere? Who measured opportunity costs? The

Community Board along with other elected officials incl. Senator Schumer, wrote as much to then Deputy Mayor Doctoroff stating that to move forward without the Tenth Avenue Station is:

“a profound mistake, inconsistent with public promises and an invitation for fiscal irresponsibility (which) would represent a failure to provide for the area’s growing residential population (and) put at risk several million square feet of potential commercial and residential development which would generate substantial direct and indirect economic benefits for the City…If it is possible to take funds initially targeted for other infrastructure projects and redirect them towards a second 7-line stop, that option must be explored immediately.” (Horsley 2008)129

Regardless of this too-polite letter sent to Doctoroff, who had just announced his resignation in December 2007, the project was allowed to move forward without the second

129 The 7-page letter was signed by Sen. Schumer, City Controller Bill Thompson, Public Advocate Betsy Gotbaum, Congressmen Nadler and Weiner, Assemblyman Richard Brodsky, State Senator Tom Duane, Manhattan Borough President Scott Stringer, Straphangers Campaign’s Gene Russianoff, Hell’s Kitchen Neighborhood Association’s Kathleen Treat and Clinton/Hell’s Kitchen Pedestrian Safety Coalition’s Christine Berthet (Horsley 2008 ).

116 station. Later in his memoir, Doctoroff takes all the credit, claiming, “I had killed the second station,” (2017, p. 167), yet another shocking example of the lack of democracy, lack of scruples and the unfathomable power of the elite.

Infighting between the city and state and a call for federal support didn’t help. Even the hope of at least excavating a cavern for a potential second station sometime in the future never materialized either. Choices were made by the elite which were again self-serving and not in the overall public’s best interest, without any public approval process. Why weren’t alternatives offered or compensation awarded? 130

The Tenth Avenue Station remains a community priority and is included in its Annual

Summary of Needs, where the CB still requests to “Work with the MTA to design the West 41st and 10th Ave Station for the # 7 and to extend #7 to service additional communities.” In response, the Transit Authority provides this unsatisfying written reply: “For information regarding the status of this Request, contact the Transit Authority directly at telephone number

646-252- 2660,” which when called, an automated government relations message advises the caller to send an email for the promptest response but neglects to even provide an email address.

(MCB4 FY2021 Capital Budget Requests and Agency Responses).

Charter Bus Garage: Thirty-third Street between Eleventh and Twelfth Avenue has functioned as the collective parking and layover spot for a multitude of tourist and commuter charter buses, along with vans and black cars. As part of the 2005 rezoning, the city agreed to

130 For instance, in the MTA’s 1989 master plan, they reference the possibility of a passenger distribution system to connect the Yards to Penn Station and mass transit. It was proposed to run underground along 33rd Street, from 8th Avenue to 11th, utilizing an already excavated portion dug when Penn Station was built. Extending to HY would only require boring of just two more blocks to complete.

117 “accommodate additional off-street parking sites” for these idling vehicles which contribute to the area’s already poor air quality, the third worst community citywide, according to the NYC

Department of Health and Mental Hygiene. NYC DOT has passed the buck. In response to the

MCB 4’s request, they also state that “Further study by the agency of this request is needed. The agency does not/cannot give priority to funding this request.” (MCB4 FY2021 Expense Budget

Requests with Agency Responses) — another broken promise without any accountability.

Compromises: “Accepting Density to Ensure Affordability” True to its historic philosophy of accepting density to ensure production of affordable housing, MCB4 has drafted plans proposing feasible alternatives to some of these unmet promises. This includes permitting denser residential development along 11thAvenue, matching the same maximum commercial

FAR, which could provide another 1,600 affordable units, according to MCB4. 131 Another proposal is to add 495 Eleventh Avenue, known as the slaughterhouse site, to the Special Hudson

Yards District and develop the property as 100% affordable housing. If agreed, MCB4 will concede that the project would “satisfy two commitments made by the City in the rezoning for affordable apartments to be built on Site M132 and on the 20th Street sanitation parking space.”

(MCB 4, 2019 p.26). They propose a 45 story, 80% to 165% AMI with an affordable supermarket and 75 units of supportive housing. MCB4 has also put forth their own plan to create and preserve another 12k+ housing units through a variety of ways, such as extending expiring 421a agreements, mandating 30% inclusionary housing on new development, and

131The Special Clinton District enacted in 1974 was actually the first to allow density increases for development of affordable housing west of Eighth Avenue between W41st and W 59th. The board strongly advocated also for affordable housing following the 1969 Clinton Urban Renewal Area designation. Plans finally came to fruition as through the CURA Coordinating Committees’ 1999 plan. The area is a mix of low and moderate affordable housing, lofts, tenements, small businesses, social service and cultural organizations” (MCB4 2019). (CURA boundaries are 50th to 56th 10th to 11th). 132Site M at Tenth Avenue between 40th and 41st Streets was slated for 150 new affordable units to be built as agreed to in 2005 and reiterated again in 2009 according to the POAs, though nothing ever transpired.

118 adopting modified zoning amendments with affordable housing bonus options, all to ensure

“social and economic diversity and integration…the only way to keep Clinton/Hell’s Kitchen,

Hudson Yards and Chelsea the thriving neighborhoods they are today” (MCB4 2019).

Office Markets – Net Growth or Just Transfers?

One of the loudest rationales cited for new commercial development at Hudson Yards was the need to reclaim NYC’s regional share of new office leases, and, therefore, workers, corporations, and the tax revenue they provide. Cushman & Wakefield were able to back the political zeal for corporate retention at all costs, by documenting the loss of Midtown’s share of regional occupied office space from about 50% in 1986 to about 45% in 2006 and 2010. Finally, and concurrent with the increase of new commercial inventory, Midtown’s share rose back to about 50% by 2015 which came at the expense of the NJ, Westchester and Fairfield office markets (C & W 2017). Even with the addition of nearly 12msf in Manhattan between 2010 and

2015, Midtown vacancy and rental rates have not suffered, buoyed by NY’s steady increase in total and office-using employment since 2010.

By submarket, Midtown South is faring better than Midtown as a whole with a lower vacancy rate, 8.1% v 10.6%, and a higher average rental rate, $82 v $74, as measured in the fourth quarter of 2019 (NYC Office of the Comptroller). This is primarily due to strong demand in the Hudson Yards District. New space with modern amenities and large open floorplates attracted Midtown tenants coming off leases in outdated buildings, primarily in East Midtown.

Several lease analyses conducted over the past five years have shown a preference for Hudson

Yards attracting between 50% to 90% of transactions dependent on year (Crain’s, Bloomberg

Financial, Jones Lang LaSalle) (See Table 35 – Leasing Relocations by Submarket in the

Appendix). Ross himself claims to have personally lured away at least 4msf.

119 Initially, law and financial service firms led demand for Hudson Yards office space.

Increasingly, Technology, Advertising, Media and Information firms (TAMI), now drive demand for high-quality modern space with high-end services and amenities. TAMI’s overall share of

Manhattan leasing jumped from around 18% to almost 28% in 2006 and 2015 respectively (OBS

2017).133 Facebook joins Buzzfeed, LinkedIn, Lyft, Google, Apple and Amazon – all with locations on the Far West Side. Still retaining its three other Midtown offices, Facebook is expanding over an additional 1.5 msf across three Related Hudson Yards towers, bringing overall occupancy at Related’s 8.6 msf to 90% with the only availability at 50 HY (Touhey

2020) (See Table 36-Industry Share of Leasing at HY in Appendix). 134 135

Transfers may have been the case in the initial lease up at Hudson Yards, but it is hard to make that argument now after the dust has settled. Even with substantial increases in inventory,

Midtown vacancy remains around 10% and rental rates have not plummeted. In 2019, 9 msf were leased downtown at Silverstein’s World Trade Center Complex, while 11 msf were leased at Related Hudson Yards, plus another 5 msf leased at Brookfield’s Manhattan West (Weis

2020).

Ultimately, however, it’s the tax payer that suffers from these midtown relocations. The problem arises when tenants move from fully-taxpaying buildings to those subsidized at Hudson

Yards. Not only are tenants able to pay less property taxes, the discounted taxes that they do pay

133 Leases over 10k sq. ft. Over the same time period, financial services share of leasing declined from 42% to 29%. 134 10, 30 and 55 Hudson Yards fully leased. 50 HY 75% leased by beginning of 2020. 135 Facebook is also retaining its space at 770 Broadway, 225 Park Ave South and 335 Madison. This new space at Hudson Yards is likely an expansion.

120 never make it to city coffers, diverted from the city’s general fund meant for basic services, and redirected to the HYIC to support investor dividends. “Just think about that,” says Ravitch.

MTA’s Missed Opportunity

Any plans could not have come to fruition without control of the rail yards. But remarkably the MTA did not capitalize on this authoritative position, especially given their inability to fund operations or finance capital improvements solely from current revenue sources.136 Not only did they settle for below-market rate prices for their air rights, they also agreed to a subordinate role in relation to the HYIC on initial incoming returns, unable to even participate in the sale process of their own air rights until recently. The MTA could have been more assertive but was strong-armed into acquiescence at Hudson Yards.137 The MTA was not proactive at Atlantic Yards either, but did at least receive some transit station improvements.

Passive participation by the MTA is even more disappointing knowing that value exists at these sites because of the regional mobility and access the MTA provides.

This was not always the MTA’s intention. Prompted by the possibility of siting a new

Madison Square Garden on its recently acquired rail yards, the MTA developed a comprehensive proactive plan for the site prior to any developer solicitation, guided by the potential public benefits such a large-scale redevelopment could supply. They acknowledged the opportunity to capture value from an ongoing revenue stream created by the site’s unique development opportunity and its waterfront location:

“A successfully planned and implemented project can achieve a broad range of public benefits including new housing, parks and waterfront recreation, transit to serve the Convention Center, support uses to enhance the Convention Center’s marketability and office space to

136 Farebox recovery, for example, only accounts for 38%. 137 One interviewee with direct knowledge of back room dealings, Charles Bagli, claims that there was an unofficial agreement between city and state officials such that the state would take the lead role in redevelopment of the World Trade Center site, while the city could dictate the use of the Hudson Yards.

121 accommodate large employers who require unobstructed development sites... Revenues that result from development can provide a significant ongoing contribution to the MTA capital program.” (MTA 1989)

The opportunity for ‘ongoing’ contribution was correctly and clearly identified, but never codified into any agreements.

Transit Trade-offs - What else could $3B buy?

The Farley Corridor connection to the Penn Station Complex was also part of the 2005 rezoning but has not moved forward at the same pace. The combined Empire State Complex project will greatly improve access, safety and capacity to this regionally essential mobility hub.

The Farley Post Office redevelopment will provide new office and retail space and a new

Moynihan Train Hall, scheduled to open by the end of the year. The project includes a sorely- needed new design for the LIRR concourse and will create more entrances and exits around Penn

Station. The Governor has stated that the plan will be financed with private sector incentives including PILOTs by acquiring and developing the block south of the station and from sites east.

But, no TIF-like structure was put in place as it was for the ‘private’ rail line at Hudson Yards.

The new 34h Street 7-line station currently services only about 10k riders per day. Penn Station, on the other hand, serves 650,000 passengers per day, more than “the traffic at Newark, JFK, and

LaGuardia airports combined,” according to the Governor’s office. After improvements, the renovated transit complex will accommodate twice that number. Phase 1 is complete. Phase 2 is underway. Total project cost is difficult to pin point, but is expected to cost at least $2.5B.

As further evidence of inequitable public investment, the nearby 34th Street-Penn Station subway stop handles 165,000 riders on an average weekday in 2018, more than 16x that of the

122 Hudson Yards 7-line station. Annually, the Penn Station subway stop served over 51 million riders, versus just about 3.2 million at Hudson Yards in the same year. Granted, the Hudson

Yards neighborhood is not fully built out, but will never reach comparable levels (See Table 37 for Comparative Annual and Daily Subway Ridership in Appendix). How can a just city rectify spending $3B – even from private sources – to serve only about 10k passengers when the same dollars could pay for improvements that would serve millions at a regionally-dependent transit hub? It can’t.

Park Trade-Offs and Where is the Waterfront Access?

As mentioned above, Phase 2 of the Hudson Park and Boulevard is expected to cost over

$125 million per acre, the highest price tag ever for a park in New York City. The exorbitant cost sparks controversy as parks all around the city are in dire need of upgrades. The Center for an Urban Future chastises the plan, pointing out that the entire cost to fund the City’s

“Community Parks Initiative”, a plan to upgrade 65 parks across the city, with a total budget of

$318 million, is significantly below the cost to construct one small park designed to serve privileged new residents. (Morley Sept. 2018). Instead of hundreds of thousands of New Yorkers benefitting from citywide upgrades, only those entitled to live or traverse Hudson Yards will benefit.

As to Related providing waterfront access, no plans have surfaced. Here again, more equitable and inclusive plans for the development were thwarted. The more civic-minded1989

MTA Master Plan envisioned a waterfront park and wide promenade connecting the development with the rest of the neighborhood. A wide range of activities could be served including “tot lots, sitting, strolling, people watching, viewing of boats and the Hudson River, a

123 jogging loop… a public amenity to the Convention Center and Chelsea Neighborhood.” Grand plans for waterfront access were presented by development teams in response to the 2008 MTA’s

RFP, including Durst’s Park Bridges and Brookfield’s waterfront walkway. The edict to require direct waterfront access has fallen by the wayside. Related’s proposed bridge connecting its

Hudson Yards to Hudson River Park hasn’t surfaced. The community has been requesting temporary access at 33rd Street at least, while the rest of the area is under construction, but to no avail.

Extra Services for the Well-off/Some Community Building

The Hudson Yards/Hell’s Kitchen Alliance Business Improvement District (HYHK) began operations in January 2015. As is the mission of a BID, HYHK provides additional cleaning, greening, seating and other amenities to its neighborhood, and has contributed to humanizing the open spaces, localizing services, and promoting diversity.138 The HYHK

Alliance was developed primarily as a vehicle to fund maintenance and operations of Hudson

Park between 33rd and 39th Streets. Its annual budget of $2.3m is funded through assessment of businesses and property owners based on square footage and assessed value, including from

Related who has an officer on the Board. Residential owners pay “a symbolic $1 a year” (Halle and Tiso 2014 p, 310). The recently renamed Bell Abzug Park is programmed with seasonal events, farmers market, food trucks, etc.

Some local residents were skeptical at the arrangement as expressed by one MCB4 Board

Member, given the BID’s “probable domination by … some of the biggest developers in the

138 Of course, BIDs are just another way to reward the privileged, who have the means to buy better service. Government should be providing equal services to all citizens (Hu 2017).

124 city– Extell, Moinian, Rockrose, Related. The concern is that they will be the driving factor and will homogenize, not foster diversity” (Halle and Tiso 2014, p. 311). In an effort to express and not ‘suppress’ the Clinton/Hell’s Kitchen ‘fabled iconic identity and sizzle’, the community insisted that the BIDs name include Hell’s Kitchen, hence the Hudson Yards/Hell’s Kitchen

Alliance BID.

Jobs at Related’s Hudson Yards

Another Point of Agreement committed to in 2005 was to “coordinate large-scale hiring initiatives linking NYC job seekers to employment opportunities …at the Workforce Career

Center in each of the five boroughs…with outreach to economically disadvantaged job seekers and/or communities.” According to a Hudson Yards press release, the Hudson Yards Hiring

Network was established, partnering with 22 city agencies and the local Service Employee

International Union, 32BJ SEIU, to fill positions giving priority to those most in need including veterans, NYCHA residents, homeless and those formerly incarcerated to HY jobs. Related claims to have hired hundreds of employees for restaurants, maintenance, services, security, and cleaning, though no data is provided and the effectiveness of the program is unclear, especially knowing that if Related really did follow through they would be sure to heavily publicize results.

(HY March 13, 2019).

Moreover, it is unclear how residents of East Harlem have received or been recruited for jobs at Related’s Hudson Yards which were implicitly promised to residents by way of its gerrymandered-approved EB-5 Targeted Employment Area.

125 Giving Back? Hudson Yards Slim on Community Benefits

In 2018, Google and Related initiated the West Side Community Fund (WSCF) which provides micro, midlevel and larger grants ranging from $2,500 - $5,000+ to community organizations with a target area of 14th to 38th Streets and 7th to 12th Avenues. Nineteen area employers, including BlackRock, Coach, Pfizer, Warner Media, Wells Fargo, etc., initially pledged $25,000 each, equating to an annual budget of $475,000 to be managed through the

Citizens Committee for NYC. The fund was created to ensure that “the significant and extensive private sector development and investment…bring demonstrable benefits and improved services to the residents of the Chelsea/Hudson Yards area.” Cycle 2 winners, announced in February include the HIV Arts Network, Holy Apostles Soup Kitchen, Penn South Social Services, and

Housing Conservation Coordinators.

Even though rich firms paid lip service to the idea of supporting the impacted surrounding community, the shockingly-low dollar amount donated and the tiny grants offered by some of the world’s industry leaders barely makes a dent towards equitable redistribution.

BlackRock, for instance manages nearly $7 trillion in assets.

126

Hudson Yards Score Card RECEIVED:

✓ New Globally Competitive Commercial CBD o About 14 msf of office space completed or under construction ✓ Hotels with more than 9,000 rooms ✓ Housing o 7,850 Market Rate Units o 1,436 affordable housing built or under construction, only 42% of promised o 112 affordable units associated with Eastern and Western Rail Yards, 12% of promised (Manhattan CB 4). ✓ New semi-gated playground for the rich ✓ Luxury Shopping Mall/High End restaurants ✓ Privately managed, publicly accessible open space and concrete plazas ✓ Ticketed Public Observatory – Edge ✓ Limited-access, free Public Staircase ✓ Privately – financed platform/usable base for development ✓ 3 block, Bella Abzug Park and New Hudson Boulevard ✓ 7-line extension and one new station, serving 10,000 daily riders ✓ Partial repayment from HYIC to City of $100 m towards ISP ✓ City out-of-pocket capital costs of at least $50m ✓ New cultural facility primarily privately funded, except for a $75m public grant ✓ Expanded Javits ✓ Final Segment of High Line ✓ Job growth and retention o Construction o Office – using ✓ Dividends to private/institutional investors of $1.4B ✓ HY/HK BID funded by $2.3m annual commercial assessments including from Related.

127

UNMET PROMISES

✓ Waterfront Access/Promenade ✓ Two Subway Stations ✓ New Mixed-use diverse neighborhood ✓ Pedestrian corridors ✓ 3,347 affordable units district–wide, waiting for 1,911 remaining ✓ 923 affordable units as part of the WRY, waiting for 811 ✓ Related’s Phase 2 incl. public park, 14 acres promised ✓ School

POTENTIAL FUTURE COSTS

✓ More ISP payments from city taxpayers ✓ Remaining mid-block park and Boulevard costs ✓ Increased sanitation, police, fire and social services ✓ Additional public costs for needed hard and soft infrastructure to support original and new residents ✓ Foregone Tax Revenue

POTENTIAL FUTURE BENEFITS

✓ Potential for Value Capture Payoff from HY, esp. when tax incentives wear off

128 CHAPTER 9 – SOME LESSONS LEARNED

The value capture scheme put in place at Hudson Yards did not capture fair market value for public assets nor did it yield returns on public investments in a way in which every day New

Yorkers would benefit. The scheme did succeed in raising capital from private sources to pay for the 7-line extension and is seemingly on track to cover its debt service without additional direct subsidies. But incremental gains thus far have only been realized by the private sector in the following ways: through the interest payments to private and institutional bond holders; through sales and rentals from new or renovated residential and commercial development; through tax abatements to private property owners; and, through the discounted purchase of air rights. Little reciprocal redistribution of value has occurred beyond a few modest concessions including some unaffordable ‘affordable’ housing, some concrete privately-owned public spaces, and, the use of one subway station designed to serve privileged new residents and new workers.

This chapter examines how the Hudson Yards Value Capture scheme led to the construction of a private rail line serving a semi-gated community for the rich. It recounts how this phenomenon came to be and what, if anything, can be done going forward which could capture and redistribute the publicly-created value to area residents, to the city and to those who need it most. This chapter will answer the central research question of this study:

• How did the public policy tool of value capture catalyze the private

financialization of Hudson Yards?

129 Findings

The story of Hudson Yards is complex. What started out as a discrete study of value capture for transit improvement turned into a convoluted, intertwined political economy story of cities, choices, and the dangers associated with the financializaton of public assets. The story shows that value — its creation, capture and redistribution, is dependent on the bias of economic and political dynamics in power at the time of a plan’s inception. These dynamics further influence outcomes by setting priorities and directing investment, which in this case were harnesses to facilitate and market New York as an attractive, luxury city – a product worthy of global investment. These choices directly impact and mold the efficacy and equity of value capture plans.

Development of Hudson Yards remained high on the wish list of multiple mayors, builders and other officials for decades. Ultimately, it was the confluence of the following conditions which finally pushed plans to implementation without much regard or designs for social equity. These dynamics worked to further polarize an already divided city, leading to inequitable outcomes at Hudson Yards. These include:

1. NYC’s real estate development climate;

2. The Bloomberg Way and class-based politics/policies;

3. Doctoroff’s assembled Olympics;

4. Tax incentives structure;

5. Distracted public participation;

6. Self-perpetuating global financialization of real estate; and, ultimately

7. The nature of value capture.

130 New York City’s Real Estate Development Climate

Mayor Michael Bloomberg took office on January 1, 2002, just months after one of NY’s worst human tragedies in history. Already suffering through a national recession, this post 9/11 city was battered. Corporate relocations to Jersey City and elsewhere were on the rise. Senator

Schumer and his prominent blue-ribbon Group were calling for 60 million more square feet of

Class A office space needed to meet anticipated demand and to attract global capital. New

York’s office stock was aging with the last major additions to supply in the late 60’s and early

70’s. The Midtown CBD had nowhere to grow. Land was scarce. Manufacturing declined due to the economic transition to a service economy prompting rezoning of underutilized industrial areas. The publicly-owned Hudson Yards were primed and deemed Manhattan’s last frontier.

Seth Pinsky, former head of NYC EDC, pinpointed the political atmosphere perceived at the time. Development at Hudson Yards he claimed, “showed that big infrastructure and big development projects could go from conceptualization to completion in a reasonably short period of time in New York City…People had lost faith that that could occur here because it hadn’t happened in a couple of generations,” (David March 4, 2019).

The Bloomberg Way

After one full year in office, Mayor Michael Bloomberg set out his economic development agenda, branching out beyond lower Manhattan post 9/11, planning “major construction projects elsewhere- downtown Brooklyn, Randall’s Island, Williamsburg and

Greenpoint, Hunts Point, Homeport, on Staten Island, and of course, the west side of

Manhattan….the Mayor argued, the city could stimulate economic growth and boost tax

131 revenues by rezoning underused land, clearing away bureaucratic red tape and investing in public works,” (Cassidy 2005). Bloomberg set out to build and market the city as a luxury product, able to attract and retain global financial flows and investment.

Bloomberg transferred his private-sector, high-risk/high-reward ideology to City Hall. As

Mayor, though, he gambled with public ‘house’ money not his own to solidify his class-based politics, carefully choosing his battles. Characterized as NYC’s CEO, Bloomberg employed a corporate approach to governing, down to creating a bull pen for City Hall workers which was lauded and replicated elsewhere in the country. He let his wealthy friends and colleagues know

NY was open for business, especially for them.

Bloomberg took an aggressive approach to growth, funneling city funds to numerous mega-projects and rezoning 37% of the city’s land area via 122 neighborhood rezonings -- all accomplished without a comprehensive city-wide plan (NYU 2010, Stein 2019). Some of the actions protected an area’s low-rise character particularly in white, middle income areas with downzoning, while other upzonings exposed lower-income, diverse neighborhoods to gentrification causing displacement of existing residents. And while he promoted the fact that he did not need to fundraise for his political campaigns and was therefore immune to influence and favoritism-based politics, he still made his decisions based on his values and class, particularly his belief in trickle-down economics. He embraced this philosophy stating in one interview, “the way to help those who are less fortunate is, number one, to attract more very fortunate people.

They are the ones that pay the bills” (Katch 2013). The ensuing consequences of Bloomberg’s policies resulted in increased homelessness and poverty.

132 In an essay entitled, “The Eighteenth Brumaire of Michael R. Bloomberg,” the author reflects on the inevitable political economy of governing, whether partisanship plays a role or not:

“Balancing budgets is not a value-neutral matter…it… forces elected officials to choose between those services that will be kept and those that will be cut, and that the choices they end up making reflect distinct political priorities. But the effects of the Bloomberg Administration’s Neo-Haussmannization aren’t only economic; they are also aesthetic, and perhaps most importantly, existential. Development has changed the character of the city, which in many respects has become more homogeneous” (Ruby 2010, pp 114-115).

Doctoroff’s Assembled Olympic Bid

Deputy Mayor Doctoroff brought his own pet project to City Hall. Here, he had ready access and control over city agencies and was able to fast-track and synthetize dormant plans and good ideas for what he and Bloomberg thought the city should be doing anyway. He repackaged policies and plans into essential components of the city’s 2012 Olympic X Bid, a plan that would pay for itself. New York would be better for it, he advocated, and would be the financial means to provide much-needed infrastructure improvements, including the 7-line extension. Doctoroff tugged at the civic pride of the city’s celebrities and bullied corporations doing work for the city to donate to his NYC 2012 organization which provided funding and backing for the Olympic

Bid. The IOC’s strict deadlines provided urgency.

Structure of Tax Incentives

With the benefit of hindsight, many claim the tax incentives designed for new development at Hudson Yards were overly generous. Speculative development in a neighborhood with little amenities and limited services does carry significant risk. This was echoed by the Group of 35 in 2001, at a time when the city was still recovering from 9/11 and a

133 national recession, plagued with headline grabbing corporate defections. The Group justified incentives to cover perceived gaps between construction costs and predicted rental rates. But, by 2005 when the area had been rezoned and the 7-line extension was imminent, Senator

Schumer changed his views. After recommending tax breaks to developers to induce new construction in the Far West, he had this to say in a speech before the Partnership for the City of

New York:139

“I do not believe we need to give developers tax breaks - the reduced PILOTS - to get them to the West Side. That money should be used for the building of the No. 7 line if needed. There is already growing developer interest in the area and I see no evidence that reductions in PILOT payments – ‘de facto tax breaks at the City’s expense’ are needed. Traditionally in this City, infrastructure alone is sufficient to induce development . . . As far as I am concerned, the No. 7 line IS the subsidy for that development and West Side developers should pay ‘full fare,’” (NYC Bar Association quoting Schumer).

While it’s true that tax incentives seem egregious in bull markets, it was unforeseen at the time.

Additional grounds for criticism can be found in the hidden agenda of these incentives.

The tax incentives at Hudson Yards were structured so strategically as to ensure their use, designed to stimulate the scale of development needed to produce substantial revenue streams, enough to eventually cover the debt service on $3B. Public officials needed to create an environment that would at least produce some visible, positive revenue to validate their promises of a self-financed project, even if steep discounts minimized overall revenue potential. If the incentives weren’t attractive enough to developers, the best laid self-financing plans could have gone awry, and did for a bit, requiring public support during a rebounding real estate market.

139 The ‘Partnership’ is one of the founding members of NY’s real estate state since the eighteenth century (PFNYC); Its mission to uphold the powerful status quo of the city’s corporate and industry elite. The Partnership, along with the Real Estate Board of NY, founded in 1894, have similar goals, advocating for the city’s elite business and real estate industries.

134 In addressing criticism soon after the tax incentives were enacted, NYC Office of

Management and Budget Director Mark Page, defended the geographically-zoned tiered incentives. “Developers in New York are accustomed to receiving tax breaks and felt entitled to them. The tax concessions in the area are average compared to incentives in other parts of the city and are designed to favor earlier developers and those who build farther from (existing) transportation.” Related was able to capitalize on tax breaks, as they shepherded the first HY office project forward which was also the furthest west from existing transit geographically, qualifying them for the most generous tax breaks of 40% for the first five years.

Systemic abuse of tax incentives throughout the city’s history makes the incentives offered at Hudson Yards seem ordinary. Madison Square Garden for instance hasn’t paid taxes in over 37 years. Related is receiving less of an annual tax rebate for all four of its buildings, $27 m per year, than taxes that should be paid by MSG, equating to more than $41 m in FY 2019 according to the NYC IBO. The same advantages are routinely afforded to other NYC professional sports leagues, as well as for many of the city’s largest employers who often don’t even hold up their end of the bargain in terms of promised job growth and retention.

Distracted Public Participation

The Western Rail Yard site was not included in the 2005 Rezoning Plan as its fate as the home of a huge sports facility was still unclear. The NYC DCP stated that the future use of the site would not conflict with plans for the larger Hudson Yards District. This decoupling actually worked in favor of the overall Special District rezoning. Community and advocacy groups focused their resources to derail an unjustified West Side Stadium, leaving the rezoning, which ultimately allowed the densest development in the city of 33 FAR, to flow through the ULURP

135 process basically without contention and only minor revisions and far-from-fair concessions.140

The little affordable housing the community negotiated, did not offset the decrease in the quality of life to existing residents resulting from the tremendous increase in construction, density, population, workers, and tourists. No mitigations were put in place to combat negative externalities. Even worse is that some of the Points of Agreements promised to the community by the city and developers, still have not been executed fifteen years later.

As to social equity, Jay Cross, president of Related Hudson Yards and former president of the Jets, fully accepts their elitist financial goals, “When you build new, it is expensive, and it’s hard to make everything as accessible economically as a lot of people would prefer…We do our best. We are not social engineers. We cannot fix society’s ills,” (David March 219). But planners do have an obligation to set socially-valued priorities which are clearly lacking at

Hudson Yards.

Self-perpetuating Global Financialization of Real Estate Markets

Free-flowing global investment capital seeks out the best returns wherever they are available. Securitized real estate assets traded in debt and equity markets become easy to access without the constraints of actual physical buildings or the need to deal directly with tenants.

They are especially attractive when other investments under perform. Global financialization of

140 The MTA’s 1989 master plan called for more contextual, moderate density of 10 -12 FAR, comparing the proposal to the scale of Rockefeller Center. The plan proposed 12.5 msf, with 8.3 msf office 632k hotel with 718 units and 3.6 msf residential plus 2,897 parking spaces.

136 tradeable physical space reinforces the need for cities to create and then maintain high value enclaves for the rich, including at Hudson Yards. Sclar explains:

“Real estate assets hold out a credible promise of above average investment returns and relative safety for invested capital because it permits the easy collateralization of a tangible commodity, physical space. This is especially the case in global cities, cities undergoing intense demand for added commercial and residential space...These vast global accumulations of investable capital concentrated in private equity vehicles create local political pressure to upzone, i.e. permit the construction of bulkier and taller buildings…This upzoning expands the potential for (and in many cases necessitates the ) further financialization of real estate markets in these places (Sclar 2020).

Increased commodification of physical assets through the growth and popularity of

REITs and CMBSs further eased the financialization of real estate assets which contribute to and are facilitated by active global air markets.141 As such, protection of the value of these investments and their ability to generate returns, puts pressure on cities to enhance and support the value and performance of these financial investments, including inequitable assurances that debt interest and portfolio returns be prioritized above comprehensive planning goals or socially- valued needs. Policy decisions which seek to ensure global investments, including upzoning to encourage luxury products, result in adverse repercussions felt all the way down to the neighborhood level. The need for cities to validate and protect these investments, increases the financialization of planning and policy actions, where the pecuniary needs of wealthy and institutional investors take preference over the needs of long-time residents and local businesses, and, by extension, negatively impacts the health and equality of the city as a whole.

141 Real Estate Investment Trusts and Commercial Mortgage Backed Securities.

137 The Planner’s Role: Confronting the Inequitable Nature of Value Capture

Value capture, by its nature, causes the commodification of existing neighborhoods or in-place economic activities, essentially devaluing any established culture and/or character by prioritizing the new and improved. Value capture banks on increases in value which habitually cause decreases in affordability. Instead of building on foundations or acknowledging the value of social uses, value capture ignores, tears down, and builds ‘from scratch.’ The concept institutionalizes the highest and best use deemed by capitalistic real estate markets. Value capture and its dependence on highest and best use to generate funds meant for public benefit, does not allow for the value of more equitable opportunities which may better serve the community, but may not necessarily maximize private profits. The planner’s role is clear, to disrupt this narrow-minded measure of value capture success, by asserting interventions which prioritize equality.

Even when the goal is affordable housing, neighborhoods are still at risk of exploitation.

In addressing several of the de Blasio Administration’s upended rezoning efforts, Vicky Been,

Deputy Mayor for Housing and Economic Development, told the New York Times the purpose of upzoning in lower density areas and why public decisions adopt private market based-highest and best use principles:

“The mayor’s rezoning efforts have been in lower-income neighborhoods like Bushwick because they are transit-rich and have the capacity to create and preserve the most affordable housing. Denser and more affluent areas, like the Upper East Side have far less opportunity for growth, adding that the affordable units that would be created by the city’s proposed rezoning efforts, including those out of reach for some local residents, would still be a relief to middle-income New Yorkers” (Chen February 7, 2020).

Advancement of middle-income livelihood - and property value, at the expense of lower- income neighborhoods is not progress. Planners devising value capture schemes need to interject

138 and champion equitable distribution. As Laura Wolf-Powers highlights: “One need only pay attention to a pattern of rising housing cost burdens, accelerating residential and commercial displacement and increased homelessness (along with increasing returns to real- estate capital) in wealthy cities to recognize that land-value gains produced in part by public- sector actions are consistently allocated in ways that deepen inequality and fray the social fabric”

(Wolf-Powers 2019), which is exactly what happened at Hudson Yards.

Value capture holds out the promise of giving value back to communities. This can be achieved. But only if the inequitable nature of value capture is confronted and mitigated throughout the entire process, sometimes spanning decades. The planner’s role is to advocate, intervene, and hold all parties accountable in the long term through continued audits and assessments.

Can Hudson Yards Contribute to a Socially-Valued City? A How to Guide

Poor social planning at Hudson Yards can still be rectified through deliberate, yet modest additional value capture techniques and the equitable redistribution of proceeds. Just as the private sector renegotiates more favorable terms when conditions change, so should the public.

Related did not hesitate to withhold any monetary payments or even forward the required cash deposit until after economic recovery and improved real estate market conditions took hold post the 2008 recession. 142 The public can do the same now that risks have been abated and profits rise. Three of Related’s Hudson Yards office towers are 100% occupied. Commercial rental rates and residential prices throughout the Hudson Yards District are some of the highest in the city. The incremental increases in value are already seemingly sufficient for both public and

142 Specifically, certain thresholds were agreed to including non – payment if office vacancy rates grew over 12%.

139 private beneficiaries. Capturing a portion of these windfalls can occur through a variety of ways.

Some specific recommendations are suggested below:

1. Institute a Business Rate Supplement so that businesses and employers over a certain

size, such as Amazon, which benefit from public improvements throughout the district,

contribute to their cost. Funds could be earmarked for a Tenth Avenue 7-line Station, or

to a general fund for transit operations or maintenance in general or dedicated to the 34th

Street – Hudson Yards station upkeep. In London, this type of levy worked to support

new heavy rail construction (See Figure 17 for Crossrail Overview in Appendix).

2. Remove the 45% discount on district improvement bonuses when used in combination

with the affordable housing incentive. DIBs should be full price.

3. Institute Tiered/Performance -Based Tax Incentives. Reduce or eliminate the Uniform

Tax Exemption Policy (UTEP), especially at the Western Rail Yard, declaring any

remaining incentives fully subscribed.

4. All taxes should be paid in full for development over the Western Rail Yard. Divert

proceeds to fund the Tenth Avenue 7-line Station.

5. Raise the price per sq. ft. for district bonuses so is consistent with prices set by East

Midtown Rezoning of $250/psf. Currently the DIB price is only $134/psf. Office rents in

the Midtown South subdistrict currently exceed those of Midtown. Purchase prices

should accurately reflect this premium.

6. Put public pressure on Related to provide additional improvements as they build over the

Western Rail Yard, beyond those already agreed to including the platform, lawn and

school. A need-based, inclusive community benefits agreement would provide Related

the opportunity to address criticism and take on some social responsibility locally. If

140 properly structured, the CBA can redistribute gains where most needed such as those

listed in Appendix – MCB4 Pressing Needs. A CBA agreed to at this point in the

development process, could not act as simply a tool to buy community support, a

common criticism of CBAs, as the development itself is already approved (See Figure 16

for brief story of the failed Atlantic Yards CBA).

7. The MTA should receive additional ongoing compensation for development rights over

the Western Rail Yard. The $1B ground lease agreed to in 2008 covers both the Eastern

Rail Yard and the Western Rail Yard. The development rights are easily worth that much

over each rail yard. MTA’s own 2017 appraisal set the development value just over the

WRY between $3.2 B - $3.7B (JLL 2017) (See Table 41 for WRY Appraisal in

Appendix).

8. Affordable Housing Support: Establish a modest affordable housing contribution from

each residential sale over $2.5m throughout the District and cut tax abatements in half.

Direct these proceeds to a local affordable housing fund to support local affordable

housing upgrades and necessities. This includes additional housing and shelters for

families and seniors and basic necessities at existing affordable facilities. For instance,

MCD4 has already identified improvements needed at Harborview Terrace which

include: new apartment doors, lighting, roof ($2.2m), boiler replacement ($7m) public

area renovation ($3.9m). These necessities could be addressed for about $13m, less than

half of Related’s annual tax abatement.

9. Establish a Mobility Improvement Fund to increase pedestrian flow and safety. Ongoing

construction barriers, traffic congestion, and access ramps to transportation infrastructure

such as for the Lincoln Tunnel and the Port Authority Bus Terminal makes for unsafe

141 pedestrian crossings, especially for those not privileged enough to “take the train or walk

the popular High Line park” (Sharf Mar 14. 2019). According to a 2014 NYC DOT

study, there were 181 pedestrian injuries and ten pedestrian fatalities recorded at 13

intersections over a three-year period (NYCDOT 2014).

10. Deliver on promises of waterfront access, particularly as part of Related’s Hudson Yards

agreements. In the meantime, at least provide safe access to Hudson River Park at 33rd

Street during Phase 2 construction.

Leading with Affordability: Hudson Yards Informs Sunnyside Yard

Sunnyside Yard is a 160-acre open cut railyard, the busiest in the country, primarily owned by Amtrak. Public officials seem to be taking a much more inclusive approach then those experienced at Atlantic Yards and Hudson Yards, including the creation of a steering committee consisting of local and city-wide representatives. NYC EDC along with Amtrak, have presided over a 20-month process hosting numerous workshops, public forums and presentations to gain community input on hopes and needs. Its master plan informed by this process was released in March of 2020 with the carefully chosen headline – 12,000 Units of Affordable

Housing.

According to the conceptualized plan, the site could accommodate 20 msf of new development, 12 msf for residential, to be created over a publicly-built $16B, 115-acre platform.143 The area could be served by a new regional rail station for Amtrak, LIRR, and

MetroNorth, plus a new BRT line, and a stop on a future new subway line. By retaining public

143 The plan includes 7,000 new permanent jobs, 30,000 construction jobs, 60 acres of open space and up to almost 20 msf of mixed-use development, primarily residential (12 msf), with office, retail, industrial and institutional space.

142 control of the platform to create public land, development over the deck will not be beholden to the concept of highest and best use to recoup the staggering infrastructure costs; thus, allowing and encouraging socially-valued but not profitable uses such as schools, libraries and community facilities.

The plan has loud, vocal, and at times hostile, opposition. Chants of “Don’t build a city for the rich, improve the city that exists,” have disrupted public meetings (O’Brien September

17, 2019). Alexandria Ocasio-Cortez notably resigned from the Steering Committing voicing frustration, claiming that “Despite the many outreach meetings…I have yet to see sufficient inclusion of the feedback from those meetings in the current plan…including community land trusts, truly affordable housing and public and green infrastructure of the scale necessary to meet our 21st century housing and environmental justice challenges” (Acevedo Feb 2020).

The approach taken by the NYC EDC and Amtrak is informed by Atlantic Yards and

Hudson Yards shortcomings, primarily the lack of community benefits and the social inequalities they exacerbated. Vishaan Chakrabarti, former Director of the Manhattan Office of NYC DCP under Bloomberg and founder of PAU144- the firm selected to create the Sunnyside Yard master plan, believes the only thing Sunnyside Yard has in common with Atlantic Yards or Hudson

Yards is the word “yard”! Keys to instilling equity, he believes, are retaining control of the development through public, not private, investment of the platform; breaking up development into multiple phases over decades, channeling federal commitment to housing, and, by not giving away the whole development to a single developer – “of course it would be privatized,” referring to Related’s Hudson Yards.

144 Partnership for Architecture and Urbanism.

143 How to Improve on Poor Planning History

The political ideology of the Bloomberg Administration manifests itself today in the exclusive, gleaming, high-rises of Related’s Hudson Yards. “Our purpose,” as Doctoroff has been quoted, “was to create the environment where private investment would flourish” (2006).

Though Related’s Hudson Yards is only a portion of the 45-block district, it epitomizes the negative externalities which invariably accompany the private financialization of public goods.

The Bloomberg Administration’s goal of globally marketing the city as a luxury product, translated to opportunities for privileged developers with easy access to Bloomberg and his

Administration.

Related, Brookfield, Extell, and their Forbes-list tenants, created an enclave where money makes more money without much social responsibility, not surprising since these actors are merely fulfilling their capitalistic, profit-driven role. Checks and balances are warranted.

Planners are obligated to provide countermeasures which are explicit, accountable and enforceable, attached to punitive consequences when developers or other public agencies are non-compliant.

The sensitive economic struggle to balance free-markets and regulation is fragile. Too much regulation can lead to collapsed agreements. Too little results in exclusion, gentrification and displacement. Although development atop Hudson Yards, Atlantic Yards, and Sunnyside

Yard, will not cause direct displacement of any existing homes or businesses, it most certainly has and will continue to pressure adjacent neighborhoods where property values increase in anticipation of development, pushing out long-term residents and quashing the character of place.

144 Planners cannot hang their hopes on the altruism or moral conscience of rent-seeking firms that are predictably self-serving, even though it is consistently clear that the private sector benefits from public actions and services. Amazon walked away from its potential new campus in Queens, before any real mutually beneficial place-making could even take place, scared away by neighborhood critics rightly demanding improvements to mitigate disruption and to serve an additional 25k worker. Too many uncertainties and perceived obstacles stunted any foresight for a symbiotic community. Yes, Alexandria Ocasio-Cortez can tweet, “Won’t you look at that!” upon hearing that Amazon is leasing space in NY anyway, as they acknowledge the importance of global brands having presence in global cities like NY. But, Amazon will arrive without the promise of the needed 25,000 jobs, committing to just 350k sq. ft. at Manhattan West. Here, they will house only 1,500 employees for now, without any obligation to improve transit stations, without support for affordable housing, and without any premise for community benefits provision. Even more frustrating is that opportunists at Amazon will end up benefitting from the

7-line extension and other public investments made in the Hudson Yards District to which they have made no financial contribution — hence the need for a Hudson Yards Business Rate

Supplement. Mandates are required for profit-seeking firms to be socially responsible. The trick is balancing expectations on both sides. Persistence and enforceable, phased, community-led agreements need to be put in place and adhered to with actual consequences financial or otherwise, if they don’t. Resigning from the Sunnyside Yard Steering Committee to make a political statement lessens the opportunity for impactful participation.

Firms and investors need some certainty and stability for their pro-formas.

Redevelopment plans can provide some reliability when taking risks. At Hudson Yards, a graduated incentive program could have been put in place, and perhaps still could be for

145 development atop the Western Rail Yard. Throughout the district, a tiered-approach could be asserted using measurable metrics if and when risks begin to abate, such as if a building was able to reach 90% occupancy, PILOT discounts could drop to 20% of full taxes instead of 30%, or, at a particular threshold. Incentives could be reduced from 10 years instead of 20. Afterall these types of assurances are routinely written into agreements protecting private actors, such as

Related’s agreement with the MTA which allowed delayed rent payments if office vacancy rates rose to 12% or more.

Conversely, to provide predictability, tax incentives could remain at a 40% discount if occupancy at new development only reaches 75%, or the like. These types of graduated and performance-based tax incentives can be linked to goals in terms of jobs, wages, level of investment and/or measured increases in property value.

Value capture plans and mechanisms can’t work without for-profit stakeholders making some profit. Some value needs to be left on the table when devising plans so agents can execute their role; and, in doing so, predictably meet expectations on both sides. The public needs to better understand their own role of injecting moral obligations and social equity when financializing public assets. It’s easy for Monday-morning critics with 2020 hindsight to espouse on and highlight the obvious negative externalities of plans which need to be addressed with more than good intentions. If we had all the answers to these wicked problems and the ability to implement just solutions, equitable distribution would be ingrained in free societies. It is the planner’s obligated role to intervene; to relentlessly improve value capture schemes to ensure plans recover value that leads to distributive justice, so that value capture outcomes

“reduce inequality, not reinforce it” (Wolf-Powers 2019).

146 The planning stories brought forth in this study reveal the monumental challenges cities face when attempting to meet the often-conflicting needs of all stakeholders and individuals.

Planners, whose job is to craft policies, plans and programs to support these public needs, must be vigilant in efforts to ensure more equitable redistribution of outcomes by devising and evaluating value capture plans through a social equity lens, especially when financializing public assets. The possibility to guard against inequality exists at Sunnyside. It’s up to public servants, planners and the community to realize this potential.

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APPENDIX

194 Hudson Yards Abbreviated Chronology

1986: Caemmerer Yards opens as an MTA-owned maintenance and storage facility for LIRR. January 2002: Mayor Michael Bloomberg takes office. November 2002: USOC elects NYC as US candidate to compete for the 2012 Summer Olympics. 2003: Hudson Yards Value Capture Finance Scheme developed to fund 7-line extension and other infrastructure. January 2005: NYC Council approves Special Hudson Yards District. Creates HYDC and HYIC. June 2005: NY Sports and Convention Center/West Side Stadium defeated. July 2005: NYC loses bid to host 2012 Summer Olympics to London. May 2008: MTA selects Related to develop Eastern and Western Rail Yards. 2009: Western Rail Yard rezoned. 2012: Related breaks ground. December 2013: Bloomberg takes ride on 7-line extension before leaving office. September 2015: 7-line extension opens to passengers. May 2016: Coach arrives as first tenant at 10 Hudson Yards. 2017: Javits Center expansion begins. March 15, 2019: Grand opening of Related’s public spaces incl. Shops, Vessel, Public Square, Gardens. April 1, 2019: Shed officially opens. 2020: Since 2005, the Hudson Yards District added: 9,100 hotel rooms, 10k housing units, 14 msf Class A office. 95% occupancy at Related’s Hudson Yards Phase 1. Hudson Boulevard. Three acre-linear Bella Abzug Park. One platform. One 1.5-mile subway extension. One transit station. $1.5B generated revenue from value capture mechanisms. $1.4B paid to private investors. 2024: Original estimated completion date for Related’s Hudson Yards Phase 2. Won’t be met. 2047: All Hudson Yards bonds set to retire.

195 Chapter 1 – Exhibits

Guiding Research Questions o How did the MTA leverage the value of their owned and operational railyards at Hudson

Yards? o What were the political, economic, social, and institutional contexts for Far West

redevelopment? o Who were the stakeholders and what were their motives? o What were the process, structure, and outcome of the Hudson Yards are redevelopment? o How did the design and implementation of the Hudson Yards Value Capture Scheme

compare to established value capture best principles? What were similarities and

differences? o How did the design and implementation of value capture techniques impact the value

capture outcome thus far? o In the case of TDRs, were they part of a well-considered plan? o Were there winners and losers? Who and Why? o What were the trade-offs and net outcomes? o What are the critical questions stakeholders must ask when considering and designing

value capture financing schemes? o Can value capture schemes serve the public interest? o What are the planner’s obligations to ensure equitable and just outcomes of publicly-supported

projects?

196 Table1 Sources of Evidence Collected Archival Direct Participant Physical Documentation Interviews records observation observation artifacts Hudson Yes Yards, Yes Yes Yes No n/a Semi-Structured NYC Sources: Yin 2009, author’s compilation

197 FOR IRB PROTOCOL AAS9165: Recruitment Script The Political Economy of Value Capture and the Financialization of Hudson Yards By Danielle L Petretta

[email protected] Recruitment Script for interview request.

Dear xxx, Hello and how are you? My name is Danielle Petretta and I am currently working on my urban planning dissertation at Columbia University. (Here, remind participant if we have met or if someone suggested I write to them) I am writing a case study about value capture and the Hudson Yards development using Atlantic Yards and Sunnyside Yard as background and foreground. I have come across your work, especially (insert here participant expertise or specific research). Would you happen to be available for a short interview over the phone (insert date/time suggestion) or another convenient time? Given all the criticisms, political and financial efforts and outcomes so far, I am trying to answer the following questions: Was it worth it? For whom? What could have been done differently? What are the lessons learned, etc.? I would greatly appreciate your input towards this endeavor.

Please let me know.

All the best, Danielle

Danielle L. Petretta Urban Planning Doctoral Candidate and NSF IGERT Ph.D. Student Affiliate, Center for Sustainable Urban Development Earth Institute, Columbia University New York, NY Mobile: 201-341-8724 Email: [email protected]

198 FOR IRB PROTOCOL AAS9165: Interview Guide The Political Economy of Value Capture and the Financialization of Hudson Yards By Danielle L Petretta [email protected] Interview Purpose and Type: I am constructing a social science case study telling the development story of Hudson Yards, NYC. I will be speaking to experts which will include about 8 - 10 individuals in both the private and public sectors. Interviews will be primarily conducted by phone and will not be audio or video recorded. Interviewees names will appear in the dissertation bibliography. I will be conducting semi-structured interviews to collect opinions on the development outcomes thus far at Hudson Yards based on the participant’s area of expertise and perspective. I intend to continue to collect stories through the use of narrative gained through semi-structured and open-ended interviews, similar to the way in which evidence was collected in a multi-year, multi-case study of global mega- transport projects. The study’s protocol rests on the:

“important underlying assumption, namely that knowledge about the planning, appraisal and delivery of MTPs (mega-transport projects) resides not only in the academic and professional literature about accomplishments and practices in the field plus government and consultancy reports produced for MTP developments, but also very much in the narratives (story-telling) of key stakeholders involved in such projects… This kind of investigation highlights the benefits of obtaining and analyzing contextually rich experiences in the form of anecdotes or ‘stories’ provided by those actually involved in project planning, appraisal and delivery’ (Omega Centre 2012, p. 10). The ultimate purpose of each interview is to “simply … keep our eyes open and look carefully at individual cases – not (necessarily) in the hope of proving anything, but rather in the hope of learning something! (Flyvbjerg 2006 citing Eysenck 1976, p. 224).

Timing: Interviews are expected to take 30 min to 90 min, depending on the availability and storytelling inclination of participant.

Questions to begin semi-structured process:

Given all the criticisms, political and financial efforts attributed to the development of Hudson Yards, what do you think of the outcomes so far?

Was it worth it? For whom?

With the benefit of hindsight, what could/should have been done differently? Do you think value capture can be a useful mechanism to finance urban transport and infrastructure?

199 Figure 1-Hong Kong: Mass Transit Railway-Cash Rich

The Mass Transit Railway Corporation (MTR) was established in 1975 and became a publicly-traded company in 2000. Today, 23% of its shares are traded, while the remaining 77% are retained by the government, making the MTR accountable to shareholders, and infusing a private sector efficiency motivated by investor obligations.145 The MTR is one of the few transit agencies in the world that usually generates a profit, but did not in 2019, something that hasn’t happened for at least the last ten years. Revenue of HK$54.5B did grow slightly at 1.1% but was not enough to offset losses due to recent political activities and social unrest in Hong Kong.146 The MTR not only carried 1.9 B passengers in 2019 in Hong Kong, it also successfully builds and operates other transit systems including in Stockholm, Melbourne, London and mainland China.

The MTR is heavily involved in the sale, lease, development and management of multiple property types including housing, retail and office space in, around and on top of its transit stations with 20k residential units and three new shopping malls under construction in 2019. Through their lucrative investments, development activities and large portfolio of real estate assets with steady streams of revenue, especially from numerous large shopping malls, the MTR is able to invest US$5 billion per year on maintenance and upgrades. In contrast, the New York Metropolitan Transportation Authority chronically suffers from funding gaps of at least that much or more in its 5-year capital plan.

Value Capture Finance Structure: The MTR adheres to the Rail + Property model, where the company capitalizes on its investment in new or upgraded rail stations by either developing, then leasing or selling the properties themselves, or, by leasing directly to private developers at a significant profit. The fundamental advantage that is difficult to replicate elsewhere is that the MTR receives land in-kind, at pre-development prices and then flips land and property at post-development market rates typically under a long-term lease arrangement with the government still retaining ownership. This is equivalent to a heavily publicly subsidized operation, though indirectly.

145 Shares were priced at HK$36.50, equivalent to US$4.71 with a market capitalization of HK$228.8 million, or about US$29.5 million, as of May 29, 2020. http://www.mtr.com.hk/en/corporate/investor/shareservices.html 146 MTR Annual Report 2019.

200 Chapter 2 – Exhibits

Value Capture Literature Classification

I. Value Capture Ideas a. Windfalls i. Hagman & Misczynski, 1977. ii. Bourassa 2009-unrealized capital gains, iii. Givings/ Takings b. Virtuous Circle (Levinson & Istrate 2011) c. Value emerges in land, physical assets, at/adjacent economic activity, regional economic activity – Salon, Sclar and Barone 2017

II. Needs Assessment a. Benefits of public transport (TCRP 1996) b. Taylor and Samples 2002 - fare box recovery c. Role Reversal & Capital Bias – i. Grengs 2002 ii. Hess & Lombardi 2005 = crazy budgets- private to public to federal to state and local iii. Taylor and Samples 2002 iv. Schweitzer and Taylor 2008, Gomez-ibanez 1985, Hess & Lombardi 2005, Sclar 2014 v. MTA Budget Woes: Example-Debt payment 16% of expenses- a. Hess & Lombardi 2005 vi. Salon, Sclar and Barone, VC & Crisis III. How does transit add value? (hierarchy) a. Debrezioni et. al 2007- n=55 b. Cervero and Duncan’s (2002) – 1,197 transactions c. Gomez-ibanez 1985 (Dark side of light rail) d. Mohammad et al. (102 observations from 23 studies) e. Salon and Shewmake 2011, f. Wagner et al 2016 –NIMBY issues g. Fischer and Sclar 2016 (citing Banister and Berechman). – maybe doesn’t add value – urbanized areas where access isn’t significantly improved i. Value to land 1. Henry George Theorem Arnott and Stiglitz 1979 –expenditures do increase value i. large economies, ii. Well defined land markets, iii. spatial distribution of economic activity is pareto optimal (competitive/bid rents pareto optimal land use) what about perfect knowledge 2. Bourassa 2009 _increase demand fueled by access 3. Levinson and Istrate 2001-Virtous circle (Small) 4. SSB – only if perfect knowledge and pareto optimum land use

201 5. Batt 2001 Batt, H. William. ii. Economic Productivity/ Agglomeration Benefits: 1. Bhatta & Drennan 2003 iii. Commercial Property Impacts 1. Cervero and Duncan’s (2002) 2. 2007, Debrezion et al 3. Mohammad et al. 4. Jones Lang LaSalle IP – 48% of new construction, lower vacancy and higher rents, 37% of office space in US transit accessible iv. Proximity/Distance 1. Salon and Shewmake 2012

IV. Measuring Transit’s Value in NY (See Chapter 2) a. Value of Economic Activity: MTA’s Capital Program i. MTA ii. APTA iii. PCAC b. Value of NYC Transit i. Falcocchio, Malik and Kontokosta 2017 c. Transit’s Value to Residential Properties and Taxes: NJ Transit, ARC and East Side Access i. Walk and Ride 2004 ii. The Arc Effect 2010 iii. Rail Rewards 2013 d. Value of Trans-Hudson Transit: 7-line Secaucus, NJ Extension i. Rutgers e. Value of New Service –Second Avenue Subway-Phase 1 1. Street-Easy 2. Jaffe 2013 –missed opportunity 3. Gupta, Van Nieuwerburgh and Kontokosta 2020

V. Value Capture Assumptions and Challenges to Efficacy a. Transport Value i. Arnott and Stiglitz 1979, – Henry George Theorum, ii. Batt 2001 – thruway-roads and farms 800% increase iii. Smith and Gihring 2006 – annotated bibliography –value effects well documented.2006 updated 2012 iv. Debrezion et al. 2007, v. Mohammad et al 2013 b. Institutional Capacity/Authority i. Boarnet & Crane – 1998 ii. SSB iii. GAO – 2010 iv. Zhao et al – 2012 1. Zhao & Larson 2011too v. Mathur and Smith 2012

202 vi. Cervero c. Institutional Capacity to Appraise i. SSB - 2017 ii. GAO – 2010 iii. Marthur and Smith iv. Flyvbjerg 2009 –optimism bias v. Fischer & Sclar vi. Bourassa 2009 d. Institutions can measure unearned increment i. Zhao 2012 ii. Rosen 1974 e. Capacity to extract and redistribute i. Bourassa ii. SSB 2017 f. Landowners ability and willingness to pay i. Istrate and Levinson 2011 ii. Bourassa 2009 iii. Fainstein 2011 iv. Rybeck 2004 v. Rolan 2008 vi. Gao 2010 vii. Zhao and Larson 2011

Figure 2 - Value Capture Assumptions

• The public action enhances value. • Institutions are able to appraise value and measure the unearned increment accurately. • Institutions have authority to extract increment and devise entities to administer the scheme, and to collect and redistribute funds. • Targeted beneficiaries such as land and property owners/tenants/businesses/users have the capacity to contribute. • There is a market with some potential to “unlock/exploit.”

203

Value Capture Mechanisms By Beneficiary

User Pays Fares Gas tax Vehicle Registration Tolls Cordon Fees/ Congestion charges Vehicle mile tax Parking Fees Transport Utility Fees HOT (High Occupancy Toll) Lanes

Beneficiaries Pay Tax Increment Finance Impact Fees Betterment Fees Sales tax Payroll Mobility Tax Business Rate Supplement Property Tax Land Tax Sale of Air Rights Joint Development Special Assessment Districts

Rich Pay Global Tax

Everyone Pays Income Tax

204

Table 4-NYC Commuter Premiums - Minutes of Commuting Time Increase in Improvement Saved Distance from Station Home Value NJ Transit/LIRR 20 minutes each way 1/2 mile $34,000 2 miles $23,000 ARC 1/2 mile $29,000 2 miles $19,000 per 1 minute walking $3,000 per 1 minute short drive $2,000 East Side Access 18 minutes each way 1/2 mile $11,000 2 miles $7,300 SOURCE: RPA

Table 5- NYC Transit Rental/Sale Premium: Second Avenue Extension Increase in Commute Time avg rental New Station Savings rate/ month 92nd Street 14 min $462 86th Street 10 min $330 72nd Street 14 min $462 Citywide per minute saved $33 Average Median Home per minute saved $22,000 Price Source: Streeteasy, 2017.

Table 6-Value of Second Avenue Subway Increase in Property Value Increase in Property Taxes $7.2B $2.1B Source: Gupta, Van Nieuwerburgh, Kontokosta 2020

205 Table 7- Hudson Yards Commercial Tax Abatements By Property NPV of Tax Building Developer Abatement Over 25 years 10 Hudson Yards Related $106.2 30 Hudson Yards Related $327.8 50 Hudson Yards Related $176.7 55 Hudson Yards Related $76.5 One Manhattan West Brookfield $115.1 3 Hudson Boulevard Moinian $64.8 66 Hudson Boulevard/The Spiral Tishman Speyer $170 0 Total $1,037.2 Source: Fisher and Leite, 2018, NYCIDA, Author.

Chapter 5 – Exhibits Figure 3-Map of Hudson Yards Finance District

SOURCE: Hudson Yards Development Corporation.

Chapter 6 – Exhibits

206 Table 8-NYC New Housing Projects Near Train Tracks Q1 2019 Share of Share New Proposed of New Borough Projects Projects units Units Queens 85 15% 5,712 21% Bronx 41 8% 5,146 20% Brooklyn 97 5% 4,197 9% Manhattan 7 2% 963 4% Source: Localize.city, NY Times. Note: No permits in Staten Island.

Notable Developments at Hudson Yards District

Brookfield’s Manhattan West

Manhattan West is a 7 msf mixed-use development by Brookfield Properties located between 9th and 10th Avenues between 31st and 33rd Streets. The 6-building mini-mega project spans 8-acres built over rail yards with the first parcel purchased by Olympia & York back in

1985. Six million sq ft of office is built above the privately-financed 2.6-acre platform above operating Amtrak and LIRR rail lines. Structures include One Manhattan West, Two Manhattan

West, and Five Manhattan West, all office, with a boutique hotel, a central 2 - acre public plaza and surrounding retail. Tenants include Whole Foods, Skadden Arps which relocated from 4

Times Square, NHL, JP Morgan, Chase, Amazon, Cravath Swain & Moore. The Eugene, named

207 after John Eugene Zucotti147 opened in March of 2017. The building is home to 844 apartments with 675 market rate and 169 affordable units. Was one of the first major residential buildings to open in the neighborhood (Hughes March 19, 2017).148 The project includes a pedestrian corridor where 32nd Street would have been, (as per rezoning requirement) but no unobstructed thoroughfare to 10th Avenue.

Table 9- Manhattan West Development Details

Typical Building Use Size Stories Floorplate One Manhattan West Office 2.1 msf 67 35k sq. ft. Two Manhattan West Office 1.9 msf 5 36k sq. ft. The Lofts Office 230k sq. ft. 13 na Five Manhattan west Office 1.7 msf 17 120k sq. ft. The Pendry Hotel 164 rooms 21 The Eugene Residential 844 units 62 Total Retail Retail 240k sq. ft. Public Plaza & Pedestrian Corridor Open Space 2 acres Source: Brookfield Properties.

147 Zucotti was formerly a partner at Olympia & York, US Chairman of Brookfield, and Deputy Mayor of NYC. 148 70k applicants entered the affordable housing lottery for just 169 units in this 80/20 building (Curbed 2017) also known as 401 W 31st Street, accessed only through the separate ‘poor door.’

208

66 Hudson Boulevard - The Spiral

The Spiral at 66 Hudson Boulevard between 34th and 35th Streets, fronts the Hudson

Yards – 34th Street Subway Station and connects to the northern end of the High Line.

Developed by Tishman Speyer, the 65-story, 2.85 msf office building will offer center-core open floor plans, and open-air terraces on every floor. Designed by Bjarke Ingels Group, the green spaces will wind up around the building to its tapered top. Tishman capitalized on available incentives and will develop one block of Hudson Park in exchange for increased density (Site

706B).

209 99 Hudson Boulevard

Just two blocks north, another Tishman Speyer massive office tower is underway at 99 Hudson

Boulevard, fronting 11th Avenue between 36th and 37th Streets, across from the Javits Center.

The 44-story 1.3 msf office tower is being designed by Henning Larsen Architect.

Three Hudson Boulevard

Three Hudson Boulevard will encompass an entire block bounded by Hudson Boulevard and 11th Ave between 34th and 35th Streets and is also adjacent to the 34th Street 7-line station entrance and the northern end of the High Line. The site was purchase by Moinian for $54 million in 2005 from Verizon and had been used since then as a construction staging site for the

MTA (6sq.ft.). The building will rise nearly 1000 feet with 56-stories, for a total of 1.85 msf.

Asking rent of lower floors start at $110 psf. To be completed by 2023 at a cost of $3B, amenities include terraces, 50k sq. ft. floorplates and 15 to 30-foot ceiling heights. Designed by

FXCollaborative and developed by the Moinian Group and Boston Properties -lender and co- developer, the building will host “delighter floors” – constructed with super amenities, ultra-high ceilings, etc., that are meant to “delight’ tenants (Site 706a).

210

Hudson Commons Hudson Commons, designed by KPF and developed by Cove Property Group and the

Baupost Group, is located at 441 Ninth Avenue & 34th Street. The 700k, 25-story office building made use of an existing 8-story warehouse which was purchased for $330 m from Emblem

Health in 2016 and acts as the podium to the rest of the tower. As with other new properties,

Hudson Commons will have outdoor space and variable floor plates. (Hall 2019). Tenants include: Peloton with 312K sf and Lyft with 100k. The property was 65% leased by November

2019 according to Cove Properties.

555 W. 38th

Rockrose is developing a 1.6 msf residential tower to occupy a full block between 10th and 11th at 38th Street, across from the Javits Center and is expected to open late 2022. Rockrose

211 assembled development rights by purchasing parcels in 2001, 2007, and 2012. In one recent transaction, Rockrose paid $20.5 m for an additional 139k sq. ft (The Real Deal). The 52-story tower underway will stand at 570 feet, have ground floor retail and 598 units, including 150 affordable which qualified the property for an additional housing density bonus. 149 (Site 710A

13)

James A. Farley Post Office and Moynihan Train Hall

Redevelopment of the Farley Post Office and Moynihan Train Hall will offer new and expanded retail and commercial space while also upgrading stairs and entrances, a new communication system plus the desperately needed redesign of the Long Island Rail Road’s concourse. This $1.6B project designed by SOM, is being jointly developed by Related &

Vornado. 150 151 The Moynihan Train Hall, 255k sq. ft, will serve and expand service for Amtrak,

LIRR and NJ Transit passengers and link to a newly renovated Pennsylvania Station,152 essentially extending Penn Station to 9th Avenue offering direct links to the Hudson Yards

149 “Rockrose was one of the earliest developers to bet on the Hudson Yards area. It developed a 394-unit property at 455 West 37th and an 835-unit property at 505 West 37th Street prior to 2009.” The Real Deal Sept. 18, 2018) 150 According to the ESDC, the entire Pennsylvania Station-Farley complex including Moynihan Train Hall is expected to cost nearly $3B. “The project will be a joint venture between ESDC, MTA, Amtrak and the LIRR.” 151 $550 m from the state, $420m from Amtrak, MTA, PA & federal funds, plus $630m from developers (ESD accessed November 2019). 152 Penn Station services “650k passengers per day, more than passengers at Newark, JFK and LaGuardia Airports combined.” (NYS Governor’s Office).

212 District. Facebook, after leasing 1.5 msf at Related’s Hudson Yards (see below), is also under negotiation to lease the entire 740k feet available at the Farley Post Office (Commercial

Observer 2.2020).

One and Two Penn Plaza

Vornado is redeveloping its properties at One and Two Penn Plaza to include 2.5 msf and

4.5 msf respectively. Their $200 m “mega-campus” will include a public plaza along 7th Avenue and a new entrance for Penn Station between the two buildings. Its redesign will offer large open floor plates and updated amenities including outdoor space and a new 140k creator space housed in an all glass cantilever, 45 feet in the air jutting out 70-feet from the building’s façade.

213

451 Tenth

451 Tenth Avenue is being jointly developed by Related and Spitzer Enterprise. The project is being designed by Handel Architects and will rise above a former parking lot between

35th and 36th Streets along Tenth Avenue near the Javits Center. Plans call for a mix of commercial and residential space across two-towers, in 1.4 msf yielding 260 housing units. The first tower will contain 415k square feet of space, with close to 300k sq. ft. designated for residential space, plus over 100k sq.ft. for community facilities (NY YIMBY).

214 Development at Related’s Hudson Yards

10 Hudson Yards 10 Hudson Yards broke ground in 2012 and welcomed its first tenant, Coach (now folded into Tapestry), in May 2016. In 2011, Coach purchased a 1/3rd stake in the building, paying

$350 million for 738k sq. ft. at the time and spent an additional $220 million for build out.

According to the Wall Street Journal, Coach subsequently executed a sale-leaseback and converted its ownership into a $707 million long term lease to cut back on its debt service payments. The 52-story building stands at the NW corner of 10th and 30th and was designed by

Kohn Pedersen Fox (KPF). The building rises to 895 feet with 1.8 m gross sq. ft. Both 10 and

30 Hudson Yards are designed by the firm’s founder Bill Pedersen to “play off of each other”.

Other pioneering tenants include Sidewalk Labs, and L’Oreal, which moved from midtown after

60 years. It’s base also houses Sweetgreen which opened in August 2018 and Mercado Little

Spain, the 35K sq. ft. food hall by José Andrés and the Adriá brothers which opened in March

2019.

215

30 Hudson Yards

30 Hudson Yards will be the tallest building at Related’s Hudson Yards, reaching nearly

1,300 feet. The building also hosts an open air, glass bottomed, 1,100 sq. ft. suspended observation deck, extending 65 feet out from the 100th floor. The deck will have 9-foot glass walls adjacent to an indoor/outdoor bar, a 10,000 sq. ft. restaurant and event space run by British hospitality group Rhubarb, all accessed by a 60 second elevator ride. The ‘Edge’ opened in

March 2020 and tickets are on sale now. Tenants include WarnerMedia, parent of HBO, Turner,

CNN, etc. which consolidated its 5,000 employees under one roof occupying 1.5 msf. They made the move from Related’s Time Warner Center at Columbus Circle. Recently, WarnerMedia was also looking to execute a sale-leaseback for $2 billion. This strategy worked well for them in the past when they executed a sale-leaseback at Time Warner selling their 1.1 msf interest there for $520 million and used the proceeds to finance their initial purchase at 30 Hudson Yards.

Related will also move from its TimeWarner Center to occupy 250,000 sq. ft. across 9 floors. Related was actually one of the first tenants to commit, buying its stake in the building through an investment partnership of Related, the Abu Dhabi Investment Authority and the

Government of Singapore Investment Group according to the Wall Street Journal. Oxford

Properties will also have their offices here.

216 30 Hudson Yards topped out in July 2018 and opened in 2020 with 2.6 m sq.ft. Located at the SW corner 10th and 33rd , its lobby has direct access to the 7-line station.

The Shops and Restaurants at Hudson Yards

The 7-story suburban-like mall, opened in March of 2015 and sits between 10 and 30

Hudson Yards at 10th Avenue between 30th and 33rd Streets. Housing the city’s first Neiman

Marcus, the retail center was designed by Elkus Manfredi Achitects and is home to more than

100 shops including 25 restaurants with a variety of local and international brands, online- retailers and variable programming. Celebrity chefs, including Michael Lomonaco-Hudson

Yards Grill, and Thomas Keller-TAK Room, have opened restaurants here as have food outlets such as Citerella. Other unique options include 3DEN – “a pay-as-you-go rejuvenating lounge” i.e. a place to take a nap. Snarkitecture’s Snark Park offers interactive exhibition experiences, with changing environments and, of course, limited-edition merchandise and food. Its main entrance fronts Hudson Yards Plaza and Vessel, appearing to turn its back to the rest of

Manhattan with little street level retail along Tenth Avenue. Ross is bucking retail trends with brick and mortar stores which have been downsizing, closing hundreds of locations or going

217 bankrupt all together. At one point, Ross was so intent on bringing Neiman Marcus to the Shops, he considered buying the franchise himself.

The Shed - Ideological Loss Leader The MTA’s 1989 development guide for the Yards included a community cultural component which carried through as a stipulation to its 2008 RFP. What evolved, however, was not in the spirit of the original intention. What was built was more a monument to excess with little connection to the surrounding community or opportunities for neighborhood activities.

The Shed is a non-profit cultural organization housed in what has recently been named the Bloomberg Building. Though Shed operators are quick to point out their independence from

Related, they can’t escape the fact that they are physically attached, housed on the lower floors of one of the most expensive apartment buildings in NYC, 15 Hudson Yards.153 The 200,000 sq. ft. multi-leveled, adaptable, indoor/outdoor cultural center is built on city-owned land.

Construction began in 2015 at a cost of $475 million, raised primarily from private donations.

Bloomberg Philanthropies donated $75 million on top of a $75 million public grant in 2013 from the Bloomberg Administration. Other donors with naming rights include Frank McCourt,

153 The average price of an apartment at 15 Hudson Yards is $5 million.

218 Jonathan and Lizzie Tisch, Ken Griffin, and Stephen Ross who lent the Shed a $45 million interest free loan (Cooper March 31, 2019).154 Nepotism runs rampant throughout Related’s

Hudson Yards development and stretches into the Shed as well. Board members include Harvey

Spevak of Equinox, Kate D. Levin- former Bloomberg Cultural Affairs Commissioner, and

Daniel Doctoroff as Chairman. Stephen Ross was once a board member but had to step down after artists and designers threatened to boycott and pull their shows from the facility in response to Ross’s hosting of a Trump fundraiser.

The Shed’s mission is to “commission new work, across all art forms for all audiences,” according to its CEO and Artistic Director Alex Potts, brought on in 2014 with a reported salary of $850k (The Shed is a Shack 2020). The building itself underscores this goal as both the structure and programming can adapt to an artist’s imagination. The dynamic facility can accommodate all forms of visual and performance art including interactive exhibitions, theater, dance, music and concerts, visual arts, films, and gallery shows – nothing too conventional. Its outer shell can open or close within five minutes utilizing six massive wheels, six feet in diameter, evoking the site’s industrial rail history. The kinetic system operates on two rails, each

273 feet long, doubling the available space when open. Its main exhibit hall can accommodate

1,250 seats or 2,700 standing and offers rehearsal and event space. There is a 3,000 sq.ft. Danny

Meyer restaurant as well, named Cedric’s, a nod to the architectural inspiration for the Shed’s design – the 1960s Cedric Price’s and Joan Littlewood’s Fun Palace. 155 The property officially

154 $45 m from Frank McCourt (McCourt Performance Space), $27.5 from Jonathan and Lizzie Tisch (Tisch Skylights Rehearsal Spaces), $25 m from Ken Griffin (Griffin Theater) (Cooper March 31, 2019) 155 The never – realized Fun Palace has been referred to as a “great Erector Set contraption made of trusses, catwalks, screens, ramps, and stairs intended for a grungy riverbank site in East London.” The flexible and temporary performance space configurations such as “theatres, cinemas, restaurants, workshops, rally areas” were meant to be “assembled, moved, re-arranged and scrapped continuously” (Davidson April 8, 2019).

219 opened with great fanfare on April 5, 2019. Attendees at its March 31st opening dinner gala read as a who’s who of New York’s elite.

The Shed claims that it recognizes its “regular prices may be prohibitive for some people” and offers discounted tickets to NYCHA residents and CUNY students, plus $10 tickets to exhibitions for all visitors.

15 Hudson Yards 15 Hudson Yards stands 910 feet tall with 960k sq. ft. The residential building also houses the back-of-house functions for the Shed at its base. The architects designed the 88-story building to withstand 100-year wind loads with tapered clover leaf turrets at the top. Its outdoor residential and event space will be the highest in NYC (Related). Construction began in the fall of 2014 and was completed January 2019. The building is designed by Diller, Scofidio + Renfro with the Rockwell Group, the interior architecture lead. This is Diller’s first skyscraper, complimenting the High Line and The Shed, both of which she designed as well.

The property offers 285 one to four-bedroom homes. Sale prices range from around $3.8 m for two bedrooms to about $35 million+ for duplex penthouses. Mirroring condominium trends elsewhere in the city, only half of its units were sold by 2019, since sales began in the fall

220 of 2016. Corcoran Sunshine Marketing Group is leading sales with an expected sellout of

$1.7B. Agents put the blended average sales price at $3,200 per sq. ft. (The Real Deal/Curbed).

A laundry list of luxury amenities, many on the 51st floor, include an aquatic center with

75-foot swimming pool, spa , 3.500 sq. ft. fitness center, entertainment floor with private dining rooms, 24/7 concierge, filtered fresh-air, screening rooms, business center, yoga studio, children’s imagination center, wellness center, beauty bar, golf lounge, wine storage, tasting rooms, etc. Fun fact: 21,720 bottles of wine can be stored in its ‘wood-clad cellars and lockers.’

The same structure also houses 107 affordable housing units with a separate address, 553

West 30th, and its own separate entrance – the poor door -with no access to the luxury amenities.

Fifty percent of the affordable units were slated for Community Board 4 residents.

35 Hudson Yards Thirty – five Hudson Yards is another dense, supertall structure at 1,000 feet tall with 1.1 msf. The tower is designed by David Childs of SOM and is located at the SE corner of 33rd and

11th. The building has 143 two to six-bedroom homes beginning on the 53rd Floor. As of June

2020, only about 15% of the units have sold (Chen 2020). The lower floors of this mixed-use

221 building house the world’s first Equinox hotel with 212 luxury rooms, the Equinox Fitness Club,

SoulCycle156, and restaurants including Electric Lemon. 157 Residents have access to the same amenities as hotel guests, including 24 hour, in-room dining, laundry, valet, concierge service, transportation, etc. Basic room rates at the 5-star luxury hotel start at $700/night and skyrocket from there, not exactly geared for the convention center and trade show crowd as the MTA originally envisioned in its 1989 plan.

The building is 1,000 feet tall with 1.1 million gross sq. ft. At least half of the homes remain on the market, with some estimating that only ‘13 of the 143’ have found buyers since its opening in 2019. Sales of luxury residences of $10 m or more were down nearly 30% in 2019, when compared with the previous year due to a glut of luxury properties on the market. The 5- bedroom penthouse on the 90th floor comes with the an astronomical asking price of $59 m (Cox

2020).

156 Ross is part owner of both. When Ross held a Trump fundraiser last summer, members of both fitness centers threatened to quit. Operators hastily sent out apologies to members pledging that Ross is more of a silent investor. 157 Ross and Spivek are launching a chain of Equinox Luxury Hotels in other cities including Seattle in 2020, Houston in 2021, Los Angeles 2022, and Chicago 2022 (Related).

222

50 Hudson Yards Related/Oxford are developing 50 Hudson Yards with Fudosan, which acquired a 90% stake in the building in 2017 (Business Now). Designed by Foster + Partners, 50 Hudson Yards will be the 4th largest commercial building in NYC and the bulkiest Related tower. It will stand

985 feet tall with 2.9 million gross sq. ft and has a reported construction cost of $3.8 Billion, making it one of the most expensive buildings in NY. To gain such bulk, Related purchased over

1 msf of TDRs from the Eastern Rail Yard and also paid for DIBs at both 50 and 55 Hudson

Yards (See Table 25 in Appendix for ERY TDR Transactions).

It will be the final Phase 1 structure to be completed, scheduled to open in 2022.

Sprawling over an entire city block located at 10th and 11th Avenues between 33rd and 34th

Streets, the property has huge floor plates with block long windows able to accommodate 500 employees per floor with many floors having access to open air terraces or ‘Sky Lobbies.’ 50

Hudson Yards had been the target of labor protests during construction due to the use of non- union laborers (See Figure 5 Controversy: Labor and Related in Appendix).

223 BlackRock, which will relocate from Park Avenue, will house its new corporate headquarters here occupying 850,000 sq. ft. for its 2,700 employees across 15 floors. According to Crain’s, Blackrock is spending about $1.3B over the course of its 20-year lease. Reportedly,

BlackRock received state tax credits of $25 million for keeping its 2,700 employees in

Manhattan and not to NJ, promising to create another 700 jobs. The New York Times calls the move a ‘gravity shift’ of the corporate elite to the slick, new Hudson Yards. Following suit, the law firm Debevoise and Plimpton will lease 450k sq. ft. and relocate to Hudson Yards from

Third Avenue.

But, it’s not just finance and law firms interested in Hudson Yards. In the fall of 2019,

Facebook announced its lease of 1.5 msf across three Related buildings. They will occupy 1.2 msf at 50 Hudson Yards, plus it will lease 57k sf. ft. at 55 Hudson Yards and another 265k sf. Ft. at 30 Hudson Yards, bringing both buildings occupancy to 88% and 100% leased. By June of

2020, the New York Times reported that all Related’s commercial properties were 93% leased.158

158 Related purchased TDRs from the Eastern Rail Yard for $375.6 million and paid DIB of $115.7 million to boost square footage at 50 and 55 Hudson Yards (See Table 7.x ERY TDR Transactions).

224

55 Hudson Yards

Designed by KPF, led by A. Eugene Kohn, 55 Hudson Yards sits at the south west corner of Hudson Park and Boulevard at 34th Street. Its gunmetal cast-iron-like façade is meant to evoke the area’s industrial past and is inspired by the High Line, according to designers. The building, opened in 2019, contains 1.3 m gross sq. ft. and is 780 ft. tall. Tenants include law firms, healthcare, and equity firms such as Milbank and Mount Sinai. Related purchased this site on the “Northern Yards” from Extell, which originally planned a 1.5 msf office tower.

The Vessel The Vessel is billed as climbable art, an interactive public sculpture meant to be the focal point of the property’s public square. The $150m structure opened to visitors March 15, 2019

225 after two years of construction. Commissioned by Ross and designed by Thomas Heatherwick, the cooper sculpture has 154 interconnecting flights of stairs, 80 landings, 2,500 steps and stands

150 feet tall.159 Entrance is free and open to the public who must reserve a timed ticket for entrance. No lingering or seating allowed at the ‘anti-social’ stairway, though Equinox offers

Vessel-utilized group fitness classes (Curbed).

Public Square and Gardens

Related’s Hudson Yards will include 14 acres of open space, 5 of which have opened over the ERY as gardens and concrete plazas. The rest will be developed over the WRY which promises a public lawn, but no doubt will cater to new residents of the semi-gated community.

Studio, the grounds are considered a “horticultural experience”, with native vegetation including

“28,000 plants, …200 mature trees, perennial gardens, canopy of native trees (and) a birch grove at 10th and 30th.. Huge fans provide ventilation to protect the greenery from the heat generated by the 24/7 operational railyard below. Table 6.3 -Related's Hudson Yards Phase 1 Specifications

159 Ross calls it ‘a 365 day-Christmas tree. (Bagli Dec 8 2016).

226 Table 10-Related's Hudson Yards Phase 1 Specifications

Completion Address Use Sq. Ft. Height Date Architect(s) Major Tenants Other 10 Hudson Yards Office 1.8 895 2016 Billl Pedersen/KPF Coach Connects directly to High Line 30 Hudson Yards Office 2.6 1296 2019 Billl Pedersen/KPF Warner Media Home of the "Edge" Observatory Elkus Manfredi Architects The Shops at Hudson Yards Retail 1 msf/720k 2019 & KPF Neiman Marcus 7 levels/100 shops and restuarants Diller Scofidio + Renfro & 15 Hudson Yards Residential 960k gsf 910 2019 Rockwell Group Residential 295 1-4 BR Diller Scofidio + Renfro & 107 units, 50% for MCB 4 553 West 30th Street Affordable Housing na 7 floors Rockwell Group Residential residents 143 2-6 BRs/212 hotel rooms. 35 Hudson Yards Residential/Hotel 1.1 M gsq 1000 2019 David Childs/SOM Residential/Equinox Residencec begin on 53rd Floor. 50 Hudson Yards Office 2.9 M gsf 985 2022 Foster & Partners BlackRock/ 850k 15 floors 55 Hudson Yards Office 1.3 M gsf 780 2019 A. Eugene Kohn/KPF Cast - Iron-like raçade Primary Source: Related Companies

Figure 4-Selected Related HY Finance Sources

• $1.6B in EB-5 Funds • $225m Tel Aviv Stock Exchange • 15 HY o $850m construction loan from Children’s Investment Fund • 10 HY o $475m construction mezzanine loan: $350 m from Starwood Property Group, and the rest from “Oxford, United Brotherhood of Carpenters and Joiners, and Coach” in 2013. o $1.2B in debt refinancing from Deutsche Bank & Goldman Sachs with insurer Allianz-German purchasing a 44% stake in 2016 (from Coach and part of the Kuwait Investment Authority’s share). This was the insurer’s largest-ever real estate investment in the US at the time. The tower was valued at $2.15B. o $432 m from State Teachers Retirement System of Ohio for 20% stake. • 30 HY o Wells Fargo bought its 500k for $650m in Dec 2015. o KRR bought its 343k sq. ft. on the upper floors at an undisclosed price. o Time Warner’s 1.6m office condo – 14th to 51st floors. o Related is purchasing its 270k. o With the Shops, the building had a total of $4.1B in financing, a mix of loans, equity and tenant/owners. • 35 HY o $2B capitalization in July 2016 o $1.2B first round debt financing from UK-based Children’s Investment Fund.

Sources: Bockman, Levitt Bloomberg, Solomont 2016, The Real Deal.

227

Figure 5-Controversy: Labor and Related

Prior to construction, the Building Construction and Trades Council negotiated a Project Labor Agreement (PLA) for Phase 1 of Related’s Hudson Yards development guaranteeing the development would be built entirely by union workers only. But, by the time the last building of Phase 1 was being constructed, 50 Hudson Yards, the BCTC was in negotiations to nail down the same union-only PLA for Phase 2. Related balked and insisted that they wanted to run an “open-shop,” i.e. a mix of non-union and union workers. The BCTC vehemently disagreed. A nasty fight with personal attacks on both sides ensued.

Related claimed the union was padding their payroll by: 1) paying salaries equivalent to working 365 straight days, 12 hours per day; 2) paying salaries for no-show jobs; and 3) paying low-level workers, whose tasks included getting coffee, the same salary of a highly skilled laborer. The Union insisted they were subjected to unsafe work conditions and unfair business practices. Related then sued for $100 million to recover what they felt were inflated costs and also sued Gary LaBarbera, BCTC president, directly. The Union claimed any blame sat with the mismanagement of Related’s own construction manager, pointing to the fact that grievances against the Union were never filed during construction.

The conflict escalated. The union’s solidarity movement, #CountMeIn arose, staging protests at Related’s Offices, Stephen Ross’s home and amassing boycotts and picket lines at 50 Hudson Yards. Dueling personal smear campaigns grew ugly as negative websites, AskGaryWhy and AskSteveWhy appeared online. #CountMeIn turned up the pressure, organizing a sit-in in front of NFL offices shutting down Park Avenue to protest Ross being named to the NFL’s Social and Racial Justice Committee. They alleged Ross, owner of the NFL Miami Dolphins, a sexist and racist. Thirty- seven protestors were arrested.

Meanwhile, Related bypassed the BCTC and began negotiations directly with the United Brotherhood of Carpenters Union, a member of the BCTC, to finish its work at 50 Hudson Yards. The Carpenters broke rank and agreed to cross the picket line. Union officials blamed the “carpenter’s international leadership.” Cracks in BCTC solidarity ensued.

Related began using some non-union workers, but quickly realized that they still required highly skilled, hard-to-replace workers at 50 Hudson Yards, which is to be one of the tallest buildings in NYC, towering nearly 1,000 feet tall. Related not only bypassed BCTC in this instance, but also bypassed the local NYC chapter and opened negotiations directly with the International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers leadership in Washington D.C. Related was surprisingly successful. On February 19, 2019 the International leadership removed local leadership, either by flat out firing, or making everyone else reapply for their jobs. Moreover, they demanded that all local assets, operations, funds and even keys to the local office be surrendered to them and ordered its local members return to work at 50 Hudson Yards. One former union leader shocked that ‘any union organization officials that say you need to cross a picket line are a disgrace to the labor

228 movement” and a “betrayal of the #CountMeIn solidarity campaign” (Goldenberg 2019). BCTC was losing its strength in numbers.

One week before the official grand opening of Related’s Hudson Yards, Related and BCTC agreed to an open-shop format for Phase 2 of the development. Both sides heralded this agreement and promised shared commitment to safety, diversity, efficiency, and direct accountability. BCTC sought to protect its skilled members so that safety wouldn’t be compromised, and, its members were still promised a career path from pre-apprenticeship and apprenticeship programs. In return, Related agreed to drop all lawsuits and the union agreed to stop all rallies, picketing and boycotting, and, more importantly, to not disrupt the March 15th grand opening festivities. LaBarbera ended up attending the highly publicized official grand opening and sat on the dais with colleagues, public officials, celebrities, and, of course, Ross.

Table 11- Related’s EB-5 Financing

TEA Name Description Status EB-5 Status Progress Hudson Yards Image of 10 Hudson I-924 I-526 petitions Completed – Fully Phase 1 yards Approved approved, and subscribed conditional green cards issued Hudson Yards Manhattan Tower – I-924 Some I-526 Completed - fully Phase 2 (picture of the mall) Approved petitions subscribed approved, and conditional green cards issued Hudson Yards Mixed-use tower (35 I-924 I-526 In progress- Phase 3 Hudson Yards), office Approved Approvals Vertical building (55 Hudson received construction Yards) and platform pre- components development (Western underway Rail Yard Platform) Hudson Details: Two residential I-924 I-526 Completed Residences condominiums West approved approvals th (outside of Chelsea (515 West 18 received Hudson Yards Street – “two towers District) straddling east and west sides of Highline” and nd 555 West 22 Street on waterfront Source: Related USA EB-5 Projects (as of Fall 2019)

229

Table 12- Estimated EB-5 Participation Max # of EB-5 Est. Total % of Loan Type Tran Minimu Total Jobs EB -5 Capital Project TPC or che m Jobs Estimated Investors Investment Cost Equity Required Est. (TPC) Atlantic 1,154 $577m $3,329m 18% loan Mortgage/ 3 11,540 20,696 Yards* mezzanine total HY I 1,200 $600m Unknow Unkn loan mezzanine 1 12,000 Unknown n own HY 1,200 $600m Unknow Unkn loan mezzanine 2 12000 19,000 Tranch n own II HY 760 $380m $4.4b 9% loan mezzanine 3 Unknow Unknown Phase 3 n Source: Calderon and Friedland, 2015, 2016, 2017. *Investors from Atlantic Yards’ first EB-5 tranche have been paid back in full, though no documentation was offered on the number of permanent US jobs the investment created.

Figure 6-HY EB-5 Targeted Employment Area

Source: City Lab

230 EB -5: A Primer

The Employment-Based Fifth Preference, or EB-5 program, was established by Congress as part of the Immigration Act of 1990. The program is administered by the Department of Homeland Security’s US Citizenship and Immigration Services (USCIS) through its Immigrant Investor Program Office. The EB categories – 1 through 5 – offer prioritized employment-based opportunities for immigrants to petition for permanent residency in the US. Qualifying conditions include extraordinary ability, exceptional skills, advanced degrees, etc. The EB-5 program was enacted to create and preserve American jobs while encouraging capital investment. This visa category allows foreign investors to participate in the financing of new commercial enterprises160 that will result in at least 10 permanent American jobs. In return, the immigrant investor and his/her spouse and children under 21 can file an I-526 form and, if approved, are awarded conditional permanent residency visas for two years. Before the end of the two years, petitioners must prove that their investment did indeed support 10 jobs and file the necessary I-829 petition. Upon approval, investors and family members, typically an average of 3 persons per petition, receive permanent lawful resident status in the US. The program caps the national annual number of EB-5 issued visas at 10,000. When maximized, the EB-5 program represents about 1% of all lawful permanent residencies granted nationwide per year.161 The program received little interest in its infancy. But enthusiasm for EB-5 capital grew, however, when banks and traditional capital sources dried up during the 2008 recession and institutions were slow to lend. Since then, the EB-5 program has generated more than $27.6 billion in foreign direct investment between 2008 and 2018 according to the industry’s trade association, Invest In the USA (IIUSA), with about $5.7B invested in 2017. IIUSA also claims that the EB-5 program has generated more than 276,000 permanent jobs in the US between FY2010-2015, though many researchers believe job growth and economic productivity estimates to be overstated and nearly impossible to track and verify (Calderone and Friedland 2017, Singer and Galdes 2014, GAO 2016). Most investment has originated in mainland China. In 2018, for instance, 75% of visas granted, originated in mainland China (7,500), greatly eclipsing immigrant investors from all other nations. Vietnam, second to China, trailed with only 500 visas in the same year (IIUSA). It is widely reported that interested investors in mainland China face a 10 year wait or more for visas.162

160 A commercial enterprise is defined as “any for-profit activity formed for the ongoing conduct of lawful business. Examples of a commercial enterprise include a sole proprietorship, partnership (whether limited or general), holding company, joint venture, corporation, business trust, or other entity that may be publicly or privately owned. See 8 C.F.R. § 204.6(e).” (GAO 2016). 161 According to the USCIS, the agency granted permanent residency visas to 1.1 million immigrants in 2018. https://www.uscis.gov/sites/default/files/USCIS/statistics/2018_USCIS_Statistical_Annual_Report_Final_- _OPQ_5.28.19_EXA.pdf In the same year, 9,602 EB-5 visas were granted, according to Invest In the USA. https://share.geckoboard.com/dashboards/F7C1F0339D47813D 162Though the USCIS currently reports processing times of 21.4 months for I-526 and 33 months for I-829 https://egov.uscis.gov/processing-times/historic-pt .

231 To participate, immigrant investors must invest a minimum of $1 million. But, if the new commercial activity is situated within an area that has experienced high unemployment of at least 150% of the national average, investment thresholds are then lowered to a more attainable $500,000. This option proved popular with investors. Almost all visa seekers invest in these “targeted employment areas” or TEAs, particularly in major metropolitan areas such as New York and California. According to a GAO study, 97% of petitioners elected to invest in a high unemployment TEAs in the fourth quarter of 2015. TEAs must be certified by the USCIS. Historically, however, the USCIS has not provided guidance as to national standards or definitions, leaving states and localities to their own self- and special interests. The program was designed to steer investment where it would be most needed but has led to irrational gerrymandering abuses such that EB-5 capital has often been used to fund luxury projects in affluent neighborhoods, diverting capital intended for struggling communities. Over its history, the EB-5 program has been fraught with scams, fraud, exploitation, conflicts of interest, SEC actions and numerous lawsuits throughout the country including in California, Chicago, Vermont, and Florida to name just a few.163 After a decade of continuous calls for reform, some issues have recently been addressed. New rules to the EB-5 program took effect November 21, 2019. The new rules increase the minimum qualifying investment from $1.0 million to $1.8 million. For projects within rural areas or distressed urban areas, minimums increased from $500k to $900k. Subsequent minimum monetary adjustments will be made every five years based on inflation. In addition, the USCIS will now define TEAs, no longer deferring to states or other local entities. This is meant to curtail political gerrymandering of TEAs, particularly because under the new rules, TEAs will not only include contiguous census tracts, but will also include “any or all directly adjacent (census) tracks” (USCIS 2019). This new provision would have likely ruled out the TEA created for Hudson Yards, as it sits adjacent to affluent neighborhoods and has included Central Park as an economically distressed area with high unemployment. In New York, TEAs are approved by the Empire State Development Corporation (Capps 2019).164 As is the case elsewhere, the ESDC has allowed great flexibility when crafting a TEA that will confidently support the required high unemployment rate. One ESDC official described the certification process as employing common sense to determine which census tracts can be gerrymandered together. They ask whether or not it might be reasonable for potential workers to travel from one census tract where they live, to another where the commercial activity and promised employment is taking place (Capps April 2019). Presumably, this thinking was

163 Conflicts of interest arise when former public officials move on to regional centers where they then lucratively promote the same projects they brought forward in their own administrations, such as Charles Gargano the former head of ESDC and the Atlantic Yards project. The USIF, United States Immigration Fund, was founded as a regional center in 2010. See also https://www.nytimes.com/2017/08/03/business/kushner-eb-5-china-green-cards.html , https://atlanticyardsreport.blogspot.com/2014/10/former-esdc-head-ambassador-gargano.html , https://fortune.com/2014/07/24/immigration-eb-5-visa-for-sale/ . 164 Need to confirm ESDC role/responsibilities with EB-5 funds.

232 applied to the case of Hudson Yards, certified after linking itself with multiple public housing complexes in northern Manhattan with actual higher-than-national unemployment rates. Almost all EB-5 investments are funneled through regional centers, public or private entities created to promote regional economic growth by acting as gatekeeper and distributor of funds. These centers were instituted in 1992 by USCIS to ease the ability of individual investor participation.165 Regional centers act as matchmakers, connecting immigrant investors with domestic commercial enterprises for substantial administrative and/or management fees.166 Through regional centers, investors pool their resources to fund projects in need of sizable cash infusions at scales perhaps unachievable individually, but more likely undesirable, for immigrant investors whose main objectives are green cards. These joint ventures in turn allow immigrant investors to also pool, then distribute a project’s total number of jobs created or preserved to satisfy individual I-526 requirements. In addition, when investing through regional centers, investors are allowed to claim not only full-time direct employees of the commercial enterprise tracked by W-2s but are also allowed to count economically-modeled indirect and induced jobs as well. This includes construction jobs, provided they are maintained for at least two years (Calderon and Friedland 2015). Currently, 822 regional centers exist nationally (USCIS), handling 95% of all EB-5 investment (IIUSA). Over 100 regional centers operate throughout New York State today (USCIS 2019). New York State is an active incubator of EB-5 funds, reportedly receiving over $4.5 billion in investment between 2010 and 2015. According to IIUSA, this equated to more than 66,000 jobs, second only to California with more than 72,000 jobs over the same time period. (IIUSA 2019). IIUSA also claims NY State has reaped about $790 million in state and local tax revenues. 167 Large-scale real estate developments are prime beneficiaries of EB-5 funds, both nationally and locally.168 Industrious firms such as Extell, Forest City Ratner, Related, Greenland, Tishman-Speyer, Trump, and many more have capitalized on the inexpensive, flexible and patient funding EB-5 investments bring. This is especially true early in the development process, when banks and other conventional lenders may be more risk averse than petitioners whose fundamental objective is permanent residency; thus, tolerating the lack of transparency and accountability as well as negligible returns -- generally only around 1% or less. EB-5 funding is attractive to real estate investors and developers for multiple reasons: 1) its flexibility as equity or debt financing; 2) its ease and understanding of simple job creation through new construction or renovation; 3) its ability to be structured as long -term loans with

165Regional centers exploded in numbers also following the 2008 recession, growing from 16 in total in 2007 to about 200 by 2010 (Singer and Galdes, 2014) and over 800 today. 166 “Centers usually charge a developer about 2% annual interest for at least five years on whatever amount of immigrant capital they raise” (Elkind an, d Jones 2014). 167 This claim should be challenged. Would EB-5 projects have happened regardless by making use of other capital, essentially nullifying job growth and tax revenue attributed to EB-5 funds? (or value capture policies!) 168 According to the GAO, real estate projects represented more than 75% of all EB-5 projects in the fourth quarter of 2015.

233 low fixed annual returns, devoid of any stake in a project’s overall profit or success;169 4) its ability to provide mezzanine financing, filling gaps between senior construction loans and any equity in a project’s capital stack; and, 5) its sustainability through times of negative cash flows, prior to occupancy and/or any sales, rentals, leases, etc.

Table 13-EB-5 Petition Characteristics Q4 2015 97% in Non-rural High Unemployment Areas 81% Combined Multiple Census tracts 75% for real estate projects: residential, hotel, commercial, mixed use. Source: GAO 2016.

Table 14-Annual EB-5 Visas

2000 231 2001 188 2002 147 2003 71 2004 126 2005 349 2006 802 2007 793 2008 1,443 2009 4,218 20010 1,885 2011 3,463 2012 7,641 2013 8,664 2014 10,692 2015 9,764 2016 9,947 2017 10,090 2018 9,602 Source: Invest In the USA, 2019.

169But not protected from bankruptcy, leaving US courts as the only recourse to retrieve original individual investments.

234

Table 15-EB-5 Petitions by State Q4 2015 Number of Projects Number of Petitioners NY 29 43 California 23 54 Florida 17 25 Texas 10 14 National Total 114 198 Source: GAO-16-749R Immigrant Investor Program, September 19, 2016

235 Chapter 7 - Exhibits

Table 16-HYIC Bond Offerings HYIC BOND OFFERINGS

Bonds Total Maturity Agreement Interest Rate Fiscal Year 2007 $2 Billion February15, 2047 First Indenture to total 4.5 – 5% Series A Senior Interest-only 40-year $3B dated December 1. Revenue Bonds maturity 2006 Fiscal Year 2012 $1 Billion February15, 2047 First Indenture – 5% - 5 ¼ % Series A Senior Second Offering 2011 Revenue Bonds FY 2017 Series A $2.1 B 2022 with Semi-annual Second Indenture dated 3 -5% Subordinate Bonds Interest payments May 1, 2017 Feb 15th & Aug 15th FY 2017 Series B $33.3 m February 15, 2047. Second Indenture dated 3 7/8% Subordinate Bonds May 1, 2017 Authorized but not $500 m na Third Supplemental yet Offered Indenture dated February 1, 2019 Source: Hudson Yards Infrastructure Corporation Official Bond Statements, 2006, 2012, 2017.

Table 17-HYIC Credit Ratings Bond Offerings Moody’s S&P Fitch 2007A Aa2 AA- AA- 2012A Aa2 A+ A+ Series 2017 (A & B)170 Aa3 A+ A+ Source: Hudson Yards Infrastructure Corporation Official Bond Statements - 2006, 2012, 2017.

170 Series A = tax-exempt from federal, NY state and NYC income and personal taxes. Series B = no tax exemptions. (Official Bond Statement 2017).

236 Figure 7-Cushman & Wakefield’s Revenue Forecasts

Table 18-HY Development by Property Type As of 2017 Millions of Sq. Ft. Completed Forecast 2006-2016 2017-2047 Office 1.9 23.5 Residential 7.6 12.1 Hotel 1.8 2.4 Retail 0 1.8 Total 11.3 39.8 Source: Cushman & Wakefield 2017

Table 19-Cushman & Wakefield HY Total Revenue Forecasts (millions) 2006 2011 2017 2007 $13.2 2008 $10.2

237 2009 $55.9 2010 $55.0 2011 $61.1 2012 $84.3 $45.0 2013 $104.5 $107.3 2014 $175.0 $113.1 2015 $206.4 $155.0 2016 $221.6 $120.1 2017 $267.3 $120.7 $106.7 2018 $310.2 $155.9 $313.4 2019 $267.0 $286.1 $235.4 2020 $269.9 $243.5 $253.7 2021 $258.1 $310.2 $292.9 2022 $287.2 $354.5 $322.0 2023 $338.1 $330.2 $355.7 2024 $436.0 $381.4 $502.9 2025 $471.6 $420.1 $506.7 2026 $503.2 $415.0 $532.1 2027 $552.6 $467.4 $539.1 2028 $637.4 $586.1 $593.0 2029 $655.2 $599.8 $660.3 2030 $718.9 $670.2 $673.8 2031 $740.1 $743.8 $716.3 2032 $811.0 $800.5 $770.7 2033 $889.1 $884.8 $881.7 2034 $956.9 $970.9 $952.7 2035 $1,049.9 $1,024.5 $957.8 2036 $1,110.0 $1,119.3 $1,026.7 2037 $1,165.3 $1,295.9 $1,091.4 2038 $1,211.0 $1,351.6 $1,210.6 2039 $1,264.8 $1,385.5 $1,262.1 2040 $1,320.7 $1,483.0 $1,341.5 2041 $1,378.9 $1,620.7 $1,419.0 2042 $1,444.0 $1,698.0 $1,498.7 2043 $1,510.9 $1,780.5 $1,733.3 2044 $1,583.5 $1,859.7 $1,709.1 2045 $1,656.7 $1,939.6 $1,765.9 2046 $1,731.5 $2,023.9 $1,846.9 2047 $1,803.6 $2,112.0 $1,929.7 2048 $1,875.7 $2,205.5 na 2049 $1,947.8 $2,307.6 na

238 2050 $2,023.0 $2,417.6 na Total $34,434.3 $36,906.5 $28,001.8 Source: Cushman & Wakefield Demand and Development Studies 2006, 2011, 2017.

Table 20-Optimism Bias in Transportation Mega-Projects "Survival of the Unfitttest” Inaccuracy of transportation project cost estimates Average Number Cost Standard Type of Project of Cases Overrun (%) Deviation Rail 58 44.7 38.4 Bridges and Tunnels 33 33.8 62.4 Road 167 20.4 29.9

Inaccuracy in forecasts of rail passenger and road vehicle traffic Average Number inaccuracy Standard Type of Project of Cases (%) Deviation Rail 25 -51.4 28.1 Road 183 9.5 44.3 Source: Flyvbjerg 2009.

239

Table 21-Value Capture Total Revenue Forecast v Actual (millions)

C&W Cyclical Actual Value Forecast Capture Shortfall/ FY 2006 Revenue Gain 2007 $13,238 $62,946 $49,708 2008 $10,233 $8,613 -$1,620 2009 $55,884 $12,328 -$43,556 2010 $54,916 $13,318 -$41,598 2011 $61,095 $30,572 -$30,523 2012 $84,286 $30,630 -$53,656 2013 $104,476 $47,005 -$57,471 2014 $174,496 $63,253 -$111,243 2015 $206,445 $336,351 $129,906 2016 $221,575 $230,504 $8,929 2017 $267,303 $133,581 -$133,722 2018 $310,173 $313,763 $3,590 2019 $267,011 $253,525 -$13,486 Total $1,831,131 $1,547,489 -$283,642

Figure 8-Forecast v. Actual Revenue

240

Table 22- NYC Interest Support Payments Expected v Actual

C&W 2006 Forecast ISPs City ISPs to HYIC 2008 $7.40 $0.00 2009 $0.00 $0.00 2010 $6.50 $15.00 2011 $32.50 $42.70 2012 $72.70 $79.30 2013 $71.80 $155.60 2014 $14.50 $38.10 2015 $0.00 $28.00 2016 $0.00 $0.00 2017 $0.00 $0.00 2018 $0.00 $0.00 2019 $0.00 $0.00 Total $205.40 $358.70 Source: Official Bond Statement 2006, NYC IBO, HYIC Annual Reports

Figure 9-Cumulative Revenue by Type

241 Figure 10-Annual Revenue by Type

*Figure 7.4: The noticeable spike in 2015 was due to eight DIB purchases that year, including for One Manhattan West for $92.8m for 740.3k sq. ft., and, Extell’s purchase of 243.4 sq.ft. for $30.5m for 555 Tenth Ave. These transactions paid $125.36 psf, the DIB price set for 2015.

242 Table 23 - HYIC Collected Value Capture Revenue by Type (in thousands)

Total Value Capture DIB TEP PILOTMRT PILOT TDR* Revenue 2006 $11,100 $0 $0 $0 $0 $11,100 2007 $57,938 $5,008 $0 $0 $0 $62,946 2008 $6,930 $1,683 $0 $0 $0 $8,613 2009 $4,488 $7,840 $0 $0 $0 $12,328 2010 $0 $13,318 $0 $0 $0 $13,318 2011 $4,635 $25,937 $0 $0 $0 $30,572 2012 $2,951 $27,679 $0 $0 $0 $30,630 2013 $3,261 $32,647 $11,097 $0 $0 $47,005 2014 $10,827 $38,553 $13,873 $0 $0 $63,253 2015 $193,652 $48,563 $0 $4,036 $90,100 $336,351 2016 $45,183 $58,656 $22,496 $4,969 $99,200 $230,504 2017 $20,705 $70,545 $31,384 $10,947 $0 $133,581 2018 $75,099 $84,332 $17,782 $31,710 $105,000 $313,763 2019 $38,638 $113,347 $70,532 $31,008 $0 $253,525 Total $475,407 $528,108 $167,164 $82,670 $294,140 $1,547,489 Percent of Total DIB TEP PILOTMRT PILOT TDR 2007 92% 8% 0% 0% 0% 100% 2008 80% 20% 0% 0% 0% 100% 2009 36% 64% 0% 0% 0% 100% 2010 0% 100% 0% 0% 0% 100% 2011 15% 85% 0% 0% 0% 100% 2012 10% 90% 0% 0% 0% 100% 2013 7% 69% 24% 0% 0% 100% 2014 17% 61% 22% 0% 0% 100% 2015 58% 14% 0% 1% 27% 100% 2016 20% 25% 10% 2% 43% 100% 2017 15% 53% 23% 8% 0% 100% 2018 24% 27% 6% 10% 33% 100% 2019 15% 45% 28% 12% 0% 100% Total 31% 34% 11% 5% 19% 100% Sources: HYIC Annual Reports, 2008, 2010,2012,2014,1016 2017, 2019, HYIC Notes to Financial Statements, NYC IBO 2016. *TDR 2018 approximate payment amount.

243 Figure 11 - As of Right and Maximum FAR

Source: Hudson Yards Development Corporation Figure 12-Hudson Yards Zoning Subdistricts

Source: NYC Planning: NYC Zoning Resolution. Chapter 3 – Special Hudson Yards District.

Figure 13-Generating and Receiving Sites for TDRs and DIB DIB Available in Orange

244

Figure 14-TDR Receiving Sites 4 – 14

Source: HYDC, HYIC Official Bond Statement 2011

245

Table 24 ERY TDR Sales ERY TDR Sales Developer Receiving Total Sale Total Purchase Property Sq. Ft. Price psf Purchase Date Purchased Price Related 55 Hudson Yards 398,009 $228 $90,547,156 11/15/2014 Related 50 Hudson Yards 1,036,875 $218 $225,779,531 8/31/2017 Moinian 3 Hudson 342,780 $235 $80,495,126 3/31/2018 Boulevard Tishman 66 Hudson 668,997 $235 $157,100,573 9/21/2017 Boulevard Spitzer/Related 451 Tenth Ave 275,000 $283 $77,756,250 na Marx 450 11th Avenue 35,550 $195 $6,932,250 7/8/2015 Development Group Chetrit 545 W 37th 62,213 $189 $11,757,056 7/24/2015 Rockrose 555 W. 38th 139,093 $147 $20,494,010 1/8/2019 Total 2,958,517 Avg $670,861,952 $227/psf Source: MTA by request April 2020, Author.

Figure 15- HY Finance District Boundaries

246 Table 25-HYIC Anticipated TEP and PILOT Revenue FY 2020 2021 2022 2023 TEP $129.4 $129.4 $129.4 $129.4 PILOT $93.8 $111.9 $115.7 $119.6 Total $223.2 $241.3 $245.1 $249.0 Source: Hudson Yards Infrastructure Corporation FY 2020 Budget, Author.

Table 26-HYIC Selected Budget Line Items FY 2020 2021 2022 2023 Payments to NYC $100.0 $100.0 $100.0 $100.0 Incoming Cash and Investments $348.9 $335.7 $327.2 $270.5 Ending Balance after all other expenses (not all listed here) $335.7 $327.2 $270.5 $217.5 Source: Hudson Yards Infrastructure Corporation FY 2020 Budget.

Table 27-NYC Capital Spending at Hudson Yards (millions) Actual Planned 2005- 2017- NYC Capital Spending 2016 2022 7-line extension 50.9 4.5 33rd Street Reconstruction 1.7 100 Shed Construction 75.5 0.5 Water and Sewer Reconstruction 0 34.3 Total as of 2017 128.1 139.3 Source: NYC IBO 2017

247 Table 28-HYIC Actual and Forecasted Debt Service Payments 2006-2019 Bond Interest Expenditures

FY Actual Cyclical Forecast* Difference 2006 $0 na $0 2007 $46,542 na $46,542 2008 $89,122 $112,125 -$23,003 2009 $87,526 $97,500 -$9,974 2010 $86,030 $97,500 -$11,470 2011 $85,652 $110,333 -$24,681 2012 $122,623 $202,500 -$79,877 2013 $140,393 $202,500 -$62,107 2014 $140,393 $202,500 -$62,107 2015 $129,356 $202,500 -$73,144 2016 $142,425 $202,500 -$60,075 2017 $129,526 $232,500 -$102,974 2018 $115,217 $232,500 -$117,283 2019 $115,390 $232,500 -$117,110 Total $1,430,195 $2,127,458 -$697,263 Sources: HYIC Annual Reports, HYIC Financial Statements, C&W 2006 *Cyclical forecast acknowledges multiple business cycles and is based on a 40.9 msf build out v. C & W base forecast which follows a steady economic growth forecast and is based on 45 msf.

Table 29-HYIC Anticipated Debt Service Payments (incl Principal and Interest) (millions) 2018 $114.3 2019 $143.2 2020 $142.7 2021 $142.2 2022 $184.9 2023-2027 $924.5 2028-2032 $924.5 2033-2037 $924.5 2038-2042 $924.5 2043-2047 $924.3 Total $5,350 Source: HYIC Annual Report, 2019.

248 Chapter 8 – Exhibits

Table 30-Affordable Housing Promised to Community District 4 as per 2005 and 2009 Points of Agreements Points of Agreement Agreed Units to Units completed/under % Completed be built construction/public approval West Chelsea 1,425 1,288 90% Hudson Yards 3,347 1,436 42% Western Rail Yards 923 112 12% Total 5,695 2,836 50% Source: MCD4 Housing Plan (updated Sept. 2019).

Table 31-2005 POA- Affordable Housing Commitments (3,345 promised with 2,265 for low income, remainder moderate and middle) Site Units Promised Address/location Site M 150 Units: Tenth btw 40th and 48 low income (60% AMI), 41st. 51 moderate (135% AMI). Rest middle (165%) AMI NYCHA Harborview 155 Units: 546 W 11th Terrace Parking Lot 63 low, Harborview Terrace 46 moderate, 525 West 55th Street 46 middle Studio City/ Gotham City 600 Built Gotham West 550 W. 45th Street, btw 44th 45th & 10th and 11th Ave SOURCE: Special Hudson Yards District POA, 2005

249

Table 32-2009 POA Affordable Housing Commitments

431 units total, 265 permanent affordable rental units on WRY and an additional 166 either yard. Related to commit to affordable housing and convert to permanent affordability.

SITE Units Address Site control Other Info W54th & 9th 100 planned 806 Ninth MTA/TA 85 feet cap on 9th but Avenue 99 on midblock/no bonus HPD promised to issue RFP for both (MTA donated land, 14 blocks from RR, supposed to be built by 2008 (H&T) W48th & 10th 160 planned 705 Tenth DEP for 3rd 77-foot height Avenue water tunnel cap/no bonus (was still in use 2013/2014 Terrific Seek extension 525 w 47th & Related But only if programs Tenements of Section 8 for 425 W 48th for incentives, another 20 exemptions, credits, years plus abatement, finance probable 2030 etc. are available in extension the future similar to (apply no later what they were than March today 2010) French Related Same as above Apartments Westport 80/20 500 W 56th Related off-site commitment to guarantee rental units remain permanently affordable up to 90% not to exceed 125% AMI The Tate 80/20 35 West 23rd Related off-site same as above

250

Table 33-City Finally Delivers on Promised Affordable Housing

806 Ninth Avenue is being developed by Housing Works and the Hudson Companies. The building will have 100 units plus social services with apartments for very low and low income and formerly homeless individuals and families. The project will also ‘provide stable and secure housing for those living with HIV. There will be 11k sq. ft. of retail on Ninth Avenue including a Housing Works flagship thrift shop. Also included is office space and parking for the NYC TA.171

705 Tenth Avenue: The Actors Fund along with Douglaston Development are providing housing plus social services, health care, counseling, and job training for people in the performing arts and entertainment industry. Its 160 affordable units will be available for very low, low and moderate incomes plus set asides for formerly homeless. The building will have community space as well as a public restroom to complement the adjacent public park. The 0.58- acre public park is expected to cost just $3-5 million and open later this year (NYC DPR by request 2020).

Table 34-Office Leasing Relocations by Submarket 2013 through 2018 Submarket Sq. ft. Share

Midtown 2,318,000 16.0%

Downtown 4,101,000 28.2%

Hudson Yards 7,419,000 51.1%

Midtown South 688,000 4.7%

Total 14,526,000 100.0% Source: Bloomberg 2018

171 “Hell’s Kitchen maintains NYC’s highest rate of existing residents living with HIV as well as being one of the neighborhoods with the highest new infection rates” (REW Feb 22. 2019)

251

Table 35-Industry Share of Office Leasing at Hudson Yards 2013- 2018 Industry Share Financial Services 30.0% Television Radio and Entertainment 22.4% Chemicals Cosmetics and Pharmaceuticals 15.9% Legal Services 13.4% Accounting Auditing and Bookkeeping 9.1% Other 9.3% Source: Bloomberg 2018

Table 36-Subway Ridership-Weekday and Annual

Table 8.6 Average Weekday Subway Ridership Station Lines Served 2013 2014 2015 2016 2017 2018 Rank* 34th Street-Hudson Yards 7 na na 2,064 8,507 10,082 10,789 145 Atlantic Avenue-Barclay B,D, N. Q, R, Center 2,3,4,5 39,871 41,645 42,231 42,711 42,095 43,211 19 34th Street - Penn Station 1,2,3 90,042 92,693 92,176 90,524 85,585 85,180 6 34th Street - Penn Station A, C, E 83,717 85,634 84,778 82,584 78,904 80,346 7 Annual Subway Ridership Station Lines Served 2013 2014 2015 2016 2017 2018 Rank* 34th Street-Hudson Yards 7 na na 693,165 269,851 3,098,699 3,189,867 156 Atlantic Avenue - Barclay B,D, N. Q, R, Center 2,3,4,5 13,122,876 13,617,153 13,690,678 13,818,168 13,571,093 13,807,282 19 34th Street - Penn Station 1,2,3 27,730,331 28,638,643 28,309,160 27,741,367 26,034,238 25,968,950 6 34th Street - Penn Station A, C, E 25,726,374 26,493,571 26,147,434 25,183,869 24,366,500 24,857,453 7 Source: MTA Ridership, * out of 472

252 Evaluating Hudson Yards Physical Planning Goals

The primary planning purpose of the Hudson Yards Redevelopment plan as stated was to create a mixed-use, mixed-density 24/7 community. The plan sought to knit neighborhoods together including Clinton to the north, Hell’s Kitchen to the north and east, the Theater District and the Garment District to the east and Chelsea to the south. The physical plan proposed six subdistricts to organize land uses. The Plan also created layered incentives to increase density either by direct payment, TDR, or through affordable housing and/or for providing capital improvements along Hudson park & Boulevard. The plan also mandated street level retail, street wall continuity, and off-street parking. The table below lists the physical planning goals on the left-hand column and answers whether or not the goal was achieved on the right.

Table 37 - Evaluation of HY Physical Planning Goals Hudson Yard Planning Goal Achieved? Extend Midtown CBD Yes Provide opportunities for substantial new office Yes and hotel development

Provide height and setback ‘controls’ to allow for Yes large open floor plates.

Mixed use-mix density Yes, but not much low-rise

New publicly accessible open space In-progress, but lots of concrete plaza.

New Parks and Boulevard Maybe - still in progress, but nothing along the lines of Bryant Park Transition to existing neighborhoods & garment Somewhat with the Farley Corridor district Reinforce residential neighborhoods and Mid-block 6 FAR. Spurred luxury encourage housing housing, not much affordable.

Two new high- density corridors supported by Not really yet. transit Encourage Transit-oriented Development Yes, highest density directed adjacent to new station

253 Evaluating the Hudson Yards Value Capture Plan

The executed value capture plan at Hudson Yards delivered on its primary goal, to raise the private capital needed to build the 7-line extension and other infrastructure improvements.

The 7-line is fully operational since the fall of 2015 with the 34th Street Station serving about

10,000 riders per average week day in 2018 according to the MTA.172

The value capture plan as designed incorporated value capture best principles offered in the academic literature and equally met some of the most difficult challenges in devising and implementing value capture schemes listed below. It has not yet fallen victim to many pitfalls associated with value capture, TIFs, and public-private partnerships in general, particularly when privatization fails and firms abandon projects, leaving the public to deal with incomplete and over-budget complications.

The tables below offer an evaluation of the design and performance of the Hudson Yards

Value Capture Plan based on best principles and practices offered by scholars and practitioners.

The tables below present the conditions needed for value capture optimization, efficacy and efficiency in the left-hand column. An analysis of how well the Hudson Yards Value Capture

Plan responded to these conditions is presented in the right-hand column. This evaluation was conducted to assess the plan’s design as well as its performance.

Table 38-Evaluation of HY Value Capture Plan Design

Value Capture Best Principle Hudson Yards Finance Plan Champion/Driver One of the most important factors. Mayor and Deputy Mayor were powerful and persistent champions of plan.

172 The station is designed to handle up to 25k riders per peak hour, which will certainly come into play once all the 33 FAR office buildings at the Four Corner Zoning Subdistrict come online in the next few years.

254 Target Correct Beneficiaries Property owners and developers. But other beneficiaries including new residents, employers, employees, retail, restaurants not targeted. Could have instituted a “Business Rate Supplement.” Political Feasibility The plan seemed to have the backing of citywide advocacy groups and some politicians including Sen Schumer, RPA and Christine Quinn. (quote at the time). Eventually the City Comptroller and Council approved the plan. Authority to regulate land Yes, mayor and deputy mayor made sure rezoning would be approved Authority to tax/raise funds Plan was structured so would not have to go through public review process, city budget or a citywide vote. Made sure not to count as citywide debt which would have been subjected to certain General Obligation limits. Community/Business Support Community wanted housing, open space and contextual development. Businesses esp RE wanted and exploited. Public willingness to pay No one wants to pay. Equitable Ability to pay - correct targets? Those Targeted beneficiaries, property owners and that can pay, those that can't developers, had and have the ability to pay. Administrative and Political Structure Administrative structure created two non-profit entities to guide development and finance. They are "self-funded." Low Administrative Cost Operational Costs for administration paid directly from value capture revenues. Institutional Capacity Yes-Bloomberg Administration. Set up HYIC to “run like an independent corporate entity” Entrepreneurial v Bureaucratic Entrepreneurial to a fault. Readiness/Willingness Other public agencies strong-armed to comply incl MTA. Risk Management Somewhat with ISP but not if prolonged. Reliable/financially sustainable Reliability because of NYC Obligation to ISPs. In time, seems as though will be financially stable. Liquidity Yes, was liquid, with reoccurring annual revenue esp. PILOTs and TEPs Planning Goals (compact development, social Met planning goals, esp. dense development inclusion, mixed use) around transit – TODs, but no effort for inclusion overall and not much encouragement of middle/moderate housing. Existing value/Potential for Value Had great potential, which has borne out.

Accurately appraised and measured market value Not really, appraisals were self-serving. Public agencies esp. MTA did not receive full value

255 Source: Batt 2001, Rybeck 2004, Zhao et al. 2012, Flyvbjberg, Fisher and Sclar, Angotti, Duggan 2014, , Salon et al. 2018, Author.

Table 39-Evaluation of Value Capture Plan Performance Value Capture Best Principle Hudson Yards Finance Plan Targeted Funds Generated Yes but was delayed On -time / on -budget No- delayed due to recession. Costs increased rapidly. Multiple beneficiaries - residential/commercial Most benefits to those already privileged. Equitable distribution of value/Addressed Equity No Issues incl. gentrification Assessed Value Accurately / Extracted Potentially, but under estimated the unearned appropriate unearned increment increment. More value could have been captured (and still could). Assessed construction costs, debt service Mostly. Debt service costs were less than payments accurately. expected. Cost of 7-line extension underestimated contributing to the demise of the second station at 10th and 41st . Ability/Ease to collect/capture Yes Delivered Public Good/Benefit New private rail line for the rich. Minuscule equitable redistribution of value. Financially Sustainable Yes, probably, but delayed Addressed shortfalls/contingencies/vulnerable to City agreed to pay ISP if and when needed. volatility Net Financial Gain/Loss Depends on time of measurement. Was a loss up through 2015. Has potential to be net gain.

256 Chapter 9 – Exhibits

MCB 4 Pressing Community Needs

✓ Pedestrian Safety Improvements at dangerous crossings including at Lincoln Tunnel ✓ Bike lane improvements ✓ 34th Street Select Bus Service 34th Street and 11th Avenue ✓ Charter Bus Garage ✓ Tenth Avenue Station ✓ Affordable Housing ✓ Enforcement of illegal SRO conversions ✓ Traffic calming measures ✓ Complete Streets ✓ Sidewalk improvements ✓ Safe intersection crossings along 8th and 9th Avenues ✓ PABT Improvements ✓ Green Spaces ✓ Elementary and Middle Schools ✓ Family Shelters ✓ Improved Conditions at Harborview Terrace ✓ Mitigation from long-term construction ✓ Mental Health Services ✓ Social services for youth, seniors and homeless

257 Figure 16-Atlantic Yard and NYC’s First Community Benefits Agreement

Eight community groups signed a Community Benefit Agreement with Forest City Ratner with Mayor Michael Bloomberg as witness on June 27, 2005. The CBA has since been highly criticized for its lack of accountability, self- serving signatories and exclusion of other community groups. The CBA also came under fire for not addressing or mitigating other real impacts to the community including traffic, parking, transit and resident re-location (Markey 2009). Because of the CBA’s weak and vague language on performance and breach of contract consequences, many of the benefits agreed to never materialized. The promised dedicated funding to implement the agreed to goals and milestones also never surfaced. As originally negotiated, Forest City Ratner (FCR) agreed to local hiring, contracts for minorities and women owned businesses, affordable housing, local tickets and community use of the Barclays arena along with other local education initiatives weren’t fulfilled. The CBA was structured into eight categories such that benefits promised aligned with the missions of each community group, some of which were formed just for inclusion in the CBA, with some community advocates believing that the 8 groups were ‘fronts’ with FCR bribing these groups to support FCR’s Atlantic Yards development (Oder February 11, 2016).173

Moreover, FCR never funded the CBA mandated “independent compliance monitor” for oversight and facilitation of the CBA (NY Bar 2010). The monitor was never hired, though Ratner did hire a grant-writer consultant to find funds to implement the CBA. When the community was outraged by the lack of progress towards the CBA, NYC EDC washed their hands of it, stating that the CBA was “out of their purview” (Oder February 11, 2016).

Ron Shiffman, co-founder of the Pratt Institute Center for Community and Environmental Development, and Develop Don’t Destroy Brooklyn (DDDB) Board member, called the plan a ‘sham’ with more residents displaced than housed, inaccessible “public” space and unrealistic, untimely promised jobs; likening CBAs as a way developers can simply “buy” support for their project (Oder November 12, 2010).

173 The eight groups were: All-Faith Council of Brooklyn (AFCB); Association of Community Organizations for Reform Now (ACORN); Brooklyn United for Innovative Local Development (BUILD); Downtown Brooklyn Neighborhood Alliance (DBNA); Downtown Brooklyn Educational Consortium (DBEC); First Atlantic Terminal Housing Committee (FATHC); New York State Association of Minority Contractors (NYSAMC); and Public Housing Communities (PHC).

258

Table 40-Western Rail Yard Appraisal Valuation Date: 6/30/2016 Zoning Square Feet: 5,700,000 Aggregate $ per ZSF PV Remaining Rent $672,522,138 $117.99 PV of Reversionary Interest $9,035,954 $1.59 Total Lease Value $681,558,092 $119.57 WRY Improvements $1,400,000,000 $245.61 Total Cost – ZSF* $2,081,558,092 $365.19 Source: JLL Broker Opinion of Value, August 22, 2016 * Zoned Square Footage

Figure 17-London: Crossrail’s a Multi-tiered Approach

On the books since 1943, the Crossrail Act was enacted by Parliament in July 2008, finally giving the go ahead and means of implentation for one of the biggest insfrastructure project in Europe at a cost of £14.8 billion.174 Construction began in 2009 at Canary Wharf and the line began operations in 2018, fully commencing by 2019.

The new east-west line links Shenfield to Maidenhead and west to Redding, directly connecting for the first time London’s business centers of Heathrow, the West End, the City of London and Canary Wharf. The line added more than 100 kilometers of track and links 40 stations with 10 new stations.175 Crossrail ncreased capacity of the entire network by 10% and east-west capacity by 40%, carrying 72,000 passengers per hour and 200 million per year.176 177 This allowed an additional 1.5 million people to be within 45 minutes of an employment center, greatly increasing access and “employment opportunities to thousands in some of London’s most deprived areas” .178

Crossrail has had a significant economic impact on London. The project supported 14,000 jobs during its peak construction period between 2013-2015 and employs about 1,000.179 It’s

174 Equivalent to about US$22. 2 billion in August 2015. 175 http://www.crossrail.co.uk/benefits/crossrail-in-numbers 176 Crossrail 2013 177 Such high capacity engineering, design and equipment is necessary to ease severe crowding of London’s transit system, particularly at peak travel times. It is also necessary to meet increasing demand from population growth and increased tourism which could increase public transport trips by as much as 50-60% through 2050 according to TfL (March 2014) . 178 HM Treasury 20007, p. 24. 179 Crossrail Ltd. 2013

259 expected to generate economic activity of £1.24 billion annually.180 In terms of impact on property and land, Crossrail is predicted to create £5.5 billion of additional value to residential and commercial properties between 2012-2022 and potentially accelerate the delivery of 57,000 new homes and 3.25 million sq. meters of office floor space all within 1km of stations.181 Already, a recent development pipeline study showed that more than 40% of planning applications within 1 km of a station used Crossrail as “justification for the development.”182 The study also found applications growing in number every successive year of the study between 2008 and 2013, pointing to increased momentum.

VCF Structure: While 75% of the capital costs needed for Crosrail’s construction came from more traditional sources such as grants from the Department for Transport and Transport for London, about 25% was raised throuh value capture finance mechansims. Different tiers of cotntributions were devised and instituted including the Business Rate Supplement, Direct Benificiary Contributions, Joint Development Projects and the Community Infrastructure Levy.

The Business Rate Supplement (BRS) is a betterment tax levied on all non-domestic properties with annual rateables (or rent) valued at more than £55,000. This equates to nearly 43,500 impacted properties with 68% of properties within London’s Inner Boroughs and 32% in the Outer Boroughs. The BRS is an add on to the annual Business Rate Bill already being paid by businesses. The fee of only 2 pence per pound of ratable value went into effect in April 2010 and is targeted to cover annual debt service of £210 million. The BRS will continue for 24 to 31 years, until “the debt has been paid”.183 Charges and ratables will be reviewed every five years and adjusted if necessary. After the first full year, collections actually exceeded estimates, raising £226.6 million, demonstrating financial success and implementation of the BRS as a land value capture mechanism (Roukouni and Medda 2012).

Source: http://www.crossrail.co.uk/route/maps/regional-map

180 Roukouni and Medda, 2012 181 GVA 2012. 182 GVA 2014. 183 HM Treasury 2007.

260 HUDSON YARDS CHRONOLOGY

1780s: The British inhabit a ‘waterfront fortification’ at 34th Street between 11th and 12th (Williams 2016). 1811: NYC street grid introduced. 1815: Rows of houses begin to sprout around 34th Street (Williams 2016). 1830s: Factories arrive including a site at 32nd Street. The Hudson river still flows freely south of 34th Street where 11th and 12th Avenues now exist (Voboril). 1846: Hudson River Railroad receives charter to operate from Albany to 11th Avenue Terminal. Freight has to then be transferred, to 10th Avenue and on to Chambers Street. In operation from 1846 to 1941. (Williams 2016). Trains and their cargo were several blocks long and interfered with pedestrians. Accidents were common and gruesome and included children. Eleventh Avenue was nicknamed Death Avenue, and the rail line’s engine, the Butcher (Gray 2011). Park Avenue mort of Grand Central has a similar problem, but residents had tracks sunk. 1856: Early insurance maps show “lumber basin, stone works and a tannery” in the area (Voboril 2005). 1864. Vanderbilt purchases the Hudson River Railroad and later merges it with his New York Central line. A freight depot that grew into a major freight terminal. An 1879 map shows the Western Yards already had already assumed the configuration of a lopsided wine glass (Voboril 2005) That same year Vanderbilt purchased New York and Harlem Railroad (Williams 2016). 1900s: State legislation mandated NY Central Railroad cover its tracks. “In Response, the railroad built a deck over newly electrified track from Madison Ave to Lexington Aver from 42nd Street to E 56th Streets, Down the middle of the deck a grand boulevard Park Avenue was built” (DCP Project overview). Planners hope the same at Hudson Yards. 1904 – 1908: As part of the Pennsylvania Station project, two North River Tunnels are built and connect through the Hudson Yards. Today the tunnels “funnel 445 trains and more than 600k riders daily.” (Related). September 8, 1910: McKim Mead and White’s Pennsylvania Station opens after work began in 1904. 500 buildings were razed for its development, at a project cost $125 million (Devlin Nov 30, 1954).

Early 1920’s Yankees considered Hudson Yards area for their new stadium, “frustrated…at Polo Grounds in North Manhattan and sharing with NY Giants, moved to Bronx” (Doctoroff 2017).

1929: West Side Improvement Project begins. City, State and New York Central Railroad agree to move rails 30 feet above street level, what is now repurposed as the High Line. Very last train to use elevated tracks 1980.

261 1929: City and State and the New York Central Railroad “finally reached an agreement, known as the West Side Improvement Project, to move rails 30 feet above street level.

1929: RPA’s First Regional Plan- Regional Plan for New York and its Environs. “Proposed to relocate (the West Side’s) shipping facilities to Newark and open the waterfront to improvement” (Mattern 2016 p. 2).

May 1933: John D. Rockefeller’s city within a city officially opens at Rockefeller Center. Construction on the complex begins in 1931 and is completed by 1939. Displaced 4,000 tenants and raised 225 buildings. 1934: Elevated tracks opened to service factories, warehouses, and other businesses along its route. Repurposed as a linear Park. The first phase of the High Line broke ground April 2006 and opened 2009. 1937: First tube of Lincoln Tunnel opens.

1950: Port Authority Bus Terminal opens.

1952: California is first state to use tax increment financing (TIF).

September 24, 1953. Webb & Knapp “close contracts for air rights over a vast expanse of the Pennsylvania Railroad tracks between Ninth and Tenth Avenues and 31st to 33rd Streets...Under a railroad’s franchise, it cannot sell its land but only the ‘air rights’ over it” (Devlin Nov 30, 1954).

1954: Mayor Robert F. Wagner takes office through 1965.

November 29, 1954: William Zeckendorf, president of Webb & Knapp, announced agreement to buy air rights from Pennsylvania Railroad over their station, located between 7th and 8th Avenues, and 31st to 33rd Streets. No dollar figure was announced nor were any detailed plans. But given the significance and size of the site-7.5 acres, Zeckendorf mused that it might be a good site for the world trade center ‘long proposed for the city” (Devlin Nov 30, 1954). This agreement in no way impacted Zeckendorf’s plan with the NY Central Railroad to also build a monumental building, perhaps the tallest in the world, at Grand Central Terminal.

April 20, 1955: Webb & Knapp purchase additional air rights over Penn’s tracks from 31st to 33rd between 8th and 9th for $4 million. Plans were announced “to expand operations of the adjoining General Post Office” topped by a helicopter landing pad” (Kihss June 8, 1955). June 7, 1955: Pennsylvania Railroad Co’s president James Symes and William Zeckendorf sign an agreement to sell the air rights and build a new Penn station below street level and build above. Would pay the Penn Railroad $30 m, of which $13m would be used to create a modern underground station which “would be the world’s largest and costliest.” Part of the plan calls for extension of the Broadway-7th Ave IRT Subway line west to 11th Avenue on 33rd Streets with a parking garage at the end. Even then, the fear of losing jobs and businesses is used to legitimize massive developments, with Zeckendorf voicing “over the attitude of the city and state administrations thus far toward “our potential role in reversing the flight of business from New York (Kihss June 8, 1955).

262 They propose to build the Palace of Progress, a $100 million, 7.5 msf, 40-story commercial building above the station to begin June 1, 1956 and finish Spring 1958 (Kihss June 8, 1955).

1955 Lincoln Square Urban Renewal Area designated following the release of their preliminary report July 20, 1956 The Committee on Slum Clearance, chaired by Robert Moses, releases their preliminary report on the Lincoln Square Project. More than 7,000 low-income families were displaced as were 800 businesses. Promised relocation assistance never materialized after demolishing 18 locks, but not before West Side Story could film scenes in the neighborhood (came out in 1961).

President Eisenhower breaks ground for the project in May 1959. This led to the 16-acre Lincoln Center for Performing Arts which opened in 1982, and, Lincoln Towers – a 20-acre residential development of 3, 837 apartments. Originally rent stabilized, most apartments were converted to co-ops in 1987, 6% remain rent stabilized until they are sold (Lincoln Towers).

January 5, 1956: Webb & Knapp’s president William Zeckendorf announces plans to abandon “Palace of Progress” and replaces it with a more “ambitious plan” to cost hundreds of millions and be built over a much larger area – 50 acres - over rail tracks, between Ninth and Twelve and W 30th W 33rd /38th Streets – where Hudson Yards and Manhattan West now sit.

The second Zeckendorf proposal included “all of the facilities originally planned for the “Palace of Progress” – a merchandise mart, huge auditorium, television center, parking facilities, general commercial buildings and a world’s fair structure” for a total of 12.5 msf to be completed by 1960. Interestingly enough, Zeckendorf said they were not seeking any tax exemptions and purported that the city will receive $16 million per year in taxes, pledging to put up a bond to guarantee that it (the city) will not lose a penny by use of its condemnation power to help carry out the new plan.”

Zeckendorf had already received buy-in from Robert Young, the chairman of the board for New York Central Railroad, who “was prepared” to recommend the “railroad invest in the proposal and make some of its real estate available for the project” In addition, the project would be linked to parking for 20,000 and to “transit and railroad facilities” by “a passenger conveyor belt system like the one planned to replace the Times Square-Grand Central subway shuttle.” “Another feature of the project would be a 1,750-foot Freedom Tower (check), the ‘highest observation tower in the world”

January 1959: Irving Mitchell Felt and Graham-Paige buys control of existing MSG at 8th Ave between 49th and 50th Streets, built in 1925 by Tex Rickard, former fight promoted. (NY Times July 25, 1961).

July 25, 1961: NY Times announces plan for a new $500 million, Madison Square Garden which requires demolition of the McKim, Meade & White Pennsylvania Station. The plan proposes to raze the mammoth station situated between 7th and 8th Avenues and 31th to 33rd Streets and build atop rail lines with space for an arena, parking, exhibit hall and a 750-room hotel. Felt said he was “reasonably certain” it could accomplish the financing without Government funds.

263 December 15, 1961: Since this time Webb & Knapp “has held a leasehold on the air rights to the part of the Central Yard that lies between West 30th and west 37th and extends from 11th to 12th Avenue and from west 30th to West 33rd between 10th and 11th Avenues” (Bedingfield 1964). The Western and Eastern Railyards of Hudson Yards.

July 27, 1962: Plans now released for a $750 million MSG complex to have a column-free arena for 25,000, an arena for 4,000, offices, hotel and parking. The Madison Square Garden Center Inc. was formed with Graham-Paige controlling 75% of stock and Pennsylvania Railroad, 25%. Deal structure includes “long-term lease with options extending for nine years” (Hailey, Foster July 27, 1961).

September 23, 1962. Pennsylvania Railroad “is committed to destruction of the old building…and…had been trying for years to get someone to help it rid itself of what had become a white elephant”. Mayor Wagner has been non-committal publicly. Felt voiced that “he believed that the gain from the new buildings and sports center would more than offset any aesthetic loss” and would net the city $5 million in new tax revenue at this site and the development of the former Garden site, and decrease congestion in the theatre district.

April 25, 1963: Mayor Wagner unveils NYC’s long -range plan for the West Side waterfront from Battery to 72nd Street. Plan includes convention center, ocean liner terminal, and freight and passenger facilities. “Project would cost $670 million and span four decades to be complete by 2000. Projects are to be “self-sustaining and self-liquidating” “no drain on the city’s already tangled finances” ... “Conversely, the effect will be to increase the city’s revenues and tax receipts…if the city itself is not in a position to provide capital, we will approach private investors to do so.” The plan took 18-months and $300,000. A main midtown distribution center is planned from 12th to 37th Street “to tie in with the existing rail yards. …will include vast cargo-handling structures, reaching as far inland as 10th Avenue.” “The area from 37th to 44th Street will include a convention hall with a capacity for 23k, a public esplanade, a helistop and terminal facilities for excursion craft, hydrofoil commuter vessels and berthing space for exposition ships. This entire area will rest on a pile-supported platform extending out into the river…north of this section would be consolidated ship terminal...and midtown expressway across the island at 30th street and the lower Manhattan expressway. (Convention Center, Observation Tower, hotel, office and apartments and other commercial development for area 59th to 72nd?)

October 28, 1963. Demolition of McKim, Mead, and White’s Pennsylvania Station begins and takes three years to complete. Plans for its demolition sparked preservation movement in NY, leading to the NYC Landmarks Law established in 1965.

August 1, 1964: NY Times reports that the United States Steel Corporation “has acquired the air rights over a 40-acre railroad yard in mid-Manhattan and is considering erecting a $100 million housing and industrial complex over the site.” The rights were purchased from Webb & Knapp’s lease of the air rights over the New York Central Railroad’s freight yard that lies between West 30th and West 37th Streets and extends from 10th to 12th Avenues”. Webb & Knapp were in default and began to liquidated assets and hold public auctions, trying to “avert financial collapse.” They reportedly realized about $7 million, netting $3 million. The NY Times reported

264 that Webb & Knapp’s financial loss, was “one of the greatest deficits incurred by any corporate enterprise in history”!

US Steel’s plan calls for “nine apartment buildings of about 30-stories each” …to provide…” middle-income housing for 12,000 families,” with other “adjoining” industrial buildings. Rents wee estimated at $30 per room”. At the time, US Steel wanted to “go ahead with the proposed housing development… for the purpose of demonstrating the company’s contention that steel is useful as a prime material in middle-income housing”. Low –cost, faster, cheaper, more efficient than other materials.

1965: “State Legislature gave the city the authority to borrow against estimated tax revenues instead of against actual ones” (Cassidy 2005).

1966: Mayor John Lindsay takes office through 1973.

1968: New York Central Railroad merged with Pennsylvania Railroad merged. Bankrupt two years later.

1969: Clinton Urban Renewal Area (CURA) designated for new affordable housing bounded by W 50th to W 56th, 10th to 11th. Between 1979 – 1981, nearly 1,500 units were constructed primarily for low income families. This included Clinton Towers, Clinton Manor, Hudson View Terrace, and Harborview Terrace (MCD4).

1969: Lindsay administration releases “Plan for New York” which includes plans for the far west side. For the west side waterfront, the plan called for “30 m sq. ft office hotel residential, parks and other civic facilities, a new subway line and development of the Hudson River Waterfront, (including) a new convention center and ocean-liner terminal.” The plan was conceived of as self-financing: the tax revenue generated by the development was expected to cover the costs of planned public improvements” Brash 2011 p. 145-146. The convention center was the only component to be built, but not at the Plan’s suggested location.

1970s Trump buys “the company’s two Manhattan freight yards with an eye toward development. One became the site of the Javits Center... the other became Riverside South in 1997” ... Penn Central’s passenger service in New York City …was soon taken over by Amtrak, NJ Transit and Metro-North” (Williams 2016). September 15, 1970: Chelsea Historic District designated. November 21, 1974: Special Clinton District enacted. Answering the Hell’s Kitchen community opposition to Lindsay Plan and subsequent plans for the Javits Center, the Special Clinton District was enacted to protect the neighborhood’s affordable low-rise residential character. The area between W41st and W59th Street west of Eighth Avenue, provides a buffer for development pressure between the high-density districts of Hudson Yards and Midtown West (DCP). It was the second special district in NYC and “the first to feature a zoning bonus for the creation of affordable housing.” (MCD 4 Affordable Housing Plan), The zoning resolution was meant to

265 preserve housing between W 43rd to 56th Streets between 8th and 11th and direct denser commercial development to 8th Ave and 42nd Street. 1975. NYC fiscal crisis. 1975: “A Federal judge authorized the bankrupt Penn Central to sell the lightly used freight yards from 30th to 39th Streets to Trump Enterprises. December 18, 1975: Trump unveils plan to develop railyards as $110 million Convention Center. City and State officials and the PANYNJ had been entertaining the idea to site a convention center downtown at Battery Park City, but business leaders, theater owners, etc. hoped to locate such a center in midtown (NY Times 1975). 1976: The Public Authorities Control Board was established after NYC’s fiscal crisis. The Board consists of three representatives, the Governor, the State Assembly Speaker and the State Senate Majority Leader. Allows state projects and land transfers to circumvent local approval processes. Gives veto power to any one representative as approval must be unanimous. The PACB struck down the New York Sports and Convention Center, delayed the Penn/Moynihan Station upgrade and “derailed Javits Center expansion plans (Halle& Tiso 2014). 1979. Richard Ravitch becomes MTA Chairman through 1984. February 3, 1981: Chelsea Historic District Extension designated. May 13, 1982: The Special Midtown District was established “to shift future development further to the west and south in response to an over-concentration of development on the east side of Midtown” with “differing bulk and density limits for avenue frontages and midblocks, and for each of the subdistricts—Fifth Avenue, East Midtown, Penn Center, Preservation and Theater” (DCP).

1984: Trump buys Penn Central Railyard for $95 million calling it the “greatest piece of land in urban America.” The 76-acre site which hugs the Hudson River from 59th to 72nd Streets was purchased in 1979 for $45 million. A proposal for the site had already been approved in September of 1982 as the Lincoln West Housing and Office Complex with 4,300 apartments, 1 msf office across 18 to 20 buildings – a plan “favored by the Koch Administration. But Chase Manhattan Bank “had begun foreclosure proceedings against Lincoln West.” Trump says he will redesign the project and renegotiate with the city for amenities. (Gottlieb 1984).

1984: New York State enacts Municipal Redevelopment Law which enables municipalities to use TIF policies. Program is initially under-utilized.

1984: Times Square Redevelopment included $25m of city and state funding “for renovation and acquisition of affordable housing in the Clinton/Hell’s Kitchen neighborhood.” (MCD4)

1986: Jacob K. Javits opens, already inadequate to host the nation’s largest trade shows and conventions.

266 1986. John D. Caemmerer West Side Storage Yard opens. The yards were named after the New York State Senator who served from 1966 to 1982. As Chairman of the Transportation Committee, Caemmerer made sure to allocated funds to purchase and update the yards as part of the MTA Capital Budget. Estimated at $100 million, total costs turned out to be $195 million. The 26-acre site is located between 30th and 33rd Streets from 10th to 12th Avenue and is bifurcated by 11th Avenue, creating the Eastern Rail Yards (ERY) and the Western Rail Yards (WRY). Relying on his extensive experience as a NYC real estate developer, Richard Ravitch sought to make the property viable. He oversaw the reconfiguration, making sure there would be enough space between tracks to drive columns that could support high-rise commercial development over the tracks.

The MTA-owned railyards are a 24/7 storage, maintenance, inspections and cleaning facility for the LIRR, which stores its commuter railcars after the morning rush to Penn Station. There is also space for Amtrak’s Empire Line and, when needed, for the Gateway Tunnel. The ERY was zoned in 2005 to allow for 6.6 msf and 7 acres of public space. The WRY was rezoned in 2009 to allow 6 msf mixed use, 265 affordable housing units and 166 on either yard for a total 431 units (HYDC).

March 26, 1987: City Council enacts the Special Garment Center District “to maintain opportunities for apparel production, and wholesale and showroom uses in existing buildings in designated Preservation Areas on selected midblocks between West 35th and West 40th Streets west of Broadway” (DCP).

1987: Stock Market crash.

Late 1980’s Times Square redevelopment pushes the CBD west, towards Eighth Avenue.

Late 1980’s Olympia and York properties plans a 51-story 1.6 million square feet building at Ninth avenue and 31st.

1988: MTA releases its masterplan “for a mixed-use high-density development” with an FAR of 12 with an estimate of 12 msf (DCP 2001). (Still looking for this plan)

February 23, 1990: Board of Estimate adopts the Special Jacob K. Javits Convention Center District along 450 feet east of 11th Avenue from 34th to 39th Street. The hope was to attract vibrancy to the Convention Center area and attract new mixed-use development. David Dinkins, the mayor at the time, opposed the spot zoning technique in favor of a comprehensive approach instead. The rezoning allowed for heights of 34 floors if residential and 39 floors for commercial. February 23, 1990: On the same day, the Board of Estimate approved Olympia & York’s plan to development their site at 9th avenue and 31st Street. The plan called for a “51 story structure with 1.6 million sq. ft.” to be built over rail yards. May 1992. Olympia & York file for bankruptcy with debts over $20 billion (Evolved and now Brookfield).

267 1993: “Steinbrenner threatens to move out of NYC. Gov. Mario Cuomo suggested new stadium on the MTA yards. The community was opposed particularly because of the number of game days, over 80.

Spring 1993: NY City Planning Commission releases Shaping the City’s Future: NYC Planning and Zoning Report. In it they recommend extending the No. 7 line west to NJ to alleviate congestion on the West Side. “The Department should also review the zoning of manufacturing-zoned areas that may no longer be needed for industrial and municipal uses. The Commission is aware of the economic importance of many manufacturing zoned areas and recommends a number of policies to support industry (Chapter 2). The long-term decline of New York's industrial sector, however, has reduced the need for manufacturing-zoned land. The Department will begin studies evaluating opportunities to map as-of-right residential zoning in such industrial areas as portions of the West Side of Manhattan, Downtown Flushing in Queens, and similar areas with little industrial activity and a significant residential presence. Subway Extension to New Jersey. Extending the IRT Number 7 line west from Midtown and building a tunnel under the Hudson River to the New Jersey Meadowlands, would link a number of economic centers more directly. A faster rail trip could induce some New Jersey and suburban New York commuters to switch from automobile to bus and subway service, reducing congestion on the Hudson River crossings and promoting better accessibility between the Meadowlands, Manhattan, Long Island City, and Flushing.”

1994: Mayor Rudolph Giuliani takes office through 2001.

1994: Daniel Doctoroff, investment banking with no previous activity in civic affairs, begins to study the idea of NYC hosting the Summer Olympics. 1994: Parsons Brinkerhoff was hired to evaluate transit options, who according to Doctoroff “quickly conclude(d) that the cheapest and most effective solutions would be extending 7-line west from Times Square then south to Hudson Yards” (Doctoroff 2017). 1996: “Giuliani pushed it as the new home for the Yankees…Pataki wasn’t excited about the site for the Yankees” (Doctoroff 2017, p.153).

1996: Giuliani and Doctoroff meet. Giuliani appoints task force to work on bid for 2008 Olympic Games. USOC decides not to put any US bid forward for the 2008 Games following Salt Lake City scandal.

1996: Doctoroff hires Yale Urban Planning Professor and former Lindsay Administration official, Andrew Garvin, as lead planner. Jay Kriegel, also a former Lindsay Administration official, becomes the Executive Director of NYC2012. This provides some legitimacy and continuity of form and personnel for the Far West Side.

1996: RPA releases Third Regional Plan: A Region at Risk which advocates for an expansion of Midtown west and mix of uses for the Far West Side.

268 May 15, 1997: US Olympic Committee votes to defer all American bids for the 2008 Summer Olympics. Coming at the heels of a bribery investigation involving the selection of Salt Lake City’s winning bid to host the 2002 Winter Games. The President and the Deputy of the Salt Lake City Olympic Committee and numerous IOC members were accused and resigned. New York’s bid led by Doctoroff and supported by Giuliani was tabled, as were bids from seven other US cities.

1997: Transitional Finance Authority created as “a separate legal entity from the City of New York. TFA General Purpose Bonds are secured by the city's collections of personal income tax and, if necessary, sales tax (NYC IBO). 1998: Related wins bid to develop Columbus Circle, now the 2.8 msf Time Warner Center. The development consists of two towers, hotel, condos, office, retail, ‘vertical dining’ and Jazz at Lincoln Center. January 1999: Giuliani includes the prospect of a west side neighborhood and stadium in his State of the City address and calls for the 7-line extension

1999: The NYC Department of City Planning receives funding from the Federal Highway Administration to study transit=oriented development on the Far West Side.

June 1999: Hell’s Kitchen Neighborhood Association partner with Design Trust to begin a three- year study to help shape the future of Hell’s Kitchen South, their 197a plan. Community residents sought to make an impact on how the under-utilized are would be developed, offering alternatives to the City’s plans for a stadium.

2000: Joseph Rose, Chair of the City Planning Commission under Giuliani supports development of the Far West Side, claiming it is “our birthright…our future, our growth potential” (Brash, 2011 p. 144).

January 2000: Woody Johnson of Johnson & Johnson, outbids Charles Dolan of Cablevision to buy the NFL Jets for $635 m from Leon Hess. Johnson hopes to bring Jets back to NY after leaving Shea Stadium in 1984 for the NJ Meadowlands when their lease expires in 2008.

2000/2001: NYC2012 begins to refer to the Far West Side as Hudson Yards.

January 2001: Jets release (check when) plan for new stadium, with retractable roof. The stadium can connect underground to Javits Center and be used for conventions and shows with 220,000 sq. ft exhibitions space. Not just football, but year-round bookings at the New York Sports and Convention Center. Planned as the main stadium for Olympic opening and closing ceremonies.

May – November 2001: National Recession

June 2001: Group of 35 report released identifying the need for office space to thwart corporate defections to elsewhere in the region with a ready supply of modern stock. Led by Senator Schumer, the Group identifies three target areas for to build 60 msf of commercial development

269 in Long Island City, Downtown Brooklyn and the Far West Side. The Group also advocates the 7-line extension to unlock growth potential (who did they say should pay).

June 1, 2001. NYC2012 submits its bid to the USOC.

November 2001: Bloomberg elected NYC Mayor.

December 2001: DCP released “Far West Midtown: A Framework for Development”. “comprehensive plan for revitalization, zoning changes, investment etc., designed to pay for itself.” Doctoroff claims it was exactly like ours (Doctoroff 2017, p 163).

January 2002: Bloomberg takes office through 2013. Doctoroff appointed Deputy Mayor of Economic Development and also maintains his role with NYC2012. Begins to talk with Woody Johnson “more seriously” (Cassidy 2005).

June 2002: The Hell’s Kitchen Neighborhood Association releases their plan for Hell’s Kitchen South, an alternative to the City and State’s plans for a West Side Stadium. The plan addressed their concerns for “open space, traffic, air quality, density, affordable housing, and sustainable development.” Their plan highlighted appropriate land use, the need for open space and waterfront access. They wanted respectful development which preserves the neighborhood character and provides for continuity from Chelsea to the south and Clinton to the north, both residential communities. Developed in partnership with the Design Trust for Public Space and with extensive community involvement of businesses and residents, the plan called for a Javits expansion south of the existing Center over the Western railyards with a roof-top public park; that commercial development and density be directed to 30th to 35th Streets; that permanent affordable housing be built north of 35th, and, atop the Eastern Railyard, a multi-level pedestrian oriented public plaza.

September 2002: MTA contracts with WSP/Parsons Brinckerhoff as the “designer of record, to conduct the EIS, and develop preliminary engineering and final design at a cost of $174 million (MTA). More contracts and costs follow with seven other firms for construction, management, finishes, mining, excavation, etc., working on the EIS which turns out to be one of the most voluminous in history 6,000 pages.

November 3, 2002: The US Olympic Committee selects New York City as the US Candidate to host the 2012 Summer Olympics beating out San Francisco.

November 2002: DCP held first “official public hearing” for NYC 2012 p. 164.

2003: In Bloomberg’s State of the Union address he set out an “ambitious economic development plan…moving beyond rebuilding of lower Manhattan and embarking on major construction projects elsewhere-downtown Brooklyn Randall’s Island, Williamsburg and Greenpoint, Huts Point, Homeport, on Staten Island, and of course, the west side of Manhattan….the Mayor argued, the city could stimulate economic growth and boost tax revenues by rezoning underused land, clearing away bureaucratic red tape and investing in public works, such as subways, roads, and parks. ‘When we lead with public infrastructure, the private market will follow”. We have to build things. We have to grow the city, and its tax base,” have to be ready with new products, we have to spend money to make money, have to be ready for

270 new demand, Innovate, w ants to secure NY’s future by taking risks and innovating (Cassidy 2005).

Bloomberg’s economic development ideology: The $3billion cost to open West side “won’t affect other city projects…because it will be financed OUTSIDE the regular budget…’You can’t go borrow to give the teachers a salary raise, You can borrow to build something that is going to employ a lot of people and generate a lot of tax revenues” anything can be stalled because there are no guarantees…but…”Forty percent of the debt service for the city and state’s part of this project is already paid for by the Jets. In business, nobody ever gets a chance to start a project where 40% of the revenue needs are guaranteed” (points to the Gates in central park everybody was against, but was a big success was great for the economy ie: visitors (Cassidy 2005).

Doctoroff “makes no apology for linking development policy to Olympics bid…revitalize depressed neighborhoods by building world-class facilities that NYers would use for decades…” (Cassidy 2005)

2003: City releases and presents Far West Side Master Plan: Preferred Direction with more details and guiding principles. Plan calls for rezoning the area, allowing 28 msf of commercial development and 7-line extension with two stations. It is compatible with a west side stadium and the 2012 Olympic bid, though isn’t reliant on those events.

2003: First segment of Hudson River Park opens in Greenwich Village. Segment Six will connect W 25th Street to West 42nd Street with ‘major entrances’ at W30th, 34th and 42nd. (DCP 2001).

Early 2003: Doctoroff receives approval from NYC OMB for financing 7-line (Doctoroff 2017, p. 167 February 11, 2004: City releases financing plan for Hudson Yards infrastructure improvements including the 7-line extension and ERY platform, which at this point, would total about $3.7 B. The value capture scheme promised to be self-financed in the long – term. Bonds would be issued and repaid from anticipated revenues in the form of zoning bonuses, sale of TDRs, and PILOTs – all backed by the City’s capital budget if revenue fall short of forecasts. In the short- term, “the city would issue about $900 million in commercial paper.” Doctoroff claims that new development will “generate about $16 B in revenues by 2035 to pay bondholders,” but before these are realized, “about $1.7 B is needed for the “subway extension alone”(Bagli February 12, 2004). “Assemblyman Dick Gottfried, founder of the Hell’s Kitchen -Hudson Yards Coalition, questioned aspects of the plan which (as designed) will bypass the City Council” calling the plan “an extraordinary departure from democratic government “ (Bagli February 12, 2004). RPA reportedly “applauded the efforts to do “what it takes to finance badly needed infrastructure” Goldman Sachs, JP Morgan Chase, and Bear Stearns have been hired to underwrite bond offering. February 2004: Financing plan for 2012 Olympics released which includes the cost of the 7-line extension. Designed also to be self-financed, costs would be covered by ticket sales, corporate sponsorships, and television rights.

271 2004: Rumblings that the Guggenheim might be interested in Hudson Yards cultural component. Thomas Krens, director at the time. June 21, 2004: NYC Department of City Planning certifies the Hudson Yards rezoning plan which starts the ULURP process. The plan included 10 ULURP actions including rezoning manufacturing t:o commercial and residential uses. June 21, 2004: Draft Generic Environmental Impact Statement (DGEIS) for the No 7 line expansion and the Hudson River Rezoning and Development Program released. Was needed to meet SEQRA and CEQR requirements. MTA and DCP lead the effort. July 1, 2004: NYC IBO releases, “West Side Stadium: Touchdown for the City?” In their baseline scenario, IBO finds that the city could generate just enough tax revenue to cover debt service of $22m on $300 m investment, but with about half as many jobs (3,600 v 6,700) and less tax revenue ($28.4m v $35.2m) then found by the Ernst & Young study commissioned by the Jets and heralded by the Bloomberg Administration. They caution that this lower margin of economic and fiscal benefits is precarious. Given that 2/3rds of economic activity are to be generated by convention center uses, IBO claims the Jet’s event estimate is too optimistic especially since prime convention season and the NFL season occur simultaneously (The Jets anticipated 35 expositions, while IBO estimates 20 in their own optimistic scenario). Moreover, they point to the most troublesome risk to the city in the current scenario: If the convention center business proves futile for the Jets, they “have little incentive – or agreements compelling them – to continue these operations and provide the city with a chance to at least break even.” In February of 2005, the IBO releases an update to this study claiming that actually the city will break even if there are only 14 exhibitions not 20. But if the Center operated only as a football stadium, there would be a loss of $145.2 million on the city’s investment. Opportunity Cost: NYC IBO too believes the air rights over the yards will have significant market value, particularly after a viable platform and the area-wide rezoning. By contracting with the Jets, the chronically-underfunded MTA cannot realize the maximum revenue potential of their Yards. July 2004: NYC IBO also releases “Estimating the Economic and Fiscal Impacts of the New York Sports and Convention Center,” their background paper detailing methodology. July 8, 2004: Manhattan Community Board 5 holds public hearing on Hudson Yards plan. July 12, 2004: NYC OMB presents Hudson Yards financing plan to the City Planning Commission. Costs of about $3 B include the 7-line extension with two subway stations, park and boulevard, and, at this point, the ERY platform. Through value capture techniques Hudson Yards redevelopment is expected to generate more than $16 B in funds ($4.2B in 2003 dollars) (NYC OMB 2004). Trade-offs: Regarding the value capture approach to self-financing the 7-line extension, Richard Ravitch was agitated by the scheme. Based on his experience with multiple roles as a public official “was concerned that the agency (the MTA), which has heavy debts should get full value for the site. The plan was “eerily reminiscent of what happened a generation ago” pointing to the

272 history of the UDC, a city and state body which he recounts “borrowed heavily (and) when tax revenues came in lower than expected, they didn’t have enough money to service their debts and they had to be bailed out…I spent ten years of my life cleaning up the mess that people of good will and integrity created in the sixties and seventies. I saw in the West Side plan all of the things that had led to the crisis in the seventies, and I thought, if I don’t speak out, why should I expect anybody else to?” He was vocal about his objections, but as to the mayor compromising, Ravitch said “he doesn’t welcome counsel-at least, that was my impression” (Cassidy 2005). August 3, 2004: Manhattan Community Board 4 holds public hearing on Hudson Yards plan. August 2004: NYC IBO releases “West Side Financing’s Complex, $1.3 Billion Story.” In this study, requested by Public Advocate Betsy Gotbaum, the IBO finds that the value capture finance policy for the necessary infrastructure improvements needed on the West Side, including the 7-line extension and streets, park and platform, would cost $1.3B more than if the project was funded under the city’s capital budget. They also bring attention to the significant risks involved for the city. For instance, since revenue generation would not occur in the short-term, the city plans to ‘use commercial paper. If sales fall short, the Transitional Finance Authority will purchase and provide credit support backed by city personal income taxes which usually cover basic city services. Also, since the future revenue is heavily reliant on commercial uses, if the actual office demand falls short of actual absorption, the city has to make up any gaps. Third, since the financing scheme is designed to operate outside the ususal budget process, it would not have to subject its needs to debate or compete with other budgetary lie items and therefore no public scrutiny. exposure September 13, 2004: Manhattan Borough President holds public hearing. September 23, 2004. City Planning Commission holds public hearing for ULURP actions and on the DGEIS. November 11, 2004: The results of a Quinnipiac poll showed that 64% of NYC voters supported “the city’s bid for the Olympics.” But, 77% of New Yorkers oppose construction of the West Side Stadium. If. If the city and state didn’t have to pay, 54% would support its construction. Voters overwhelmingly support the individual components of the West Side Redevelopment as 57% support the expanded Javits Center; 72% support the 7-line extension; and 58% support the rezoning to commercial and residential uses. Also, 47% disagree with Mayor Bloomberg’s assertion that NY won’t win the Olympic bid without the new west side stadium (Quinnipiac/Poll). November 17, 2004: NYC’s bid for the 2012 Olympics is released and submitted to the IOC via a 582-page Presentation Book, plus an additional 1,500 contract and legal pages. By this point, NYC had entered into contracts with hotels, advertising agencies, set ticket prices, planned “Olympic Priority Lanes” bus lanes f and devised a citywide system of ferries for athletes, coaches, media, etc. November 22, 2004: City Planning Commission adopts ULURP applications.

273 December 1, 2004: RPA releases “Urban Development Alternatives for the Hudson Rail Yards.” Their alternatives include a variety of commercial and residential uses, which they claim would “generate far more revenue for the city than a stadium.” Also would create link to waterfront in sharp contrast to the Jets proposed stadium which would create “ a 12-block wall along the riverfront” The Community Board and many civic organizations were against Stadium as were State Senator Thomas K. Duane, Assemblyman Richard N Gottfried, Hell’s Kitchen/Hudson Yards Alliance. (Broadway Theater Owners were too). Stadium was vehemently opposed by residents because of its expected traffic and congestion, community benefit, and the Jets mostly suburban fan base. At this point, it seems like the only ones who adamantly thought the stadium was essential were Bloomberg and Doctoroff, though Rangel and Sharpton back the plan for its ability to provide jobs to minority workers (Cassidy 2005). 2004: Price for 7-line extension rises to around $3B. Plans for a second station were scrapped instead of scrimping on parks and open space according to Doctoroff, who claims to have chosen parks over second station. Doctoroff claims to have compromised with Senator Schumer by carving “out a cavern and a right of way for a future second stop” (Doctoroff 2017, p. 168). 2004: Related’s Time Warner Center opens at Columbus Circle, 19 years after Mortimer Zuckerman was “selected to build a different tower”(Bagli March 27, 2008). Ross succeeds in 2nd chances. January 19, 2005: New York City Council approves Special Hudson Yards District, 46 to 1, creating the Special Hudson Yards District generally bounded by West 42nd and 43rd Streets, 7th and 8th Avenues, West 28th and 30th Streets, and Hudson River Park. In the finalized plan, total office development dropped from 28 msf to 24 msf and affordable housing units rose from x to y. The plan also allows for 13, 500 housing units, 4,000 affordable, 1 msf of retail, 2 msf hotel and expanded Javits Center. City Council Speaker, Gifford Miller, voted against. Miller had agreed to back the plan but then told Doctoroff that since he wanted to run for mayor, he had to vote with his constituency (Doctoroff 2017 p. 169). Two public institutions were created to carry out the redevelopment plan: the Hudson Yards Development Corporation (HYDC) spearheads the plan’s implementation, and the Hudson Yards Infrastructure Corporation (HYIC) is its financing vehicle. The HYDC manages the District Improvement Bonus (DIB) process, which set an inaugural purchase price as $100 psf. Developers can increase their FAR by making payment to the District Improvement Fund (DIF) which is used to pay off debt service. NYC DCP is required to make annual adjustments based on CPI fluctuations. However, this doesn’t seem to keep pace with rising market value. The price per sq. ft. today stands at just $134.63, while the average Hudson Yard’s asking office rent is double at $ x psf (JLL). In addition, the HYDC oversees the TDR purchase process over the ERY, WRY, and other areas such as the Hudson Yards Park & Boulevard. HYDC operates under the President and staff and a Board of Directors including Deputy Mayor for Economic Development(chair), Commissioners of NYC DCP, HPD, Parks, Small Business Services, Director of OMB, Pres of NYCEDC, NYC Comptroller, City Council Speaker, MBP, City Councilperson for District 3, Chair of MCB 4. According to HYDC, “more

274 than 5,600 apartments and more than 3,900 hotel rooms have been built in Hudson Yards” since the rezoning. HYIC is authorized to offer bonds, collect revenue and disburse payments connected to financing infrastructure improvements, including the construction cost of the 7-line extension, within the Hudson Yards Infrastructure District. HYIC management includes resident and staff, plus Board of Directors made up of public officials, including NYC Comptroller, Director of OMB, Dept. of Finance Commissioner, Deputy Mayors for Economic Development and Operations and City Council Speaker. February 2005: Criticism of Doctoroff from WNYC Bernstein and Village Voice Tom Robbins reported “builders and financiers with interests in Hudson Yards and other development zones have attempted to curry favor with Doctoroff by making financial contributions to NYC 2012” (Cassidy 2005) . For instance, ‘family foundation controlled by Woody Johnson gave more than a million…banks that have been hired to help finance Hudson Yards, Goldman Sachs, JP Morgan and Bear Stearns – have also made sizable donations…developers who have contributed, include Douglas Durst, Steven Roth and Stephen Ross-Doctoroff’s friend. Trade-offs: Who is the stadium for? Wealthy NFL owners and athletes, tourists and other out-of- towners, plus luxury apartments while under affordable housing crisis? Bloomberg insists the economic benefit brought about by a stadium and expanded convention center outweighs any costs. February 4, 2005: Cablevision makes offer to develop Wester Rail Yards one-week before the MTA Board is scheduled to vote on the Jets Stadium plan. In a letter to Peter Kalikow, chairman of the MTA, Hank Ratner, the Vice Chairman of MSG, pledges $600 million for the “right” to develop a mixed-use community. Doctoroff is miffed and contends that a “Friday afternoon press release (from Cablevision) cannot compete with years of planning.” Jets called it “a desperate ploy and cynical PR gimmick…that will do anything to protect its monopoly” (Bagli Feb 5, 2005). Details did not accompany the offer at the time. This apparently the first time Cablevision expressed any interest in developing the site, even though planning and negotiation had been underway (how much public discussion was there? Kalikow responds through a spokesperson, “Mr. Kalikow’s main concern is obtaining the best financial deal he can for the MTA and its customers.” The RPA agrees, saying that “this underscore what we’ve said all along…this is a valuable site and the MTA has a responsibility to get the highest dollar amount.” Thomas Duane State Senator concurs, “we always wanted competition…and options for the site.” Cablevision, owner of MSG, the NY Knicks and NY Rangers, launces a self-interested, negative campaign against the West Side stadium. Unusually brief 27 days to submit an offer…some developers didn’t want to bid even though a good opportunity to develop on this property because thye didn’t want to “infuriate” Bloomberg (Bagli April, 19, 2005).

275 March Cablevision “brings six developer who agreed to pay $400 million of air rights. Kalikow rejected without discussion March 21, 2005: Deadline set by MTA to receive bids for the WRY “set last month”“Jets and Cablevision both raise their bids for the railyards, and a third company, Trans Gas Energy Systems, also submitted an offer, which few took seriously (Cassidy 2005) According to Cassidy, the Jets offer of $720 million included $280 million from the Jets and $440 million from developers to buy the air rights for development. Cable vision “revised bid to $760 million…but details remained murky”. Jets raise bid to $720m and add housing market and museum and brings in six developers who will buy air rights for $440 million. Cable vision reveals plan for “Hudson Gardens” - housing, park and hotel. Both plansnow would need rezoning of Western Rail Yards, Jets offer contingent “if and when” on zoning change, Calevisios was not. (Who paying for platform in Jets proposal?) Cablevision includes $360 for platform so only $400 m for MTA (Bagli and Chen,March 29, 2005 (Details released yesterday) Both $ for maintenance fund for platform MTA received a third bid from TransGas Energy Systems, which bid $1B up from $700 m but requires the MTA to buy “power from the company for the next 20 years” and to help build a “$2B electric power plant along the East River in Williamsburg (NY Times Bagli, March 22, 2005. Another two bids were received, but didn’t submit the required $25k deposit. March 31, 2005: MTA Board votes 14-0 to accept Jets bid for stadium for $210 million and maintain the ability to sell the air rights over the stadium at an estimated $1 B. Even though the cash offer is less than Cablevision bids $400 m, Kalikow claims the stadium is more economically valuable to the city. According to Bagli, he “has not been enthusiastic” about the 7-line until now (part of why city agree to pay the $2B “ James Simpson, chairman of the MTA planning and real estate committee defended the vote, that the Cablevision offer would be worth taking if the transit system were desperate for cash and about to default on its bonds, he said, adding “But that’s not the case I think we need to take the longer -term view.” !!!! We can’t think of ourselves strictly as a transportation company…we are part, the most important part of the economic engine of the City of NY.”, (Chan and Bagli April 1, 2005). Outrage of course. Jets plan called for the city and state cash $600 to build the platform Cable vision wasn’t asking for any public money. We don’t want and we don’t need said Gifford Miller April 2005: Estimate of Stadium cost grows from $1.4 b to $1.7 B. City offers $300 million. Jets, owner Woody Johnson, pledge $800 million, for construction. April 18, 2005: The Straphangers Campaign, Common Cause/NU, the Transport Workers Union and the Tri-State Transportation Campaign jointly sue the MTA for not selected the proposal with the highest cash value to develop the Wester Rail Yard. The suit alleges the selection of the Jets to develop a stadium is flawed and unlawful, pointing to the MTA’s own appraisal of the property at $923 million (Bagli April 19, 2005). By this time, the Jets had offered $250 million, so far up a ibit from their original offer of $100m. But also by this point, Cablevision had

276 offered $750 million up from $600 million xxx ago. . Gene Russianoff points out why, “We want top dollar. If we don’t get a fair price for the yards, the loss will be taken out on the riding public in fewer new cars and buses, less repairs and eventually higher fares and poorer service” (Bagli, April 19, 2005). April 28th, 2005: Joseph Bruno meets with Jim Dolan of Cablevision for lunch and golf. Meeting was set up by his son, a lobbyist working for Cablevision to “defeat the stadium plan” . Bruno had claimed that the son did not lobby his father on “matters before the state” . Documents which became public during Bruno’s corruption trial in 2009, revealed that staff wrote directly to him stating that “I wouldn’t want someone to see you, Ken and Jim Dolan on the golf course and question the ethics of the situation (NY Post 2009). “State abandons Javits expansion (why?) MSG and Penn station and “a new monumental train station with 6 skyscraper collapse” June 5, 2005. IOC releases a positive report on NYC2012 bid, but expressed concern over the uncertainty of the main stadium. June 2005: City and State begin process to acquire land through eminent domain for 7-line extension. June 6, 2005: Plan for Jets Stadium is defeated at the final approval stage. As a state-owned property involving state subsidies, the plan had to be approved by the Public Authorities Control Board (PACB). The PACB, made up of just three-members, the Governor, and then State Assembly Speaker Sheldon Silver, and State Senate Majority leader Joseph Bruno, delaying the vote twice. Finally, Silver and Bruno abstained, and only Governor voted for the stadium. Silver claimed he had to protect his constituency which was still rebuilding after 9/11. Later, both were ultimately accused and tried for fraud and charges involving millions of dollars over their careers. Silver was first convicted in 2015 found guilty then overturned on appeal. Was convicted again on May 11, 2018 and sentenced to 7 years in prison but remains out collecting his $6,600 pension. Bruno was convicted of fraud and sentenced to two years in jail. in 2009 Was overturned “vacated” in 2010 and retried and acquitted in 2014. taking payments and forgiving debt and sentenced to xxx. But was vacated. Upon retrial in 2014, Bruno was found not guilty. Resigned in 2008. Federal fraud charges. June 2005: NYC2012 shifts plans for the Olympic Stadium to Flushing Queens. June 23, 2005: Special West Chelsea District enacted to allow for TDR transfers from High Line meant to protect the linear park’s light, air, views and open space, offering floor area bonuses for development between Tenth and Eleventh Avenues and West 16th and West 30th Streets. July 2005: The IOC selects London to host the 2012 Summer Olympics. August 11, 2005: NFL re-opened bid for Superbowl. Eventually Jets partner with Giants to build a new stadium in the Meadowlands, NJ.

277 2006: Related Companies and Harvey Spevak purchase Equinox. December 21, 2006: HYIC issues $2 Billion “Fiscal 2007 Series A Senior Revenue Bonds (FY07 Bonds).” “ The FY07 Bonds were term bonds with semi-annual interest payment dates beginning on August 15, 2007 and maturing February 15, 2047” (HYIC 2018).

July 2007: MTA releases two RFPs for sale or lease of “air space” a top the Eastern Rail Yard and the Western Rail Yard. The objectives of the proposals which included design guidelines were to maximize revenue for the MTA, to ensure uninterrupted LIRR service, and “to promote excellence in architecture, urban design, and sustainability” (NY Mayors Office 2008). Building on the Eastern Rail Yard (ERY) could begin once a contract was executed. Development plans over the Western Rail Yard (WRY) still needs EIS and ULURP approval.

October 2007: The MTA receives five bids from developers.

December 2007: Construction begins on the 7-line extension. Launch ceremony takes place in Times Square. MTA’s NYC Transit will own the line. MTA Capital Construction will oversee the design and act as construction manager. WSP and Parsons will design the system.

The 34th Street – Hudson Yards Station will be NYC Transit’s 469th. The station will have 9 escalators, 4 elevators – 2 incline, 2 vertical. The full station is three levels and temperatures of 72 – 78 will be retained year-round. The platform is 125 feet underground, column free and extends 1,200 feet along 11th Avenue from West 32nd to West 37th. Its platform will be the widest (36ft) and longest (585 ft) in the transit system.” Entrances will be at 34th & HY Boulevard East, 35th & HY Boulevard East (MTA). March 26, 2008: “Mayor Bloomberg, Governor Paterson, MTA Announce (Conditional) Selection of Tishman Speyer To Develop West Side Rail Yards.” The deal would have been structured as a 99-year lease with options to purchase and consisted of 12 msf of mixed-use development for both the ERY and WRY. The official press release claimed that Tishman was selected because they offered the highest NPV to the MTA at $1B which would have supported the MTA’s capital budget. March 27, 2008: Richard Ravitch quoted in the NY Times, “a critic of the deal. He said the authority should not have tried to sell the development rights in a down market on the promise that the developer will build towers and pay rent at some point in the future. Jerry Speyer is an eminently responsible developer, but I don’t yet understand how this helps the MTA meet its capital needs. They sold an illiquid investment for another illiquid investment.” (Bagli March 27, 2008) May 8, 2008. Negotiations collapse as Tishman Speyer’s main investor and anchor tenant Morgan Stanley drops out (Bagli March 27,2008 because they realize they can’t be moved into by 2013). MTA then selects Related to develop both the ERY and WRY. The 2005 Rezoning of the ERY allowed for 6.6 million sq. ft. of mixed-use development and 7-acres of public space. The Western Rail Yard, rezoned in 2009, and allows for another 6 million sq. ft. of mixed-use development, including 265 permanent affordable housing units. Another 166 affordable could be built on either yard for a minimum total of 431 units (check units).

278 Tishman wanted to delay rent payments on both ERY and WRY until through ULURP and EIS. Related deal includes the option to delay rent payments for two years if they can’t secure an anchor tenant and/or ‘suspend its annual rent payment” “with penalties if economic recession or ….(Bagli May 20 2008. May 18, 2008: Related’s Stephen Ross and the MTA sign an agreement to develop the ERY and WRY. The terms include a $10 million deposit on the $1.054 B 99-year lease. Another cash payment of $18.8 million when closing on the ERY, and another 24.7 when closing on WRY (Bagli May 20, 2008) (did this happen? for the right to utilize the air rights ten days after the deal between the MTA and Tishman Speyer collapsed when Tishman wanted to delay payment until after the land use review process having also lost its investment partner and anchor tenant Morgan Stanley. The MTA Board has to approve at is meeting May 22. By this time, Related’s original anchor tenant, News Corp. had dropped out. Related’s investment partner Goldman Sachs is still in. “Though the profits from the project are potentially huge, it is not without great risk, “ (Bagli May 20, 2008) First says must spend $2 B on planforms and then compete with Brookfield at Manhattan West, Silverstein WTC and the PA’s Freedom Tower” Paterson calls it “the resiliency of the public-private partnership in the face of the national economic downturn” Andrew Bereman of the Hudson Yards Advisory Committee, voices criticism and concern that “development of this scale could overwhelm our infrastructure and offer very little in return in terms of affordable housing or other much-needed amenities, “ (Bagli May 20, 2008) . Another public official voiced the difficulty of deciding whether or not this is a good deal, without explicitly knowing “the level of subsidies involved” July 15, 2008: West Chelsea Historic District designated. December 2009: NYC Council approves rezoning of Western Rail Yards. “In December 2009, the New York City Council approved a comprehensive rezoning of the Western Rail Yard that will transform this open-air railroad storage yard into a vibrant, transit- oriented, mixed-use development with approximately 5,000 apartments, office, hotel, retail, cultural and community facility, and parking uses, and 5.45 acres of public open space.” HYDC 10/2/19. May 26, 2010: MTA announces finalized deal with Related-Oxford in which the developer will construct decks over the ERY and WRY. They agree to a 99-year ground lease for the property with purchase options. The lease payments are reportedly equivalent to $1B. Upon contract signing, Related agrees to pay $21.75 m deposit with additional deposits in six and twelve months of about $11 m each. Jay Walder, MTA Chairman and CEO, says “ We were able to maximize value for the MTA and provide a new revenue stream to support many of our vital capital projects.” (MTA 2010). But did they?

October 19, 2011: HYIC announces successful sale of $1B new money bonds (HYIC).

279 October 26, 2011: HYIC issues $1 Billion “Fiscal 2012 Series A Senior Revenue Bonds (FY12 Bonds). “The FY12 Bonds are term bonds with semiannual interest payments beginning on February 15, 2012 and maturing on February 15, 2047.” (HYIC 2018) 2011: Coach purchases 1/3rd stake at 10 Hudson Yards - 738k sq. ft. for $350 million and spend $220 million to “build out” the space. They move in May 2016. 2011: Equinox acquires SoulCycle. 2012: Related’s 10 Hudson Yards breaks ground at 30th and 10th. Will connect directly to the High Line. May 2012: First rails for 7-line extension are installed. Project is 65% complete according to the MTA. 2013: Related and the Building and Construction Trades Council of Greater New York (BCTC) sign a Project Labor Agreement for Phase 1 of Related’s Hudson Yards. December 20, 2013: Michael Bloomberg and other officials take inaugural train ride on 7- extension from Times Square to Hudson Yards. Senator Schumer quips, “the Far West Side is not so far away anymore.” (MTA December 20, 2013). January 1, 2014. Mayor Bill De Blasio takes office.

March 2014: Caisson drilling begins on ERY platform. There will be 300 caissons installed. Fall 2014: Related’s 15 Hudson Yards breaks ground.

Fall 2014: ERY receives trusses and steel columns and bars. 2014: Alex Poots named CEO and Artistic Director for the shed. Rumored salary of $850k 2014: Third phase of High Line opens between 30th and 34th Streets. The 1.45 mile linear park connects directly to Related’s Hudson Yards and Hudson Park Boulevard, skirting the edge of the development from 10th to 12th Avenues, offering free, open-access waterfront views. The line runs south to Gansevoort and is designed by Diller Scofidio + Renfro (also designers of High Line and 35 Hudson Yards), plus James Corner Field Operations as landscape designer and Piet Oudolf, planting designer. The High Line structure was donated to NYC by then owner, CSX. 2015: The Shed breaks ground. 2015: 10 Hudson Yards tops out. August 2015: Phase 1 of Hudson Park & Boulevard opens from W 33rd to W 36th. 14 acres Connects to High Line to the south and Hudson River Park to the north. September 13, 2015: The 34th Street - Hudson Yards Station opens for service at 11th avenue and 34th Street. A 2014 opening was planned but due to complications with the only two high- rise inclined elevators in NYC, designed to quickly move riders to and from deep underground platforms 125 feet below ground (MTA Capital Programs 7-line Extension). This is the first new station since 1989 and is fully ADA compliant. Can handle 25,000 passengers at peak.

280 According to the MTA, it is expected to be one of the busiest stations in NYC and the 7-line will connect 18 of the 24 NYC subway lines. There are two entrances at 11th Ave between 33rd and 34th, and at 11th between 34th and 35th Streets with ‘hybrid, turtle shell, glass canopies. Entrances are adorned with ‘glittering mosaics’ from Miotto Mosaic Art Studio. Heralded for “fostering transit-oriented growth.” At opening, Gov A. Cuomo gets in a dig and calls it “a clear example of how the City and State can work together to support a transit network that drives our regional economy.” (MTA 2015). Prendergrast, MTA Chairman at the time, recalls how transit builds neighborhoods, “Just as the 7 train created neighborhoods like Long Island City, Sunnyside, and Jackson Heights in the 20th Century, the extension instantly creates an accessible new neighborhood right here in Manhattan.” Horodniceanu says “Without the extension, this new development would not have been possible (well maybe) (MTA 2015).

January 7, 2016: Governor Andrew Cuomo announces $1B plan to expand Javits Center by 1.2 msf in his State of the State Agenda. RFP released September 2016. Team of LendLease, Turner Construction and TVS Design is selected by January 31, 2017.Groundbreaking March 2017 and completion expected 2021. (RFQ first) January 2016. Governor Cuomo also announces $2.5 billion development of Pennsylvania Station-Farley Complex, including Moynihan Train Hall. “This renovation and construction of a new train station at what is currently the Farley Post Office will extend Penn Station west to 9th Avenue. This new station will alleviate pedestrian congestion in Penn Station and allow access to Amtrak, New Jersey Transit, and the Long Island Railroad trains. “ Will link to Hudson Yards. 2016: ERY platform completed. From related 30 active tracks, “300 caissons drilled deep into bedrock between the rail lines to support the structures.” Due to the location of tracks, underground tunnels and utilities, only 38% of the site can be used to support structures.” 23k sq ft of LIRR tracks with room for 7-line expansion, Amtrak Empire Service, Gateway and North River Tunnels. 2016: Sales begin for 15 Hudson Yards. Asking prices range from $3.8 million to 39 or 59 xxx m May 2016: 10 Hudson Yards opens. Designed by Kohn Pedersen Fox. Major tenants are Coach, L’Oreal, , Sidewalk Labs. Coach opens at 10 Hudson Yards with employees arriving May 31st. June 22, 2016: MTA Board “authorized a bond offering to monetize a portion of the 99-year lease payments from HY commercial and residential developments” (Burton Bond Buyer) ”The issue would yield $1.053B, or the full amount of proceeds assumed in its 2005-2009 and 2010- 2014 capital programs, after deducting issuance costs.” Patrick McCoy, Director fo Finance for the MTA told the finance committee that, “This is a way to bring that money forward and to really close out that funding necessary for the capital program.” The MTA already services $37B in debt. The MTA will offer these lease securitization bonds under a trust agreement with Wells Fargo Bank as custodian, as a 40-year bond. COO Robert Foran says the refunding will take advantage of lower interest rates.

281 Moody’s rate deal as A2. Kroll Bond Rating Agency rates A-minus with the interesting breakdown: legal framework (AA-minus), the nature of property tax/assessment revenue base (BBB-minus) economic base and demographics (AA-plus) , revenue analysis (BBB) and debt service coverage and bond structure (A-plus)…. Which reflects the significant risk associated with the scale and complexity of the construction and development in the project area as well as elements of uncertainty in the timing of construction and the ultimate value of developments” (Burton, Aug 2016). August 2016: Sidewalk Labs, run by Doctoroff, moves in to 10 Hudson Yards taking 67,000 sq. ft. over 1.5 stories. NY Times calls the move a home coming and vindication for Doctoroff. September 14/15, 2016. NY MTA brings to market “$1.06 B ”of Hudson Rail Yards trust obligation bonds. Goldman Sachs priced as 5s to yield 1.875% in 2046, 2.375% in 2051 and 2.625% in 2056 (Barnett and Weitzman, September 15, 2016). One trader was quoted that the bonds “were pretty darn attractive to put it candidly, anytime you get a short call structure with that size and the New York name behind it, there is going to be a lot of interest in it, and that was the case.” January 10, 2017. NYC IDA “permitted Related and Oxford to send payments in lieu of city real property taxes, city and state mortgage recording taxes and city and state sales and use taxes”…“The NYC Industrial Development Agency approved $195 million in tax breaks for Related Cos. and Oxford Properties Group for their planned $4 billion office tower at 50 Hudson Yards” (Bond Buyer and others). (Why for higher FAR or something else) March 2017: Javits expansion breaks ground. April 18, 2017: Thomas Heatherwick’s Vessel breaks ground on the Hudson Yards Plaza. The $150 million sculpture is made of concrete and bronzed steel with 154 interconnecting staircases, almost 2,500 steps and 80 landings. It’s 16 stories can accommodate 1,000 visitors, centerpiece of Hudson Yards Plaza. May 19, 2017: HYIC begins two-day retail order period for $2.19 billion, Series A, second indenture, tax exempt, bonds. Afterwards “the deal will be priced for institutions” Proceeds will be used to currently refund all of the outstanding Series 2007 bonds and advance refund part of the Series 2012 bonds.” Bonds are priced to yield 1.31% “with 3% and 5% coupons (in a split 2022 maturity to approximately 3.568% with a 3.5% coupon in 2038; a 2042 maturity was priced as 5s to yield 3.19% while a 2045 maturity was prices as 4s to yield 3.53%) “Final stated yields ranged from 1.28% in 2022 to 3.43% in 2044 for a 4% coupon bond and 3.13% in 2045 for a 5% coupon bond” HYIC May 23, 2017) Moody’s rated the deal at Aa3; S&P and Fitch Ratings at A-plus. S&P upgraded HYIC’s outstanding Fiscal 2012 Series A first-indenture senior revenue bonds two notches, to AA-minus from A before the deal.

282 May 23, 2017: HYIC announced the “successful” sale of $2.15B Series 2017 Second Indenture Bonds comprised of $2.12 B of tax-exempt fixed rate bonds and $33.4 million of taxable fixed rate bonds (me) May 30, 2017. HYIC issued $2.1B “Fiscal Year 2017 Series A Subordinate Bonds and $33.3 million Series B Subordinate Bonds (together known as FY17Bonds) under the Second Indenture. Proceeds were applied, with other available funds, to refund all of the FY07 Bonds and $391 million of the FY12 Bonds…This caused the conversion of the remaining First Indenture Bonds…and a payment to the TFA to defease (void) a portion of its debt” (HYIC 2018, p.6) On May 30, 2017, the Corporation issued approximately $2.1 billion of refunding bonds which refinanced all of its initial $2 billion bond issue and a portion of its second bond issue under a new legal structure. This enabled the Corporation to transfer to the City in the future any excess revenues over and above amounts needed for debt service requirements. September 2017: Four penthouses at 15 Hudson Yards come to market at astronomical asking prices, including $32 m for a four-bedroom, 5,000 sq. ft. duplex on the 88th floor. November 2017: RPA releases its fourth regional plan, “The Fourth Regional Plan Making the Region Work for All of Us” and advocates/recommends several actions to enhance the future of Hudson Yards, including a second bus terminal under Javits Center, prioritization of pedestrians and a complete overhaul and unification of Penn Station/MSG. February 2018: 15 Hudson Yards topped out. July 2018: 30 Hudson Yards topped out. August 2018: Related and the NY District Council of Carpenters strike an individualized deal to carry on work at 50 Hudson Yards and other Phase 2 construction, circumventing its membership in BCTC. This only inflames the already extremely contentious situation pitting labor against the developer of the largest construction project in New York. Fights have grown ugly and personal with biweekly #Countmein protests in front of the Time Warner building, Related offices, and at nearby Trump International Hotel and Tower, where Stephen Ross, President of Related, has an apartment. Each side establishes dueling websites set up askstevewhy.com and askgarywhy.com. Related sues the unions and LaBarbera personally, claiming inflated costs of $100 million. The unions claim unfair business practices and unsafe construction conditions. As non-union workers gain market share into commercial construction, Related seeks to use open – shop practice at Phase 2 of Hudson Yards, with a mix of union and non-union workers. September 2018: NYC Council gives approval to the HYIC to issue another $500 million in bonds to fund acquisition and construction of Hudson Park and Boulevard between 36th and 39th Streets between 10th and 11th. At an estimated cost of $374 million equating to $125 million per acre, the park will be the most expensive ever in NYC. Coming in at about $125 million per acre, the HY park easily surpasses the previous record holders of $54 million per acre for Bushwick Inlet Park and $36 million per acre for the High Line (Morley 2018). The high cost is

283 attributed to land acquisition from private property owners and the cost of building a platform over the Amtrak rail cuts. HYDC will oversee construction and the land will be transferred to NYC Parks and DOT. The park will be managed by the Hudson-Yards-Hell’s Kitchen Business Improvement District. Tishman Speyer is expected to buy some of the available TDRs (they did in 2019) to defray some of the cost for the park which will be designed by Michael Van Valkenburgh Associates (MVVA). Groundbreaking is scheduled for late 2020 with a projected opening date of winter 2023 (Gannon September 2018). Trade-Offs: The high cost sparks controversy as the Center for an Urban Future estimated the need for massive upgrades to the city’s parks. “The city’s Community Parks Initiative, an effort to upgrade 65 parks across the city, has a budget of $318 million, less than what the city will spend on the Hudson Park and Boulevard expansion” (Morley Sept. 2018). September 2018. Trade-offs - Leasing slows in other NYC markets as the allure of newly constructed buildings with large column-less floor plates, collaborative workspaces, floor- to- ceiling windows, envious amenities, LEED – certified, newly constructed, state-of-the-art, high end commercial space comes to market. In contrast, according to the PANYNJ, more than 30% of One World Trade’s 3 million sq. ft. remains vacant. (Add Jll) October 2018: Affordable housing lottery begins for 107 units on seven floors at 15 Hudson Yards. The affordable units have separate entrance and address - 553 West 30th Street. 400 of the 4,000 total new residences s at Hudson Yards are to be affordable (Plitt Oct 2018). Offered are studio, 1 and 2 bedrooms for those making $31,303 to $62,580 or 50 -60% of the area’s median income. Rental rates range from $858 to $1,350. 50% are slated for MCB 4 residents. Application deadline is December 13, 2018. “This building is being constructed through Low Income Housing Tax Credit Program (LIHTC) of New York State Homes and Community Renewal and is anticipated to receive a Tax Exemption through the 421-a Tax Incentive Program of the New York City Department of Housing Preservation NYC Housing Connect” October 2018. 55 Hudson Yards complete. October 31, 2018: The West Side Community Fund for the Chelsea-Hudson Yards area (WSCF) releases calls for Chelsea & Hudson Yards Innovation Grants - microgrant proposals due by December 3rd and to be announced in February 2019. The WSCF is a newly-formed organization “initiated by Google and Related/Oxford Hudson Yards “made up of 19 private Hudson Yards employers, developers and investors including BlackRock, Coach, Google, Related, Pfizer, Warner Media, Wells Fargo, who each initially pledged $25,000, with a budget of $425,000. Each donor has one seat on its Board. The fund which will distribute grants of up to $5,000 also has established an Elected Advisory Board made up of local elected officials. “The target area is between 7th and 12th Ave and 14th to 38th. The area “is being significantly impacted by extensive private sector development and investment” (Related PR). “to ensure that this increased investment and heightened economic activity brings demonstrable benefits and improved services to the residents of the Chelsea/Hudson Yards area.” Related PR. The Citizens Committee for New York City is a sponsor and “will provide administrative and staff support for

284 the fund”. Small …-scale targeting “youth, seniors and underserved residents” so to schools, teachers, work-force development, healthcare, culture ..underserved populations – seniors, homeless, special needs, disabilities, pantries and soup kitchen, Citizens Committee for NYC – micro up to 2500, mid-level up to $5,000 and large grants $5,000+ (Citizens Committee for NYC). Including community groups, tenant and block association, service and civic groups seniors, homeless, disabled, education programs etc.(Related PR) Equity Issues: Such low dollar amounts. BlackRock, for instance, manages nearly $7 trillion in assets. November 2018: HY contracts with Visa as partner for contactless payment within the Yards. November 2018: Hudson Yards invites residents to sign up to “climb with us” and reserve timeslots for the Vessel’s opening in 2019. The interactive experience is free but must reserve time slots. Equinox offers work out class on the Vessel. December 2018: Second entrance at 35th Street – Hudson Yards opens. December 2018: MTA announces suspension of 7-line service on nights and weekends to repair new signaling systems which failed. The modern system allows for maximum route capacity and faster service, plus is a key focus of NYC Transit Chief Andy Byford’s “Fast Forward” plan.

January 2019: Tenants move in to 55 Hudson Yards.

January 2019: 15 Hudson Yards complete.

February 2019: Related “launches” its national restaurant division with Ron Parker, formerly the COO of Union Square Union Square Hospitality Group, as CEO. Will develop venues both within and outside Related properties.

February 2019: Related’s $100 million in commissioned art unveiled, primarily in lobby entrances.

February 19, 2019: The parent union of the locally based Iron Workers negotiates directly with Related and ends up dismantling the local chapter, firing all the leadership and instructing others to reapply for their jobs. “Former union president John Skinner tweeted” ….” Any union organization officials that say you need to cross a picket line are a disgrace to the labor movement” and betrays the #CountMeIn solidarity campaign” (Politico 2/20/19).

March 1 2019: Hudson Park officially renamed Bella Abzug Park, between 33rd and 36th Street. The 2-acre park is operated and maintained by the Hudson Yards-Hell’s Kitchen BID. Community programs include yoga, children’s activities and more. March 6, 2019: Related and the Building and Construction Trades Council of Greater New York agree to a truce. Related will drop all lawsuits and BCTC will stop all protests and boycotts at 50 Hudson Yards. This conveniently coincides with Related’s Hudson Yards “grand opening”. Details will be worked out but it appears that the agreement will allow Related to utilize some

285 non-union workers for Phase 2 of the project such as those that clean debris or move equipment, but will use higher skilled “hard-to-replace” union workers for more experienced positions such as crane operators. Bargaining leverage of BCTC was damaged after both the United Brotherhood of Carpenters and the International Association of Bridge, Structural, Ornamental and Reinforcing Iron Workers broke ranks and negotiated individual deals separately and directly with Related. March 14: Pre-grand opening party for 17,000 elite New Yorkers. Mayor de Blasio attends (NY Post, check). March 15, 2019: Official Grand Opening of the public spaces of Related’s Hudson Yards., The Shops and Restaurants at Hudson Yards open with 100 shops anchored by Neiman Marcus (the first in NY). The Vessel, public square and gardens are revealed. March 15, 2019: Official grand opening of Related/Oxfords Hudson Yards public areas. Bloomberg did not attend nor did Governor Cuomo and Mayor DeBlasio (check again). Mayor De Blasio on his weekly Morning Joe segment reminded everyone that the deal and its subsidies were struck with the prior administration, stating, “We're not here to continually empower the one percent. We're not here to have government policies that make the rich richer while working people work harder than ever and get the — less, less and less back,” he said. (Jorgednson March 2019) MANY scathing critiques: New York Times: Michael Kimmelman “A Gleaming Behemoth Rises, for Better or Worse.”: "It is, at heart, a supersized suburban-style office park, with a shopping mall and a quasi-gated condo community targeted at the 0.1 percent." “Hudson Yards glorifies a kind of surface spectacle – as if the peak ambitions of city life were consuming luxury goods and enjoying a smooth, seductive, mindless materialism.” …“Over all, Hudson Yards epitomizes a skin-deep view of architecture as luxury branding. Each building exists to act like a logo for itself. The assortment suggests so many crowded perfume bottles vying for attention in a department store window display.” As for the Shed, “eye-catchingly swathed in a tufted Teflon-based sheeting that can bring to mind inflated dry-cleaning bags.”…And the Vessel is later referred to as “a trash- basket-shaped tourist attraction.” Forbes: Ellis Talton and Remington Tonar: "The physical space Hudson Yards has created is ostentatious and energizing, but the social space it has created is illusory and inauthentic. "A truly equitable space, one that honors the values of eclecticism and imperfection that have made New York great, would be less concerned about matching the grandeur of Dubai or Singapore and more focused on matching the dynamism of New York City culture. This can certainly be done on a grandiose and spectacular scale, but the architectural approach needs to be social not just structural." USA Today: David Oliver: 'A dystopian playground': Hudson Yards, New York City's new $25 billion urban complex, draws mixed reviews.”

286 Places: Shannon Mattern. “From the observation deck atop 30 Hudson Yards, projected to be the highest in the city, residents and visitors will look out upon a dream made manifest: a clean, efficient urban machine; a carefully curated cultural experience; a Keller-fed, Equinox-toned, Coach-clad populace; New York Magazine: Justin Davidson: I have a feeling were not in New York Anymore! “Hudson Yards is a billionaire’s fantasy city and you never have to leave – provided you can pay for it.” CityLab: Feargus O’Sullivan, “Cities Deserve Better Than These Thomas Heatherwick Gimmicks.” Archinect: “Is Hudson Yards a playground for billionaire’s or a budding new landscape?” NY Eater: “Hudson Yards $200M Art Piece Looks Like a Giant Shawarma.” The Guardian. Hamilton Nolan. “New York's Hudson Yards is an ultra-capitalist Forbidden City.” May 13, 2019. Most of the city will never get to live, work, shop and play in the billionaire’s fantasy now grafted on to the side of Manhattan.” “ Hudson Yards, the biggest private real estate development in US history, may be slightly less offensive to the memory of Jane Jacobs than a freeway running through Greenwich Village, but not by much.” Counter Point: NY Post’s Steve Cuozzo… Progressives have no “legitimate reason to “ hate the project. Hudson Yards didn’t level charming old buildings or drive out poor people. No neighborhood was gentrified… no hobos were evicted.” “Damning Hudson Yards is a favorite sport in the Big Apple.” “Yards shaming.” “maybe, Hudson Yards will prove as enduring and be one day as beloved as Rockefeller Center.” (1/20)

March 29 to March 31, 2019: 127,000 people visit Related’s Hudson Yards public spaces over the weekend, with 90% also visiting the High Line according to a NY Post study using GPS from visitors’ cell phones. March 31st: Opening dinner party for The Shed. The building that houses the cultural institution is renamed the Bloomberg Building in recognition of his leadership and philanthropy, having donated $75 million. April 5, 2019: Grand opening at the Shed with commissioned works, Soundtrack of America. The building is designed by Diller Scofidio + Renfro and the Rockwell Group as a six-story, flexible performance and exhibition space. Its outer shell transitions open doubling capacity and closed, tucked into 35 Hudson Yards also designed by Diller Scofidio and Renfro. Connects to High Line. Doctoroff is Chairman of the Board.

287 Week of April 26 2019: – Moody’s upgrades NYC’s credit rating to Aa1 citing the local economy’s diversification. It is the best rating NYC has ever received according to Crain’s. NYC has a total of $38 B in general-obligation bonds. May 2019: CNN’s ‘Anderson Cooper 360’ moves to Studio 21L at 30 Hudson Yards. Joins other shows including New Day and Cuomo Primetime. Summer 2019: Hudson Commons to open 700,00 sq. ft.at 441 Ninth Avenue between 34th & 35th Streets. August 2019: Related and LIRR still negotiating on design of wester platform. 2019: Equinox hotel along with its 100th gym opens at 35 Hudson Yards. Hotel is branded as a total sleep, health and wellness experience. FY 2019: The HYIC announces surplus: “During Fiscal Year 2019, the Corporation receipts totaled approximately $318 million, including $71 million of Payments in Lieu of Mortgage Recording Tax, $39 million of District Improvement Bonus, $113 million of Tax Equivalency Payments, and $76 million of Payments in Lieu of Tax. Additionally, during the year, the Corporation disbursed project costs of approximately $50 million for the extension of the No. 7 subway and other work related to the development of the district (the "Project"). Finally, the Corporation remitted $100 million of surplus funds to the City.” (HYIC ) November 2019: Facebook leases 1.5 msf at Related’s Hudson Yards across 30 floors in three buildings, demonstrating the tech industry’s interest in HY. They lease 1.2 msf at 50 Hudson Yards now 75% leased, 57k sq. ft. at 55 Hudson Yards now 99% leased, and 265k sq. ft. at 30 Hudson Yards now 100% leased. Reportedly, Facebook’s rents range from $116 psf to $130 psf. This represents job growth, not a transfer as Facebook will remain at 770 Broadway, 225 Park Ave. South and 335 Madison Ave, as reported by the NY Post. 2019: Trade-offs: According the HYDC’s landing page, over 5,600 apartments and 3,900 hotel rooms have been built since the 2005 & 2009 rezoning. Public subsidies may be perceived by many to be excessive. But, spread out over numerous projects, numerous developers and some beneficiaries, how does it compare to other publicly incentivized development? Is public price per sq. ft. of new development worth it? Worth what? What other benefits could have accrued elsewhere with the same investment? What about distribution, gentrification and displacement issues (Wolf-Powers)? January 14, 2020: Three structures in the Hudson Yards District receive AIANY 2020 Design Awards: The Shed, 55 Hudson Yards, and One Manhattan West designed by Diller Scofidio + Renfro, KPF and SOM, respectively. January 2020: In an effort to bring lightheartedness and better customer experience while also creating a new revenue stream, the MTA brokers deals with the entertainment industry, allowing celebrities to announce in-car messaging while promoting their work. Akwafina, aka ‘Nora Lum” records messages along the 7-line, to bring humor and raise awareness for her Comedy Central show, “Nora from Queens.” This is reminiscent of the TLC’s celebrity recordings in the

288 1990’s welcoming you and reminding you to take your belongings, among other messages. Both receive mixed reviews from passengers. January 10, 2020: Michael Kimmelman breaks the story that Related was considering walling off the promised 6 – acre public open space required for development of the Western Rail Yard. The purpose, reportedly, was to allow for several floors of an underground parking structure. The resulting 720-foot, 20-foot-high wall would reinforce Related’s Hudson Yards enclave as an already “quasi-gated community” for the rich, inaccessible to most NYers, particularly for residents of the “park-deprived” surrounding neighborhoods. Gale Brewer, Manhattan Borough President, already has pointed out the difficulty of “getting people of color to utilize these places” as it is. Kimmelman warns that without proper oversight, Related’s “public” open spaces could be privatized and unwelcoming, similar to many vest-pocket parks, plazas and closed off lobbies-- the unintended products of past zoning density incentives or POPS - “Privately Owned Public Spaces.” (Kimmelman, January 10, 2020). Related insists that this was just misinformation and that there never was, nor will there ever be, a wall. They release renderings of a great lawn that doubles as an ice rink designed by Nelson Byrd Wolz Landscape Architects. But later, this claim is directly contradicted after anonymous photos surface showing Related’s HY model being removed from display with the wall intact. January 2020: Related opens membership health center at 55 Hudson Yards aka 390 !1th Ave. The Health Center is a first-of-its-kind membership-based multi-specialty practice located at 55 Hudson Yards. Members receive access to primary and urgent care services, with same-day appointments and no-wait time, as well as specialty services that include dermatology, behavioral health, physical therapy, women’s health and x-ray. May 2020: Neiman Marcus files for bankruptcy. 2021: Expanded Javits Center expected to open. Will add 1.2 msf to the north. 2022: 50 Hudson Yards scheduled to open. 2022: The Spiral at 66 Hudson Boulevard to open, a full-block Eleventh Avenue at 34th and 35th Streets. Fronts 7-line station, northern most point of High Line and Hudson Blvd Park. Developed by Tishman Speyer, the 65-story, 2.85 msf office building will have 27k sq. ft. of retail, center-core open floor plans, open air terraces on every floor. Designed by Bjarke Ingels, Group the green spaces will circle up around the building up to its tapered top. Tishman Speyer receives bonus for construction of park parcel and eventual land transfer. “The developer last week quietly bought 527 W. 36th St., a two-story auto repair building, for $20.14 million, city Finance Department records revealed.

2025: Estimated completion of Related’s Hudson Yards.

289 Atlantic Yards/Pacific Park Score Card

RECEIVED:

✓ Entertainment/Sports Arena for Nets/Islanders. Barclay’s Center opens 2015. Islanders move to Nassau in 2020. ✓ Renovation of Subway and LIRR Station ✓ 22 acres begun in 2005 to have 2,250 affordable of its 6,430 planned. Supposed to be completed by 2025, now looking at 2035. Community saying the affordable so far, not affordable for (most) residents. ✓ $100 m was promised to MTA for development above Vanderbilt Yards. Still being paid of $20 m deposit then $8-$10m/year. ✓ No buildings scheduled to be completed in 2020 (Curbed Dec 2019). ✓ First tranche of EB Investors paid in full – $228 m – no information from NYC RC about how many jobs were created but ‘helped’ 1,331 receive permanent residence. ✓ Greenland USA purchased 70% interest from Forest City in 2013 and upped to 95% in 2018. Now called Greenland Forest City. Forest City acquired by Brookfield in 2018 and retained remaining 5%. ✓ $100 million city subsidy to go for infrastructure or land but reportedly funded Ratner’s purchase of properties. City also added another $105 m including $31m for land. (Oder Dec 2019). ✓ Tax Breaks ✓ NYC first CBA Agreement – Not honored Neighborhood Tickets Women and Minority Work Job Training ✓ Open space – Privately managed/owned public spaces ✓ Jobs – promised 2,000 arena employees, 10k office jobs and 15k construction – not met ✓ Bloomberg quoted at 2010 Barclays ground breaking “No one will remember how long it took, they’re only going to look and see that it was done.” (Oder 12/19)

✓ Property Status ✓ 535 Carlton and 88 Sixth to be 100% affordable. ✓ 461 Dean Street, tallest modular structure in the world (Multi-housing news Dec 2019) ✓ 662 Pacific, ‘mixed-income’ rental under construction to include school. ✓ Work underway at 18th Sixth Avenue, 858 residential rental units, with 258 affordable. Greenland partnered with Brodsky and they have received $460 m construction loan from M & T Bank and Bank of New York (The Real Deal Feb. 2020). To be largest bldg at Pacific Park ✓ 535 Vanderbilt completed condominium. ✓ 595 & 615 Dean Street. Scheduled for 2020 ground breaking, 800 units and 72k open space. Greenland sold to TF Cornerstone. ✓ 662 Pacific Street will have 312 rental units to be developed by Brodsky Organization who has received $144 m construction loan from Bank of New York Mellon in September 2019.

290 ✓ 37th Sixth Avenue, also known as 495 Dean Street and 664 Pacific Street, is under construction, developed by Brodsky and designed by Marvel Architects. The 26-story, 344k building will create 323 housing units and will house a 616-seat public school with 70k sq. ft. over 7 floors (2 below-ground). PROMISED:

✓ No platform yet. Greenland Forest City working on plan for platform. Three buildings planned for above platformed Vanderbilt/LIRR Yards. ✓ Commercial office space and office jobs. No Miss Brooklyn. Development rights could be transferred across from Barclay’s.

291 Atlantic Yards 21st Century Chronology

June 2001: Senator Charles Schumer and a convened blue-ribbon panel release Group of 35 report, “Preparing for the Future: A Commercial Development Strategy for New York City.” The study is based on 18 months of deliberations with 35 executives, labor leaders, public officials and academics supported by numerous practioners and experts. The report highlights office space needs calling for tax incentives, rezoning and site assembly to attract and retain businesses, targeting Downtown Brooklyn, Long Island City, Queens and the Far West Side of Manhattan for commercial development. October 2002: Reportedly when Marty Markowitz, then Brooklyn Borough President, urged developer Bruce Ratner, to look into buying the Nets, bringing them to Brooklyn and building a new stadium and mixed-use development at Atlantic Yards. Regardless, plans for the area had been bantered about for decades – from a plan for Baruch College to build a complex; to Walter O’Malley’s desire to build a new stadium and keep the Dodgers in Brooklyn; to Brooklyn Borough President Sebastian Leone’s plans for a sports arena too in the 70’s (Oder 2006); to a mixed use plan for the urban renewal area floated by the Koch administration in the 80’s; and more. May 2003: Ratner meets with Canadian architect, Frank Gehry. December 10, 2003: Ratner unveils plans at Brooklyn Borough Hall with Mayor Bloomberg, Bernard King, Jay –Z, Marty Markowitz, for a new Frank Gehry designed arena for the Nets and a $2.5 billion plan for a 22-acre commercial, residential development. (Had already been working with the City and state). Gehry’s comment that he was building a new community from scratch shocked and angered residents and business owners who had been in the established neighborhood for decades. Residents and businesses were not informed of the scheme which required them to move whether they wanted to or not. December 10, 2003: NJ State Governor James E. McGreevey announced that they “had secured $150 million to build a rail line to Continental Arena in the Meadowlands” in the hopes of enticing the Nets. (NY Times). December 2003. Ratner raises bid to $300 million for Nets. January 21, 2004: Kushner also raises his offer to $300 million, “all cash”. But with no response, withdrew by the end of the day (NY Times 1.25/04) Edwin Stier, head of the Nets Ownership group called Ratner “to tell him the team was his” (NY Times, 1/25/04). January 23, 2004: Nets Board approved the sale of Nets. Ratner announces at Brooklyn Academy of Music with Bloomberg and Pataki. (NY Times). March 28, 2004: Develop Don’t Destroy Brooklyn (DDDB) holds first rally.

292 March 2004: Council member, Letitia James convenes Atlantic Yards Development Workshop with residents, urban planners, architects; beginning the process which culminated in the UNITY Community Development Plan, Understanding, Imagining & Transforming the Yards. This plan was developed and promoted as the local stakeholders’ preferred, rational, and more livable vision for the Vanderbilt Yards which did not include a sports arena, was more contextualized to adjacent neighborhoods and called for more affordable housing. May 2004: All inhabitants, 130 homeowners, of 636 Pacific Street reach settlements and move out, with one exception, Daniel Goldstein. (Battle for Brooklyn 2011). (Movie claims Ratner was given public money for buyouts) July 2004. FCR began to campaign for support of their project convening selected community groups. Other groups that criticized the project, such as Develop Don’t Destroy Brooklyn and Prospect Heights Coalition, “did not participate in the discussions” (NY Bar March 2010, Markey 2009). “Jobs, Housing and Hoops” becomes BUILD’s mantra. Although, BUILD continually claimed it was a volunteer, grass-root community organization, it was later discovered and proven with IRS records, that BUILD had received $5million from Forest City Ratner. Critics viewed BUILD activities and advocacy for the project a deliberate, orchestrated tactic used to divide the community and deflect negativity away from FCR (Battle for Brooklyn 2011) 2004: NYC “issued the tenth” amendment to the Atlantic Terminal Urban Renewal Area (ATURA), first enacted in 1968 as an “expansion of the 1963 Fort Greene Urban Renewal Plan”. The tenth amendment “extends the duration of the ATURA for another 40 years” (AKRF June 2006, p. I, B-5). July 2004. Forest City Ratner opens Atlantic Terminal Mall with 380,000 square feet of retail and 400,000 square feet of offices (ICSC), built atop LIRR and NYC Subway with skybridge connecting to FCR developed Atlantic Center Mall with 400,000 sq. ft. of retail. 2004: Downtown Brooklyn Rezoning Plan approved by City Council 47-0 (1 abstention). The purpose of the Downtown Rezoning, according to the DCP and EDC was to stimulate commercial development hoping to create NYC “3rd” CBD, to attract businesses moving out of Manhattan and stem relocation to other office markets such as Jersey City. The plan estimated 4.6 m sq.ft of office but received 1.3, 850,000 sq.ft. retail but received over 1 m sq.ft. about 1,000 units 979k of housing but received nearly 11,000 or 9.9 m sq. ft. The plan displaced 130 res. units and 100 businesses operating downtown. According to a 10-year review by Brooklyn Borough President, Eric Adams, only 1.3 million sq.ft. of office space was developed, over 9.8 m sq.ft. 11,000 new housing units with only 530 affordable. With population in the area increased by nearly 2,500 residents between 2000-2010, the growth has put a strain on services, including on public schools, transit infrastructure with an increase of 37,000 at stations serving Downtown, pedestrian safety, and increased need of police, fire and sanitation services. Not including development spurred adjacent. BBP calls for more services and incentives to ensure more affordable housing.

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Rudin says $10 b in private investment and $1.5 b public investment from city and state since 2002 “instrumental in attracting more than $12B in private investments rudin calls for better transit networks to Brooklyn Nayy Yard, between Downtown, waterfront, job centers February 2005: Community formulates “Principles for Responsible Community Development On the Vanderbilt Yards,” highlighting the planning principles developed through the community-based UNITY Plan. Numerous community groups and local elected officials endorse. March 4, 2005: City and state signed and entered into a nonbinding M o U with Forest City Ratner Companies to build home for the Nets along with a $2.5 billion plan for the largest mixed-use development in the history of Brooklyn after a year of negotiations (NY T 3/4/05). City and state agreed to give $100 million each for “site preparation, new streets and utilities and environmental cleanup.” The Empire State Development Corporation (ESDC) would take the lead and condemn the land Ratner needed. March 4, 2005: Patti Hagan conducts her own census and disproves FCR claim that only 100 people will be affected. Hagan counts more than 800 in the footprint that would lose their jobs and homes. May 24, 2005: MTA hastily releases RFP to solicit bids for TDRs of Vanderbilt Yards, asking for detailed, financially viable responses within just 42 days. MTA Chairman Peter Kalikow dismisses the $214.5 million independent appraisal for the Yards, exclaiming “it’s just some guy’s idea of what those yards are worth.” (DDDB). The MTA grants only FCR a 45-day extension and eventually accepts FCR’s Bid of only $100m, $50 m more than original BID but grossly undervalued when compared to the independent appraisal. The NYC IBO agrees. May, 2005: Develop Don’t Destroy Brooklyn distributes RFP along with the “Principles For Responsible Community Development on the Vanderbilt Rail Yards to one hundred developers, hoping to attract solicitations. Extell Development Company responds and meets with group “‘using’ but not completely meeting the group’s own guidelines” (NYT July 7, 05). Extell’s plan does not warrant widespread displacement of residents and business and requires no eminent domain actions. They bid $150 million, $100 million more than FCR’s Bid of $50 m. (Note: Extell and FCR already clashed over the new NY Times headquarters in Midtown with FCR winning the development opportunity.) June 27, 2005. Eight community groups signed a Community Benefit Agreement with Forest City Ratner with Mayor Michael Bloomberg as witness. The CBA has since been highly criticized for its lack of transparency; self- serving signatories and exclusion of other community groups and community needs including traffic, parking, transit and resident re-location (Markey 2009); its weak and vague language on performance and contract breach consequences; and its lack of dedicated funding to implement the agreed to goals and milestones. Benefits promised by FCR included local hiring, contracts for minorities and women owned businesses, affordable housing and local tickets and community use of the Barclays arena and other local education

294 initiatives. The CBA was structured into eight categories such that benefits promised aligned with the missions of each community group. In addition, FCR promised to fund an “independent compliance monitor” for oversight and facilitation of the CBA (NY Bar 2010) The eight groups were: All-Faith Council of Brooklyn (AFCB); Association of Community Organizations for Reform Now (ACORN); Brooklyn United for Innovative Local Development (BUILD); Downtown Brooklyn Neighborhood Alliance (DBNA); Downtown Brooklyn Educational Consortium (DBEC); First Atlantic Terminal Housing Committee (FATHC); New York State Association of Minority Contractors (NYSAMC); and Public Housing Communities (PHC). (NOTE: Independent oversight never hired, though Ratner hired a grant-writer consultant to fund CBA but to no avail-Oder says because “people thought that these 8 groups were “fronts” for Forest City. EDC didn’t help, stating that the CBA was “out of their purview” (Oder February 11, 2016). Ron Shiffman, urban planner, co-founded if the Pratt Institute Center for Community and Environmental Development, and DDDB Board member, calls the plan a ‘sham’ with more residents displaced than housed, inaccessible “public” space and unrealistic, untimely promised jobs; likening CBAs as a way developer can “literally buy” support for their project (Oder November 12, 2010). July 6, 2005: Only two Bids submitted by MTA’s deadline Gary Barnett and Extell Development Company submit rival bid to MTA to develop Atlantic Yards causing “Ratner a significant obstacle (NY Times July 5, 05) Plan is for more contextual development with residential and recreation areas, enough for ‘4,500 people’ . July 22, 2005: MTA releases documents revealing BIDS. Extell BID $150 million cash for Atlantic Railyard TDRs and Ratner only $50 million. Releases appraisal for TDRs $214.5 million. (NY Times) July 27, 2005: MTA Monthly Board Meeting. Agreed to work with Ratner only. September 2005: Ratner doubles bid for Vanderbilt Yards to $100 million. (NY Times) September 6, 2005: NYC Independent Budget Office releases report “that the arena would generate a modest but positive fiscal impact for state and city. Surplus of $107 million over 30 years or $28.5 m for city” NYT 9.7.05 September 14, 2005. MTA approves FCR’s plans and agrees to sell development rights for $100 million “$50 m less than Extell and $114.5 million less than the MTA’s own appraisal” (NY T 9.15.05). Mitchell Pally votes against the sale stating that “we are not getting the full value...we’re selling the property for less than we can get” and even though the MTA will get a new $182 million railyard, the MTA had never sought a new yard in its 20-year needs assessment. (NY Times) (Not shown in Battle for Brooklyn-cameras not allowed inside). December 2005: “ FCR announces plans to demolish six nearby buildings on the grounds that they are dangerously unstable” leaving empty lots. (NY Magazine and Battle for Brooklyn)

295 June 2006: AKRF released Atlantic Yards Blight Study prepared for ESDC, confirming blight conditions still afflict the area proposed for the Atlantic Yard’s Arena and Redevelopment project, with 70% of parcels (51 of 73), amounting to 86% of land area within the proposed redevelopment area which exhibited “one or more blight characteristics, including: buildings or lots that exhibit signs of significant physical deterioration, buildings that are at least 50% vacant, lots that are built to 60% or less of their allowable FAR” p. ii). The blight study, as prepared, reads more like an advocacy piece as opposed to an objective analysis. AKRF points to the below-grade, Vanderbilt Yards as one of the main impediments to development on blocks south of Atlantic Yard which remain blighted and underutilized, referring to “the large gap in the urban landscape” causing isolation, unsafe conditions and lack of street activity. Multiple owners also limit land assemblage needed for large-scale development, citing at the time, that the sponsor, MTA/LIRR or the City held at least 80% of the lots (97), while 27 tax lots were still owned or controlled by other parties. (p. iii). [Note: AKRF also performed the Blight Study for the Columbia University Educational Mixed-Use Development Land Use Improvement and Civic Project which prompted Kaur v New York State Urban Development Corp, No. 08976, 2009 wl 43484 (NY App. Div. Dec. 3 2009). The court in this case held that “the taking of property by use of eminent domain to expand a private university is unconstitutional” (DeWitt 2010, p. 478).] September 5, 2006: Ratner reduces size of development and lowered the height of Miss Brooklyn so that the Williamsburg Savings Bank Tower would remain the tallest in Brooklyn. October 26, 2006: Goldstein et al v. Pataki et al: DDDB and Community Groups file federal lawsuit challenging public purpose and use of eminent domain arguing benefits are conferred on private entity and no meaningful public participation. Claim was rejected. Plaintifss appealed 6/07. Upheld on appeal 6/08 determined some public use and stadium created “public space. US Supreme Court refused to hear case. November 2006. Final Environmental Impact Statement completed. December 8, 2006: Empire State Development Corp approves 2006 General Modified Project Plan. December 20, 2006: The Public Authorities Control Board (PACB) approves project (Board includes 3 people- Pataki, Silver and Bruno) (NY Bar 2010) April 5, 2007. DDDB et al v. ESDC et al. state lawsuit filed seeking to annul the Final EIS. January 2008 Court agreed ESDC met requirements. Appealed with oral arguments September 17, 2008. A supplemental EIS was court ordered in 2011 and upheld in 2012. SEIS focused on Phase 2 and released June 2014. September 2007: Update to UNITY Plan released, shepherded by Marshall Brown, Tom Angotti and Ron Shiffman and Council of Brooklyn Neighborhoods. “It’s not a done deal.” Plan calls for more affordable housing, pedestrian, bicycle and transit improvements, more inclusive open space, and a transparent and accountable public planning process for development of Vanderbilt

296 Yards (UNITY Plan does not require eminent domain or the railyard to be moved). City and state officials remain, however, committed to the FCR plan. August 1, 2008: State lawsuit filing challenging use of eminent domain, Goldstein et al. v Empire State Development Corporation. Court of Appeals on June 30, 2009. Argued October 14, 2009. November 24, 2009 ruled in favor of ESDC. March 1, 2010 “judge rules ESDC can take title ownership.” (DDDB). 2008: FCR delays construction of residential buildings and office tower due to economic recession, credit crunch and lack of tenants “prompting fears that they, and the affordable housing units they were to contain, will never be built” (NY Bar 2010, p. 10). Also, DDDB challenges if developer can’t build agreed to project, then should revert back to owners/city claiming that the approved 2006 plan no longer exists. October 2008: US Treasury Department approves the use of tax – exempt bonds for Brooklyn Sports Arena, following the Internal Revenue Service proposal to cease the use of tax-exempt financing for-profit sports arenas (Yankees and Mets stadiums had used and were approved to continue). November 2008 - January 2009. FCR halts construction. Gehry-Ratner begin falling out and FCR explores less expensive designs for arena. Begins “value engineering” of arena and rail yard plans to reduce costs. Designs scrapped for community park and ice rink previously planned for atop the arena. Gehry says I don’t think it’s going to happen; Ratner says yes it will. FCR stock drops to $5 per share, way down from a high of $69.75 (Battle for Brooklyn). FCR approaches MTA re: the agreed upon $100 million payment for the railyard hoping to structure a payment plan instead of a lump sum with only $20 million up front. February 2009: FCR gets 2- year extension and payment plan from creditor (Gramercy Capital Corporation). March 2009. FCR, by this time had demolished 26 buildings, “creating the blight” FCR had “argued was there all along” (NY Magazine). June 2009: Ellerbe Becket takes over design of Barclays Center. Critics point to another item “stripped away” from promised benefits-benefits used as leverage to gain support for the project in the first place - “world-class architecture” for “world-class arena”.(MAS, Bagli June 10, 2009). New design drops idea for professional hockey. But eventually, the NY Islanders do play at Barclays. Players complain about ice quality and fans subjected to “awkward hockey sightlines and layout” (Sports Illustrated, Oder 10/4/ 17). Ouroussoff writes of monstrosity claiming “city would be better off with nothing” (NY Times June 8, 2009).SHoP later added to design, including “pre-rusted metal mesh” (Oder 10/4/17). June 2009: ESDC approves modifications to the 2006 General Modified Project Plan prompting preparation of a 2009 Technical Memorandum. This memo makes not of new timelines: Phase I

297 “from 2010 to 2014… and full build out from 2016 to 2019…with 2024 selected as a hypothetical completion year” (SEIS June 2014, p.2). Challenges were brought to determine if a supplemental EIS was warranted (see AY litigation) and a 2010 Technical Analysis was prepared which again found no need for a SEIS since the design guidelines were not changed and the date changes would not further impact the environment beyond what was already stated. But here, in 2010, the hypothetical build out date was extended to 2035. Challenges were again brought with the Court agreeing this time that a Supplemental EIS was indeed warranted, a decision upheld in the Appellate Court. The SEIS was to focus on Phase II of the project. June 2009: Forest City Ratner buys subway station naming rights from MTA for $200k per year for 20 years, to coincide with Barclays Center opening in 2012 (Grynbaum June 23, 2009) . Name changed from Atlantic Avenue/Pacific Street to Atlantic Avenue–Barclays Center. September 2009: NYC Independent Budget Office releases Fiscal Brief on “The Proposed Arena at Atlantic Yards: An Analysis of City Fiscal Gains and Losses”. The analysis focused on costs and benefits of only the arena, as opposed to the entire planned Atlantic Yard development, stating that there is “considerable uncertainty” surrounding the entire project making analysis of the project’s full impact “extraordinarily uncertain”. Based on city and state provided public benefits of “direct contributions of cash; capital investment and property; access to tax-exempt financing; exemptions from property, sales and mortgage taxes; and a below market sale of MTA property” (NYC IBO 2009, p.2), they found net negative fiscal benefits of $8.3 million and opportunity costs/losses of $218.9 million for the city, state and MTA combined. October 13, 2009: Montgomery et al v. MTA et al. State Senator Velmanette Montgomery, Brooklyn assemblyman James Brennan and others filed state lawsuit claiming violation of Public Authorities Accountability Act. They sued MTA/EDC to release financial documents and audits re: Atlantic Yards Project. Plus wanted reassessment of the 2005 appraisal of the Yards since there was a delay and the deal was renegotiated. December 16, 2009. Ruled for MTA who claimed the changes were just modifications. October 19, 2009: Filed state lawsuit to annul the 2009 MGPP, DDB et al v. ESDC et al. Because timeline changed from 10 yr build out to 22 according to renegotiated deal with MTA, claimed violation without any “meaningful plans or assurances …that the project …will be built for decades if at all (Lavine and Oder 2010, p. 358). January 2010: LIRR Atlantic Terminal Entry Pavilion opens. The $108 million renovation was designed by John di Domenico and funded by the FTA and the MTA Long Island Rail Road Capital Program. The new 3-story entrance and atrium provides “a civic presence at the historic transit hub” where LIRR riders can transfer to buses and ten subway lines and provides access to the Atlantic Terminal Mall. According to the MTA, the facility serves “25,500 LIRR customers and 31,650 subway riders” each day. The terminal building and tunnels date back to 1907, built “as part of the Atlantic Avenue Improvement Project”. [“LIRR service between Jamaica and Brooklyn dates back… to the 1830’s”] (MTA January 2010). The NY Times reported that the

298 project “finished more than $26 million over budget and 30 months behind schedule” with work starting in 2002. March 1, 2010. Court rules ESDC “can take title ownership by eminent domain” (DDDB). State seizes all property in AY footprint. FCR “reached resettlement agreements with seven remaining residents of the footprint of the project’s basketball arena” (NY Times) March 8, 2010. NY Bar Association releases brief urging city to remove CBAs from the land use process citing Atlantic Yards as one example where they question whether or not CBAs are truly representative of the community, that community groups may only advocated for their own interests, and whether or not community groups can adequately negotiate with developers who typically have more resources. But regardless, the Atlantic Yards development was not subject to ULURP as state took control, effectively sidestepping a required public process and review where the borough and community boards have a formal seat at the table. March 11, 2010. Ceremonial ground breaking for arena with state and city officials. No local elected officials attend (Battle for Brooklyn 2011). Daniel Goldstein concedes that “NY State has sanctioned the theft of my home to build a money-losing arena for a billionaire and a Russian oligarch” (Battle for Brooklyn 2011). March 2010: MTA and FCR enter into agreement on rail yard requirements. April 21, 2010: NY Times reports Daniel Goldstein, last person residing in the AY arena footprint and founder of Develop Don’t Destroy Brooklyn, had no choice except to settle and vacate after the state seized his property at 636 Pacific Avenue, 7C. Reportedly, Goldstein received $3m after state seized title (purchased for $590k). Settlement attached a gag order, retaining Goldstein’s rights to free speech, but is not permitted to talk about or publically oppose the project, stepping down from DDDB” 2010: Mikhail Provkhorov buys 80% stake in Nets –still in NJ at the time. Acquired all shares by 2015 (ESPN). Resold 49% to Joseph Tsai in 2017 for $2.2 B. November 12, 2010: The Civilians Investigative Theater company opens, “In The Footprint: The Battle Over Atlantic Yards”, an original production based on actual events and performed at the Irondale Center. Funded by a $150,000 grant from the Rockefeller Foundation, the script consists of verbatim dialogue edited from 125 stakeholders interviews conducted over two years. The comedic show has some 20 characters including Leticia James, Daniel Goldstein, Bertha Lewis, with Marty Markowitz and Frank Gehry represented as talking basketball and disco balls respectively. The show runs through December 11. August 2012. Barclays Bank name affixed to arena. Bank agrees to pay $200 million for 20-year naming rights in annual payments of $20 million to FCR. Before recession, Barclays had bid $400 million. September 17, 2012. Atlantic Avenue-Barclays Center new subway entrance opens after two years of construction. Allows for riders to directly access Barclays Center entrance without crossing Atlantic or Flatbush Avenues and starts to address pedestrian safety issues. Forest City

299 Ratner renovated at a reported cost of $76 million (Newsday). New escalators, turnstiles, staircase. September 28, 2012: Barclays Center officially opens with first of 8 concerts performed by Jay- Z. . Construction costs reach $1 billion. Redesigned by AECOM and SHoP. Seats “17,732 for basketball, 15,795 for hockey, and up to 19,000 seats for concerts, and has 101 luxury suites.” LEED Silver certified. According to the Barclays Center, Billboard ranked the center in the top 5 facilities in the world in “gross revenue and attendance”. November 3, 2012. Nets play first home game at Barclays. NY Islanders move from Nassau Coliseum starting with 2015-16 season. November 2012: BUILD, the FCR-funded Brooklyn United for Innovative Local Development and original signatory to the CBA, closes its doors after Barclays had only been in operation for two months, stating that it had fulfilled its mission of workforce development and local hiring. Of the 2,000 jobs at Barclays only 105 are full-time according to Next City. (The project as a whole had promised 17,000 jobs.) And apprentice program ended in lawsuits brought by would- be apprentices. June 2014: The court ordered Final Supplemental Environmental Impact Statement (FSEIS) completed by AKRF and Philip Habib & Associates accepted by ESD for Phase 2. June 2014: Greenland Forest City Partners formed. A Shanghai-based government-owned firm, Greenland Holding Group, buys 70% stake in the project for $200 million “minus Barclays Center and one tower” (slated for commercial development) B5 (Oder Feb 11, 2016). Development rebranded as Pacific Park. Maryanne Gilmartin states Greenland is “not a passive partner” (TRD August 1, 2017). June 25, 2014. The MTA approved “a new plan” to allow FCR to “build the platform foundations at the same time as the railyard” with deadline for completion of rail yard extended to December 2017. Other improvements to be made include “subway facility improvements” and the new “reconfigured and improved” rail yard equipped to service and store LIRR trains and accommodate increased activity due to “East Side Access” service for LIRR trains to Grand Central. (NYS Press Release June 27, 2014). June 27, 2014. The ESDC Board approves Modified General Project Plan, a scaled-back version which includes an accelerated construction and delivery schedule and penalties for non- compliance and delays. Prompted by threat of lawsuit by seven community organization and with gubernatorial and mayoral involvement, developer agrees to reduce delivery date of 2,250 affordable apartments by 10 years, from 2035 to 2025 (50% of planned total rental units). The Atlantic Yards Community Development Corporation, subsidiary of the Empire State Development Corporation, is created to function as an advisory and monitoring board. AYDC Board includes “14 directors, nine appointed by the Governor and five by other elected officials – President Pro Tem of the NYS Senate, Speaker of the NYS Assembly, NYC Mayor, Speaker of the NYC Council, and Brooklyn Borough President” (AYDC). (Note: originally promised 50% of all housing to be affordable not just rentals.)

300 Mayor De Blasio announces that the NYC Housing Development Corporation “will provide financial support to ensure the delivery of two 100% affordable housing buildings totaling at least 590 units…to begin by December 2014” (NYS Press Release June 27,2014) . February 2015. Atlantic Wool (Aaron Piller) forced to vacate property (666 Pacific Street) across from the rail yard his family owned since 1997 and Jerry Campbell’s townhomes owned since the 1940s and 1960s (1 building was 493 Dean Street) after State Supreme court ordered “to make way for the second phase of development” under eminent domain. Campbell claims the compensation offered by the state does not cover replacement costs, is less than what Forest City offered previously, and really wanted a “swap” for space inside one of the new buildings echoing grandfather’s advice to have property over money (Chaban, NY Times, February 16, 2016). June 2015: Thomas Balsely designs for Pacific Park’s 8-acre public space revealed. Amenities include basketball court, children’s play areas, seating etc. Park areas – or courtyards - will be situated within the development and will be built in phases over 10 years- as opposed to all at once which would benefit the whole community. Critics question the public access. “The first phase of the park, which will comprise a swath of land between new residential projects on Carlton and Vanderbilt Aves. and Dean St. and Atlantic Ave., is slated to open next summer to coincide with the opening of two towers abutting the park — they are 550 Vanderbilt, a 278 -unit condo development, and 535 Carlton, a 298-unit affordable housing complex.” (Clark Daily News June 23, 2015). Spring 2015. Barclays begins installation of green roof. December 31, 2015: Forest City Enterprises Inc, founded in 1920 Cleveland “by Polish immigrant Ratowczer (later changed to Ratner)” and publicly traded since the 1960, is restructured as Forest City Realty Trust – a real estate investment trust (REIT). Ratner family retains voting control under a “dual-share structure” (The Real Deal) David LaRue named president and CEO, was president of Forest City Enterprises for previous five years. January 2016: FCR sells “its stake” in arena and team - team valued at $875 million and $825 million for arena - to Mikhail Prokhorov. NBA signed off on in Dec. FCR nets $285 million (RE Weekly, TRD). Prokhorov acquires full ownership of both in 2016. (FC sells 55% of Barclays and 20% nets $125.1 for team and $162.1 for arena – TRD May 2017) January 2016: Forest City Realty Trust (FCRT) sells “vacant development site at 625 Fulton Street (Downtown Brooklyn ) to Brooklyn-based Rabsky Group for $158 million”. Had been looking for partner to develop site which Forest City cleared in 2013 and planned a residential tower. In their statement, Forest City claimed that this sale was part of their “corporate commitment to shareholders to shore up our balance sheet by enhancing liquidity and de- leveraging through strategic dispositions” (Commercial Observer, January 26, 2017). February 2016. Devotion produces video in hopes of rallying support for Forest City and local politicians to honor CBA contract. (Atlantic Yards Report Blog February 11, 2016).

301 February 2016: FCRT sells Forest City Military Communities, 15,000 “privatized military housing units”, operations, equity interest and service contracts to Hunt Cos , El Paso Texas valued at $209 million (TRD March 2017). July 2016: Housing lottery begins for 535 Carlton Avenue with over 95,000 applications for the “all affordable” 298 rental units (Warerkar, NY Curbed Jan, 2017). August 2016: FCRT, succumbing to pressure from shareholders and a reported “$307.6 million impairment – a drop in asset value largely due to shortcomings at Pacific Park (TRD March 2017, Aug 2017), announces its intent to “enhance stockholder value” through a variety of alternatives including mergers and/or sales of its assets. Sheds other property types, focusing only on office and market-rate, multi-family properties making it more attractive to risk averse REIT investors. August 2016: New Barclays owner, Mikhail Prokhorov, refinances Center with $480 million “in municipal bonds” with interest rate up to 8%. Reportedly “will save $6 million in interest payments compared to the original debt” which issued in 2009. (The Real Deal) August 2016: “Crews cut through 100-year tunnel” (Barone August 22, 2016-AM NY) to connect LIRR Atlantic Terminal to West Portal part of the 8.3 acre Vanderbilt Yards. Trains will no longer have to backtrack a half-mile into the yard saving six minutes per train. Improvements will eliminate the two hour wait for service per train. Trains will have direct access from the terminal “with seven storage tracks and two connections to the LIRR Atlantic Branch line” (WSP-PB 2017) along with new power, tracks, signals, facility for transit workers and sewer connections for nine tracks – later changed to 7 – which will support increased capacity and multi-train maintenance and operations at the site (How to measure value of these improvements? Are there benefits/impacts for riders? [Note to get more details re: “will help LIRR “replace regular scheduled Brooklyn service with ‘scoot’ shuttle trains between Atlantic Terminal and Jamaica…will increase the number of trains in and out of Atlantic Terminal”…and “require all Brooklyn riders to transfer at a dedicated platform at Jamaica” (Costillo 2015] Once west Portal is complete, GFC plans platform over the ‘30-foot chasm’ between Atlantic Ave and Pacific Street to support new residential development of up to six buildings ranging from 16 to 50 floors with foundations constructed between the tracks (WSP-PB 2017). (Temporary Yard built in 2009) (Note: WSP also worked on 7 – line extension and 2nd Avenue subway). Press and private organizations convey that the yard is bonus offered by FCNY “free-of- charge”. Ratner VP quoted in Newsday stating, “Brooklyn is hot. We and the railroad capitalized on that and were able to bring improvements to their rail yard that wouldn’t have been possible under their own resources” (Castillo March 22, 2016, Newsday). WSP (the firm leading design and construction at the yard and had previously worked on the arena) portrayed the upgraded yard as a generous offer from the developer. “To keep the arena plans on track, an offer was made to LIRR: Move the rail yard to a temporary location to accommodate the arena plan, and in exchange, the developer would finance and build a modern rail yard to replace the outdated Vanderbilt Yard….LIRR accepted the offer” (WSP Insights, March 2017).

302 December 2016: Bruce Ratner and Cousin Charles Ratner resign from Forest City Realty Trust Board. 2016: 461 Dean Street opens to residents. The 32-story, 363-unit rental with half affordable and designed by SHoP architects, is reportedly the “tallest modular construction in the world”. After difficulties with supplier, Forest City sets up own factory for modular at Brooklyn Navy Yard. Half of the units are set as “affordable,” meant for low, moderate- and middle-income families. There were more than 84,000 applications for just the 181 units (Warerkar, NY Curbed Jan, 2017). January 4, 2017: LIRR train derails at Atlantic Terminal injuring 100 passengers. January 30, 2017: Land and Buildings’ Jonathan Litt sends scathing 8-page letter to all shareholders documenting rampant nepotism at the Board and throughout the firm, severely undeforming and destroyed assets, returns and values, “corporate governance deficiencies”, and “grossly inferior operations” -- the result of “decades of mismanagement”. He calls out Bruce Ratner’s personal gains and conflicts in particular, adding that downtown Brooklyn properties including Pacific Park suffered a $743 million impairment. January 2017: Housing lottery launched for 303 rental units at 38 Sixth Avenue, 2nd, a 23-story tower designed by SHoP Architects. Building is under construction and planned to open in 2017. Reportedly, half of the units are set aside for residents in CBs 2, 3, 6 and 8 (Warerkar, NY Curbed Jan, 2017). March 2017: FCRT sells affordable housing portfolio to Jonathan Rose Companies for $500 million, doubling Rose’s portfolio, adding 8,500 units in “48 affordable housing communities…“across 7 states”. Reportedly, many are in “need of repair”. Gross price reported as $80 million, net $65 million (TRD March 2017Rose also assumed all debt. For Rose, this sale is a means to honor commitment to preserve affordable housing in urban areas including Brooklyn (TRD March & June 2017) (Rose and TIAA-CREF “launch a $51 million affordable housing preservation fund” in 2014 (). May 2017: At Atlantic Yards Quality of Life Committee community meeting, NYC DOT presents plans for improved pedestrian and vehicular flows and design for Times Plaza open space - though because of its size criticized as a pass-through space instead of “gathering”. Plans call for more crosswalks, signal changes, turn lanes, drop off area in for arena, etc. NYC DOT will wait for West Portal work to be finished. Times plaza will be maintained by the Downtown Brooklyn Partnership (Oder, May 25, 2017). June 2017: FCRT releases 50 retail and entertainment employees as it adjusts resources based on restructured portfolio (TRD June 2017). June 17, 2017. All affordable 535 Carlton Avenue designed by COOKFOX opens to residents. Mid 2017: Forest City sells its remaining 51% stake in its 2.1 msf retail portfolio delivered 95% occupied to Madison International Realty and valued at $1.2B total. This includes about 700,000 sq.ft at Atlantic Terminal Mall and Atlantic Center. Madison had already partnered with Forest

303 City following its previous purchase of 49% of 15 centers valued at $851.5 million in 2011 for $172.4 million – infusing much needed cash into the Barclays Center construction. Also, FCRT was “niche”/ small player in retail…with just 20 malls versus the 100s owned by Simon and others. Following decline in traditional retail shopping due to increases in online and “value- oriented’ shopping, Madison plans to redevelop Atlantic Terminal and Center hoping to capitalize on the “densely-populated and well-trafficked areas…(which) offer significant opportunity for value creation” (Cunningham, TRD September 20, 2017). (Who benefits from this value created by access –not public! How to measure value/profit?). Will invest “tens of millions” including roof deck, more dining, “experiential retail”. Hopes “that guests at Barclays look across the street and be drawn in by what they see” says Madison founder and President Ronald Dickerman (Geiger, Crain’s September20, 2017). (Note: Australian-based QICGRE to take control of the rest of FCRT retail portfolio which consists of 11 malls. They also had previously purchased 49% of 8 FCE malls for $435.6 in September 2013 (TRD May 4, 2017) (Trend to redevelop/reprogram tradition mall space and anchors into interactive facilities offering recreation, fitness, dining, art, concert, business centers and cultural opportunities). Summer 2017: Forest City Ratner Companies, the NY subsidiary of Forest City Realty Trust, scrubs out Ratner name and evolves as Forest City New York. Marianne Gilmartin, former CEO of FCRC since 2013, succeeding Bruce Ratner, is named President and CEO of Forest City NY. One analyst quoted predicts that “Bruce Ratner is a developer and the era of big developments is ending for Forest City” (Putzier TRD August 1, 2017) July 2017: Corcoran Sunshine replaced by Nest Seekers International for marketing at 550 Vanderbilt due to a slowdown in condominium sales. Building reportedly 65% sold (TRD August 2017) August 2017: Mikhail Prokhorov’s Brooklyn Sports & Entertainment, owner of the Nets and Barclays center, will move out of 15 MetroTech to 70,000 sf in Industry City at 168 39th Street Sunset Park - the same building where the Nets opened a new $50 million practice facility in 2016. This will consolidate “business and basketball” at the same facility and can accommodate 350 employees (The Real Deal August 10, 17) September 2017: After announcing his intention to sell a minority share in the Nets in Spring 2017, Prokhorov is now seeking to sell a controlling stake or even 100% of the team. He is looking for a $2B total price tag after the Houston Rockets sold for $2.2B earlier in the year. Joe Tsai of Alibaba is rumored to have purchased 49% of team valued at $2.2 B. The Nets had the worst record in the NBA 20-62 and revenues are not covering costs (Sports Illustrated, NY Post, CBS sports, etc). (Who profits here? Started with public subsidies and eminent domain) (Are taxes enough?) November 2017: “Open marketing begins for vacancies at affordable units at 535 Carlton . Even though a reported 93,000 applications for the 300 units, broken down by 2,203 applications for 148 units in highest bracket 2203 for 148 units in highest bracket vs. 67,000 applications for lowest units reserved for the highest income bracket, 165% of AMI or $74.6k to 173k.

304 2017: 550 Vanderbilt, market rate condominium, 275 units, designed by COOKFOX expected to open this year. 2017: Other buildings include: 615 Dean Street, 245 condo units; 664 Pacific Street, 300- market rate rental units plus NYC DoE Public School, 38 Sixth Avenue, 303 affordable units for incomes from $20,126 to $173,415 (Pacific Park). A total of 600 affordable units are under construction. December 2017. Anticipated and required completion of LIRR West Portal and all pre-platform work. 2018: With JEMB, Forest City plans to break ground on One Willoughby Square, a 36-story commercial development Gilmartin calls “the first modern office tower in DoBro since Metrotech” (Schram TRD July 19, 2017) Smaller floor plates of 20 -30K and hoping to attract digital economy firms. Designed by FXFowle and asking rents of $65 to $75 psf. Compete/undercut with B5? AKA 420 Albee Square 450,000 sq.ft. with 87k for NYC School. EDC had sold air rights and small parcel to JEMP. First building since Downtown rezoned in 2004 (Commercial Observer). Completion planned for 2021. Willoughby Square, a 1-acre. street level park also scheduled to open in 2018, will be operated by the Downtown Brooklyn Partnership and supported by innovative finance through revenues from a 700-space underground parking structure (NYC EDC). 2018-2019 Hockey season: NY Islander’s last season at Barclays. Prokhorov –owned Brooklyn Sports and Entertainment analysis shows that ticket revenues will not exceed annual operational costs of $53.5 million (TRD January 2017) and hasn’t since team left Long Island in 2015. Islanders have the third lowest attendance with only an average of 12,828 for home games in the NHL (Sports Illustrated January 30, 2017). Back to Nassau Coliseum (also owned by Prokhorov) or to Belmont? August 2019: Joseph Tsai exercises option to buy 51% of the Barclays Center and the Nets franchise for a total of $2.35B, the highest ever paid for a sports franchise (NY Post 2019). This follows his 2018 purchase of a 49% stake for $1B in 2018 from M. Prokhorov. Prokhorov more than doubles his investment made just three years earlier in 2016. 2025: Greenland Forest City promises to deliver 2,250 affordable housing units. Penalties will be $2,000 per month per every apartment without a temporary or permanent COO (Putzier TRD August 1, 2017). According to Pacific Park (2017), there will be a total of 6,430 units, with 2,250 affordable rentals for low, moderate and middle-income families. In addition, there will be between 600-1000 affordable home owner units with at least 200 units on site and the rest “as close to Pacific Park as possible”.

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