NEW YORK, June 22 (Reuters) - New York’s mass transit agency on Monday weighed restructuring a 2005 deal with developer Forest City Ratner FCEa.N for a multibillion-dollar project in Brooklyn, by slashing the upfront payment and giving the developer more time.
The Atlantic Yards project, which would include an arena, office space and apartments, would bring the New Jersey Nets basketball team to Brooklyn, giving the borough its first professional sports team in decades. But like many other big and small real estate developments, it has been choked by the recession.
The Metropolitan Transportation Authority on Wednesday will vote on whether to cut the upfront payment to $20 million from $100 million and outline a schedule of payments.
“Obviously, it would be better to have $100 million at the closing,” MTA Chief Financial Officer Gary Dellaverson told the agency’s finance committee, noting that the economy is much worse than when the accord was originally agreed.
Forest City Ratner wants to start marketing the tax-exempt bonds for the arena this summer, the main factor driving the negotiations, said Dellaverson.
A committee member said it was “outrageous” that the board would have so little time to review the deal, which calls for the arena to be completed in 2012.
The board of the Empire State Development Corporation, which would sell the tax-free debt, will consider other aspects of the project on Tuesday.
The Atlantic Yards project, expected to include thousands of affordable apartment and offices, was first delayed by law suits over eminent domain and then by the recession.
Under the new proposal, Forest City Ratner would be given time to build out the project in steps.
“This was expected to be under way by now, obviously,” Dellaverson said.
Representatives of business and construction workers spoke in favor of the development but opponents urged the MTA to rebid the deal. Extell Development four years ago outbid Ratner by $50 million and Ratner will no longer spend $345 million on rail yard improvements, they said.
“Using the MTA to bail out Bruce Ratner’s failing project is an insult to straphangers and taxpayers who just rescued the MTA one month ago,” said one of the project’s fiercest critics, the group Develop Don’t Destroy Brooklyn, in a statement.
The state approved fare increases and new taxes to see the MTA through the recession. Agency officials said the MTA is free to replace Ratner with another developer.
Forest City Ratner, which used the Nets and a striking arena design by Frank Gehry to build public support for the project, has been eager to slice costs.
Earlier this month, the developer replaced Gehry, saying his plan was too costly, but architectural critics bashed the new design for resembling an airplane hangar.
The new accord calls for Ratner to post an $86 million letter of credit to ensure that the MTA gets its upgraded rail yard. A roof would be built over the yards to support office towers and apartment buildings.
The new rail yard will have seven tracks, two less than expected, but officials said seven would be adequate.
Over time, Ratner could buy the development rights for the non-arena buildings. The deal calls for the company to make four annual payments of $2 million, followed by 15 payments of $11 million, Dellaverson said. (Reporting by Joan Gralla in New York; Editing by Editing by Leslie Adler)