Ratner gets 45 days to up ante MTA talks exclusively with Bruce despite his low offer

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As it once was, so it shall be again, the Metropolitan Transportation Authority board decided this week, when it cast aside the high bidder — who offered $150 million to develop the Long Island Rail Road storage yards at Atlantic Avenue — and instead voted to continue their exclusive negotiations with preferred developer Forest City Ratner.

The MTA board voted 11-1 on Wednesday to approve a resolution calling for exclusive negotiations with developer Bruce Ratner’s company, with the hopes of upping its bid by the board’s Sept. 29 meeting.

Ratner’s bid offers $50 million up front. It also includes $29 million in renovations of the rail yards (to help pay for the relocation of them required by Ratner’s plan), $20 million in environmental remediation of the land (which needs to be done in order to develop the site for housing), $182 million to build a platform (to build the housing and commercial properties over the shifted rail yards), $25.4 million in MTA operating expenses and $23 million in new sales tax revenues.

The other bidder, Extell Development Company, submitted a $150 million bid.

MTA Chairman Peter Kalikow said at the July 27 meeting that neither bid came close enough to the state authority’s $214 million appraised value for the rail yards to justify the board’s interest.

Compared to Ratner’s bid — which was two years in the making and included dozens of support letters from elected officials, a myriad of minority contracting organizations and numerous labor unions, the Extell bid — hastily prepared to meet the MTA’s one-month deadline — was presented on standard-sized sheets of paper with far fewer support letters and little analysis of the benefits.

At the board meeting, held at the MTA’s Madison Avenue headquarters, Extell Senior Vice President Lela Goren vowed the commitment of her company to the project, and reiterated Extell’s plans to develop 1,940 units of new housing, with 573 mixed-income units.

She said the costs of infrastructure and any required platform would be paid for by Extell, and again raised an offer presented by Extell on Monday to work with Forest City Ratner to add an arena that would be developed on private property.

“One thing someone asked us,” Goren said after her testimony to the board, “if we would have had more time would we have done more? Yes. We would have reached out to some of those other groups. You know, the unions, we use union labor,” she said, pointing out the commitment Extell made to hire union laborers, provide job training and aim for 20-percent minority and women-owned business hires.

“They didn’t speak against us, they just want more jobs,” she pointed out.

Another thing she said her company’s bid lacked was a thorough economic development analysis. “Before the Sept. 29 meeting we would’ve been able to do that,” Goren said. “It usually takes 60 days to do a comprehensive analysis of the economic benefit and impact of a project.”

Extell owner Gary Barnett was made aware of the request for proposals in mid-June by Develop-Don’t Destroy Brooklyn, a group protesting Ratner’s plan and favoring, instead, smaller-scale development. The MTA had put out the request for proposals on May 25, with a deadline of July 6, leaving a truncated bidding period of only 31 days.

Forest City Ratner, MTA officials have said, has been in discussions over the rail yards development rights with the MTA since last spring.

In his presentation to the MTA this week, Forest City Ratner Executive Vice President James Stuckey rattled off the numbers of their offer like an auctioneer.

“If you use the methodology that was followed in your appraisal, and you take into consideration the cost of the land, and creating the platform, which you need in order to make your land valuable in the first place, as well as the cost of the new yards, which allow your new M-7 trains and your infrastructure to meet the 40 percent capacity that you wish to have in the growth of your system, the plan we submitted, which was, in fact, designed to meet all of those things, comes to the value of $395 million,” he told the board members.

He said Extell’s equivalent of $217 million paled in comparison.

“We have experience. We’ve worked with you. We have a track record. We know how to do this site. And it’s critical we move on this quickly because it is important. We need to get this arena going,” so as not to delay construction in time for the 2008 basketball season, he said.

In addition to a 19,000-seat arena for his New Jersey Nets, Ratner’s plan promises 1,500 construction jobs yearly on the site — covering six city blocks — as well as 6,000 permanent office jobs, and up to 7,300 new housing units.

Following more than 50 speakers in support of and against the Ratner project, the board opened a motion, which had been pre-written, and suggested selection of Forest City Ratner as the bidder, with the caveat that they up the ante.

Commissioner Mitchell Pally, from Suffolk County, was the lone dissenting vote.

“Both bidders should be given an opportunity to come back during this 45-day period, sit down as equals with the chairman [Kalikow] and the executive director [Katherine Lapp],” he said.

In response to board member criticism of the now sole-source bidding process, Kalikow said, “I think it probably makes more sense to negotiate with one bidder at a time, because otherwise it’s never-ending.”

“Anyway, I don’t like two bidders,” the MTA chairman said.

“I’ve been in business for 38 years and I’ve had my ups and downs, but in all those years I’ve never sent two tenants the lease for the same space at the same time. It’s just not right, it’s immoral and it’s not the way l like to do business.

“Ratner knows that Extell is out there,” Kalikow added. “And if Ratner doesn’t comes up with money that we think is adequate, then I predict we won’t take it.

“Extell leaves the table, and we’ll either find somebody else — we won’t sell it.”

Candace Carponter, an attorney for Develop-Don’t Destroy Brooklyn, slammed the MTA’s determination and Kalikow’s statements on the matter.

“The fact that they won’t allow or won’t negotiate with Extell and will allow Ratner to supplement his bid speaks to the fact that he’s a preferred developer, and violates the exception in the eminent domain decision,” she said, referring to the Supreme Court’s ruling in favor of using eminent domain for private economic development projects, but not for projects by preferred developers.

“Although Mr. Kalikow said that when you give out a lease you don’t give out two leases for an apartment, certainly, when you’re selling your property you do get potential bidders to bid against each other, and that’s the way you get the better bidder,” said Carponter. “By not doing that, they’ve prevented themselves from getting the best dollar for the bid.

“It makes no sense from any sort of business perspective.”

Updated 4:00 pm, November 10, 2010
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