Monday, October 19, 2009

Thompson’s Advocated Multiple Parcels (a la Battery Park City) vs. Single-Developer Mega-monopolies Should Boost Developers’ Bids

As reported in the Observer in a story by Eliot Brown (Thompson on Mega-Development: Look to Battery Park City, by Eliot Brown, October 15, 2009), Comptroller and mayoral candidate Bill Thompson at a Crain’s breakfast Thursday has begun to clarify his message about what is wrong with Bloomberg’s megadevelopments, calling for the Bloomberg administration’s single-developer mega-projects to be divided into multiple smaller parcels per the successful and proven Battery Park City model. This is quite consistent with what Noticing New York advocates and as Atlantic Yards Report points out it is essentially the UNITY Plan for the rail yards where Bruce Ratner wants to put his Atlantic Yards arena while seizing adjacent neighborhood blocks. (See: Saturday, October 17, 2009, Would you believe it? Thompson likes Battery Park City (but has ignored the UNITY plan).)

This post reprises comment we have offered on the Observer article.

Multiple Parcels Enable and Speed Development

We agree that the Battery Park City model of dividing up large development into separate parcels is the best way to go. Yes, it allows for staged development which can be good and is sometimes appropriate, but it also allows for multiple parcels to go forward simultaneously whereas a single developer would not have the wherewithal to proceed on multiple fronts at the same time. (For instance, the city was getting strong advice not to try to advance the new phases of Queens West as a single-developer site given this kind of incapacity.- Queens West had already wound up delayed under the Bloomberg administration due to the Bloomberg/Doctoroff preoccupation with the Olympics bid.)

Our “Wholesale” Disagreement With Observer: “Retailing” Parcels Increases Developer Bids Increasing Funds the Public Will Collect

There is one thing in the Observer Article that we think is misleading:
“Giving a big site to a single developer all at once—such as the 22-acre, $4.9 billion Atlantic Yards project—could bring a higher bid given, among other reasons, that the developer would benefit from economies of scale and increased values as it fills out the site.”- -
- - We think that it needs to be understood that `giving a big site to a single developer all at once—such as the 22-acre, $4.9 billion Atlantic Yards project’—could bring a MUCH LOWER bid.

No doubt everyone has heard the expressions “You didn’t pay retail for that, did you?” and “I can get it for you wholesale.” Suffice it to say, retailing sales RAISES the prices a seller can charge. Furthermore, dividing huge sites into multiple parcels increases the number of capable bidders in the game and that raises the price the government will receive. Another benefit is that it mitigates risk for the government, allowing for more flexible Plan Bs (and Cs). As Atlantic Yards Report notes (and suggests may have been understood when the Observer article was authored), the lack of alternative plans can lead to costly additional concessions later on. Or the lack of alternatives can be used as political excuses to wind with a “deal on terms more favorable to the developer.”

Doubtful “Economies of Scale” Argument

Finally, when it comes to sites as large as Atlantic Yards there aren’t actually any economies of scale for the developer because these megadevelopment sites are way past the point where any such economies max out and developers never gear up to that scale.

If there were, in fact, actual economies of scale you would see it in developers putting out the highest bid for multiple parcels all at once or on a running basis. That didn’t happen at Battery Park City although some developers did bid successfully to build more than one site.

The only thing slightly inconvenient about the multiple-parcel style of development that is that it pushes the government to the fore in terms of traditional government responsibilities like developing some of the common infrastructure such as parks and roads. But as Atlantic Yards Report has pointed out this probably means that those things that the public wants, like parks, will probably be delivered sooner.

And Properties Might Get Retailed Anyway, So. . .

Government also ought to feel chagrined if it wholesales megadevelopments to (no-bid or low-bid) developers like Forest City Ratner and those developers then retail out sub-parcels to other developers at a marked-up price. This is something we may see at the West Side’s Hudson Yards.

The Four “M”s

Not mentioned above is that single-developer development produces listless monoculture and monopoly. That way you wind up getting the four “M”s: Megadevelopment, (Mega-) Monopoly, Monoculture and Monotony.

No comments: