Ruling Lets Atlantic Yards Seize Land
After enduring three years of delays, several lawsuits and the collapse of the real estate market, the $4.9 billion Atlantic Yards project in Brooklyn took a major step forward on Tuesday when New York’s highest court ruled that the state can seize private property for the 22-acre development.
The Court of Appeals ruled 6 to 1 that the state could exercise eminent domain in claiming businesses, public property and private homes for economic development projects like Atlantic Yards. In doing so, the court backed the state’s assessment that the area in question — where some holdouts had refused to sell their property — fit the legal definition of being blighted.
The ruling also had broader implications — reaffirming New York’s use of eminent domain even as many state legislatures seek to curb government’s power to condemn private property.
The project’s opponents had argued that eminent domain on behalf of the private developer, Bruce C. Ratner, was improper and unconstitutional. They vowed to continue their battle, but there was no question that a cloud of uncertainty that has hung over Atlantic Yards for more than a year had lifted.
Mr. Ratner called the court’s ruling a “light-switch” kind of decision for the long-stalled project. “I look at this as the last major hurdle; now we can proceed as we’ve wanted to for the last three years,” he said on Tuesday. “The courts have made it clear that this project represents a significant public benefit for the people of Brooklyn and the entire city.”
Mr. Ratner plans to begin selling tax-free bonds next month to finance the development’s cornerstone project: an 18,000-seat basketball arena for the New Jersey Nets at Flatbush and Atlantic Avenues near downtown.
Construction work is already under way at portions of the site. The developer expects that it will take about 28 months to build the arena, enabling the Nets to move from East Rutherford, N.J., to Brooklyn around June 2012.
Those opposed to the project said the decision, while a setback, was hardly the end of the fight.
“The fight against the Atlantic Yards project is far from over,” said Daniel Goldstein, a spokesman for Develop Don’t Destroy Brooklyn, a community group that opposes the project. “The community has four outstanding lawsuits against the project and, meanwhile, the arena bond financing clock ticks louder and louder for Ratner. While this is a terrible day for tax-paying homeowners in New York, this is not the end of our fight to keep the government from stealing our homes and businesses.”
If construction begins in the coming weeks as expected, Atlantic Yards will stand out in a city where 530 construction projects are stalled, sitting lifeless and without adequate financing in virtually every neighborhood.
Atlantic Yards would transform a busy intersection of two thoroughfares dominated by a railroad cut where Long Island Rail Road trains are cleaned between rush periods. The billion-dollar arena would be the most expensive in the country and home to Brooklyn’s first major sports team since the Dodgers left after the 1957 baseball season. Plans also call for 16 high-rise towers on nearby blocks, mostly residential buildings with as many as 6,430 apartments.
The developer has said that he will start the first residential building six months after beginning the arena. But with so many new apartments sitting vacant, analysts say it could be many years before demand would justify building so many units in one neighborhood.
The arena would be built on an 8.5-acre railyard and on adjacent property, much of which Mr. Ratner has acquired.
Mr. Ratner is not expected to get possession of all the property until sometime next year. He and his underwriters, Goldman Sachs, plan to sell the bonds for the arena by mid-December. They must complete the bond sale by Dec. 31 to qualify for tax-free financing. Otherwise they would have to resort to conventional financing, which could be prohibitively expensive.
In the next few days, the developer is also hoping that the rating agencies will give his bonds an investment-grade rating and a lower interest rate. On Tuesday, a state-sponsored local development corporation authorized the sale of a combination of tax-exempt and taxable bonds.
“We anticipate having the ratings necessary to successfully market this transaction and fund the project by Tuesday,” said Greg Carey, a managing director of Goldman Sachs.
In the meantime, Mr. Ratner’s company, Forest City Ratner, completed construction of a $50 million temporary railyard, just to the east of the original one, and turned it over to the Long Island Rail Road on Monday. The company, which was the development partner for the Midtown headquarters for The New York Times Company, continues to do construction work on the railroad property while it awaits title to the rest of the 22-acre parcel.
Even in New York, where large-scale development is always a contentious affair, Atlantic Yards has been a long-running story of a tenacious developer and an equally implacable opposition. The development has been hobbled by a series of disputes ever since it gained state and city approvals in 2006.
Mr. Ratner bought the New Jersey Nets in 2004 for $300 million, not out of a love for basketball so much as a lever for a large real estate project. The developer promised great architecture with designs by Frank Gehry; lots of affordable housing for teachers, firefighters and construction workers; a larger and better railyard as a replacement; and for sports romantics, a professional basketball team.
But critics, led by Develop Don’t Destroy Brooklyn and some local elected officials, said the proposed towers would loom over the low-scale neighborhood and worsen traffic. Opponents resented that just as the area was improving, they were threatened with condemnation by a developer who got $305 million in subsidies from the state and the city, as well as tens of millions of dollars in tax breaks.
Since 2004, the project has lost some luster. Mr. Ratner scrapped Mr. Gehry’s designs for a glass-walled arena and 16 towers. He renegotiated his deal to buy the railroad land. Instead of paying $100 million at closing, he will make a $20 million down payment and pay the rest over time, while building a smaller permanent railyard than originally promised.
Now, he is selling a majority stake in the Nets to a Russian billionaire and basketball enthusiast, Mikhail D. Prokhorov.
The Nets, who are currently on a West Coast road trip, have started the season 0-13.