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Old October 29th, 2005, 08:04 PM   #1
New Jack City
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Privatizing Battery Park City?

This is not really a news article but moreso an idea floated...

The Slatin Report


The Esplanade at Battery Park City, part of the public spaces that create the site's value.

NYC 10 27 05
Peter Slatin

Should Battery Park City be privatized?

It's certainly a hell of a lot more than a $64 million question. And it's what Charles J. Urstadt, who was appointed by New York Governor Nelson Rockefeller as the first chairman and CEO of the Battery Park City Authority in 1968, thinks should happen. Urstadt, who rejoined the BPCA board under Governor Pataki as vice chairman, called for the state-controlled authority to put at least the commercial components of the 92-acre parcel up for bid, placing a value on the property of $3 billion. Floating the idea in a speech at a dinner in his honor – and on his 77th birthday – held by the Steven L. Newman Institute, Urstadt then called on the city and state to extend the existing Battery Park City another 2,000 feet to the north. Urstadt put the cost of such an exercise at $300 million, barely denting the profits from the net lease of the original property.

The idea would be to enter into a master lease for the existing site, allowing the revenues from ground rents paid by commercial office and residential developers to flow to the leaseholder, similar to the deal that was struck between the Port Authority and Larry Silverstein for the World Trade Center site.

With millions of square feet of office space held by Brookfield Properties and thousands of rental and condominium units developed by leading New York real estate companies, from LeFrak to Related to Albanese, the site offers a veritable garden of blue-chip cash fountains for potential investors, from private-equity players to REITs to institutions.

So what would New York State, which controls the authority, get out of doing such a deal – or deals? The Battery Park City pie could be sliced up into residential and commercial neighborhoods and net leased to different developers or institutions.

To start with, a big chunk of change to get at that cash flow. In 2004, Battery Park City paid $130 million in surplus to New York City; Urstadt believes that figure could rise to $200 million in the next few years. And perhaps even more tantalizing is the prospect of having a big chunk of liability removed from its balance sheet when the lease is assigned.

"The state or city shouldn't control it," Urstadt told The Slatin Report recently. "They should take the money out of it and continue to own the land. It should be privatized the way the Port Authority privatized the World Trade Center."

James Gill, who was appointed chairman of Battery Park City by Governor George Pataki, was – to put it mildly – cautious about the privatization option.

"It's a long way off," he told The Slatin Report. "A long way off."

The prospect brings up a host of questions. Would the current system of payment in lieu of taxes (PILOT), that private-sector developers participate in at the site, be converted to typical taxes? If so, how would that change their tax burdens?

Of primary concern would be preserving the integrity of the Battery Park City's award-winning and very popular public spaces. These occupy 30 of the 92 acres and are paid for from the rental stream – and also add tremendous value to the site. A private owner would be sorely tempted to divert some of that stream into other uses.

Another issue: the city's share of the spoils. According to Urstadt, the site is owned 50-50 by the state and city; although the state has a master lease, the city is not likely to let a deal pass without partaking.

Urstadt, a major Republican supporter, heads publicly traded REIT, Urstadt Biddle Properties, formed from a family fortune in real estate holdings. He self-published a book, Battery Park City: The Early Years, , detailing what he describes as the battle to get the project going in the late 1960s and early 70s as city and state, Democrat and Republican interests battled for control.

The 40-year effort to build Battery Park City, which should be concluded at the end of this decade as development of the last site is completed, saw gradual evolution and dramatic change in design philosophy, political leadership and market conditions. The site's placid facades and graceful parks belie the bitter, contentious infighting that often ruled the process. But its present success has arrived as much in spite of rather than because of that process. Markets and tastes have come to match what Battery Park City has to offer, and Battery Park City has been allowed to adapt to changing values in both realms. Whether that holds any lessons for its sister public development across West Street, whose excavation in the 1960s provided almost one-fifth of Battery Pak City's landfill, and the redevelopment of which is beginning to define contention, remains to be seen.

The 92-acre site throws off more than $100 million in surplus revenue a year.
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Old October 30th, 2005, 07:03 AM   #2
Third of a kind
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very interesting article.....on a side note has anyone seen that tribeca green condo buidling around there, it looks amazing. Is it one of these new "green" buildings?
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