Mr. Junkersfeld Talks Brooklyn Bridge Park Finance

By on October 20, 2009 7:38 am in Brooklyn Heights

Karl  Junkersfeld writes about his latest opus:

The attached video talks about Brooklyn Bridge Park economic development and sources of income ranging from condo and hotel construction to park concessions. BBP is designed to be self sustaining with a projected annual costs of $15.2 million for operating and maintenance expenses. The state and city are contributing over 100 million for construction of the park but daily operating and maintenance costs will be generated from the park itself. This ties in quite nicely with the concept of its environmental self sustaining elements like renewable energy generation and habitat restoration. For example, as explained in prior video, reuse of rainwater for irrigation.

As mentioned earlier, condominium development (4 newly developed condos) plus the existing One Brooklyn Bridge Park building added to the Hotel at Pier One are the major sources of income for the Parks construction. This, in my opinion, is problematic considering the precipitous drop in real estate values in New York City area. This is especially the case in the Downtown Brooklyn area. There is already a glut of luxury condo and rentals that are either recently completed or ready for completion within the year. Toren, Oro, Tillary, Avalon Fort Greene , Ratner’s building on 80 Dekalb, Brooklyner, Be@Schermerhorn, Forte, Beltel to name a few. One Brooklyn Bridge Park is approximatly 20% full and is currently holding a major sale with a 35% discount on selected apartments so they can reach the 30% threshold in oder to get proper financing from the bank. Forte went bankrupt. Be@ has been on the market over a year now and hasn’t sold any apartments and now is considering changing to rentals. From the video, does John Street at the edge of DUMBO look appealing? The view is less than stellar as you can see. If 1 BBP can’t sell, do you think that 2 condos further south will do better? As I mentioned earlier, this financing is very problematic and definitely not a sure thing. Will the City and State step in to fill the vacuum? How can 1BBP be expected to contribute anything with an empty building on their hands with the future looking like prices will decline further and a less wealthy tenant likely to be asked to supplement building maintenance to sustain a park? Remember 20 Henry? Ouch.

The theory is that that this recession is temporary and jobs will return and NYC will be like it was prior to the collapse of Lehman Brothers, the financial capital of the world. Wishful thinking. We are experiencing a structural change in both flow of jobs in the financial sector and the range of salary given to these”so called” masters of the universe.

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  • Park Advocate

    What is the point of this video? If you don’t have anything positive to say, suggest something productive rather than just pooh pooh some extraordinary progress on a wonderful thing.

  • bklyn20

    There IS a way to fund the park without additional housing — Daniel Squadron’s PIRC plan. If I have it correctly, PIRC stands for Park Incremental Revenue Capture. PLease see the following quote from a letter the Cobble HIll Association sent to Mayor Bloomberg:

    “We are especially excited by Senator Squadron’s proposal for a new revenue model, the Park Increment Recapture (PIRC). The PIRC will not raise anyone’s property taxes, nor will it take any revenue from the City’s financial plan since it is based only on future rezonings. It is a simple and elegant solution to a problem that has vexed Park supporters for half a decade: how to maintain the Park without the proposed new housing. The argument all along has been that housing is necessary to pay for the park’s operations budget. No one wants the housing per se. The housing plan has only sown division and distrust since it was first foisted on the neighborhood. Nor does housing belong in a park as a matter of principle. What an awful precedent the City would be setting by building apartments inside a park. Senator Squadron’s PIRC proposal may be the way to prevent that dreadful precedent from ever happening. It deserves your support.”

    The idea is to capture some of the increase in the property values of real estate generated by proximity to a “world class park.” Some PIRC versions target new real estate — I prefer capturing the property increase of all real estate in the general park area.

    As I have writtten elsewhere on this and other blogs, I do believe that the park plan being built now is too extravagant for our economic situation . Yes , some pretty fancy stuff is emerging — but the central piers with the much needed- active recreation space are still unfunded.

  • nabeguy

    “Hopefully” Gee, that puts my mind to rest. And if it’s not self-sustaining? Fill in the blanks…..

  • Karl Junkersfeld

    Park Advocate, you are missing the entire point. I am a tremendous advocate of the park. As the opening title suggest, it will be transformative for the Brooklyn Heights area. Next to the impact that Robert Moses had on western Brooklyn Heights this is the next largest developmental impact this neighborhood has ever experienced. I am shocked by the tremendous apathy I see in the neighborhood about this development. Next to personal relations, changing of the physical structure of your immediate surroundings has got to be on the top of the list of things that make life worth living. This is an extraordinary time to be living in the Heights. I relish it. its impact on the community both socially and economically will be monumental. The Wine Bar on Henry will be a gold mine.

    The point of the film was to enlighten those in the area of what development will be taking place in your immediate area and where it will be. Secondarily, my commentary was a concern that the Park’s major dependence on financing on Real Estate revenues in problematic and I proceeded to give examples of declining real estate values in the immediate neighborhood. This isn’t a revelation to anyone who reads the paper.

    I wasn’t being negative as much as just being realistic. The park will be beautiful and because I am such an advocate, I want it to succeed.

    This is a very expensive project that has got to be self sustaining on an ongoing basis. After all, 15.2mm is not a low annual figure. We all have read about the controversy regarding annual costs problems with respect to HighLine in Lower Manhattan. That was another point in the film, City and State government, because of the projects proximity to the waterfront will not contribute to the annual operation and maintenance of the park. That was mentioned in the film.

    There was good news coming from 1BBP condo a couple of days ago when they announced the following results due to price reductions:

    “In less than one month, the building has signed 12 new contracts and eight contracts out.”

    If you are truly an advocate of the park, aren’t you concerned about the dependence of 3 condominiums that are at relatively undesirable locations for financing in an already glutted luxury condo/rental market?

    Personally, I am fine with condominium development in the park, my question is if there is demand for that product and if not are their alternative proposals to fund the park? I’m aware of the new economic realities that confront NYC public development and I accept that the city needs to develop private partnerships for revenue.

    In summation, I am a tremendous advocate of the park and because of that I have tremendous concern about its financial underpinnings. Don’t you?

  • nicky

    Daniel’s plan needs to be considered…so do others Evan Thies’ plan as well as floating bonds.. etc etc. The plan to depend on real estate either in or near the park(via rezoning)is very questionable..Despite our wishes the financial sector has shrunk… note the fewer investment banks etc… We need to think this throught again.. Fewer folks will be buying aapartments for 1 M or more ….and more will need the public recreation parks have provided to citizens of this city as part of the contract between citizens and government

  • nicky

    this blog continues to be edited and controlled to death

  • bklyn20

    Mr. J, there IS another funding mechanism — pls see my post above. This PIRC plan was proposed and is being pursued by Daniel Squadron, our new State Senator. A funding mechanism of this type was also proposed by 33rd District City Council candidate — he came in third in the end — Evan Thies. Thies’ proposal was published as a NY Daily News OpEd. Steve Levin, the winner in the council race, supports the PIRC plan as well (see his web site.)

    In addition, the BBPark budget is bloated – the cost per acre is WAY higher than it should be. Please note that the Brooklyn Bridge Park Development Corporation counts the water acres in their figures. The park is cited as c. 85 acres, when the actual land mass is c. 65 acres — if you take out the water between the piers! Their tactic is that total cost divided by more acres = lower cost per acre. Do water acres have to be landscaped, fertilized, watered…? I hope you get my point.

    I want very much to see this park built AS A PARK. I wish the plan was scaled down, so the central piers could get developed sooner. Can’t we claw back the design budget for a less over-the-top plan? Andrew Cuomo, are you available for audit duty?