The Price of Affordability

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The Battery Park City Authority (BPCA) is allocating more than half a million dollars to pay a team of consultants to advise it on measures designed to preserve affordability within the community. This funding will be divided among a panel of five different firms, through 2024.

At the March 26 meeting of the Authority’s board, BPCA president Benjamin Jones explained, “I’m requesting an increase of $589,000 to our fiscal year operating budget to enable us to continue our efforts with regards to analyzing and addressing lease term and lease reset concerns and to also help us in taking advantage of opportunities related to preserving, and increasing affordability, and also enhancing sustainability and resiliency in this neighborhood.”

This appears to be a reference to a pair of ongoing negotiations, both of which are taking place behind the scenes. The first is a dialog between the BPCA and the LeFrak Organization, with the goal of preserving rent stabilization at Gateway Plaza, the community’s largest rental complex. The second is a series of discussions between the Authority and a coalition representing condominium owners, which aims to scale back a series of future increases in the cost of home ownership in Battery Park City, which are expected to be financially ruinous.

Both of these negotiations will necessarily hinge on the issue of ground rent, the fees paid by buildings (whether rental or condominium) for the privilege of occupying the State-owned land within the community, through the year 2069, when the ground lease that governs property ownership in Battery Park City ends.

BPCA president Benjamin Jones: “the Authority doesn’t want to kick the can on these issues, and so we’ve been ramping up over the last several months in this regard and are eager to keep momentum going.”

In particular, Mr. Jones’s use of the words “lease reset” appears to refer to dates at which annual ground rents for various buildings are scheduled to jump by as much as several million dollars per year. And the words “lease term” may refer to the possibility that all of these agreements might be modified to extend beyond their current termination, in 50 years.

“The nature of our work is largely subject to nondisclosure agreements, but you are aware of our efforts to date,” Mr. Jones said at the March 26 meeting. “As you know, it involves continuing our policy work and overall strategy development as well as financial modeling and also assistance with building assessments, particularly with regards to capital needs and plans and sustainability and resiliency improvements.”

This may be a reference to the possibility that the BPCA is considering modifying the terms of its ground leases with individual buildings, and scaling back payments in exchange for those buildings undertaking measures to make them more energy efficient, or more resistant to climate change.

Mr. Jones continued, “we’ve mentioned here and in public meetings that the Authority doesn’t want to kick the can on these issues, and so we’ve been ramping up over the last several months in this regard and are eager to keep momentum going. So this budget request is really in tandem with the next item that you’ll hear about, pending approval here, which is to retain a panel of real estate advisors as we get into the nitty gritty of the work.”

BPCA chairman George Tsunis replied, “we’re all doing a lot of work, let me leave it at that.”

Abby Goldenberg, the BPCA’s general counsel the continued, “we felt that it was crucial to also make sure that we had as robust a panel of real estate consultants as possible. And with that in mind, we issued an [request for proposals] to empanel prequalified real estate consultant services. As a result of that, we would like to recommend five consultants.” Two of these firms, CBREand HR&A, are firms that have a long history of advising the BPCA.

Authority board member Catherine McVay Hughes interjected that, “I just also want to add that a lot of this work is in response to community comments over the last year and more. So it’s in response to the people that live in the neighborhood.”
Matthew Fenton

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