Developers mull impacts of tax-credit deferrals
In Yonkers and other communities where industrial operations once thrived, developers of polluted sites could be on shaky ground with lenders and adjusting their companies”™ financial planning in the wake of the state”™s sweeping deferral of business tax credits.
Some developers of brownfield sites will challenge the state”™s action in court, real estate professionals predicted.
Legislators in the recently adopted state budget approved a three-year deferral on annual tax credits that cumulatively exceed $2 million.
In Yonkers, the deferrals could apply to brownfield cleanups for Hudson Park North, the completed mixed-use waterfront project of Collins Enterprises L.L.C., and to Ridge Hill, the massive retail, office and residential development being built by Forest City Ratner Cos. and due to open in 2011, said Ellen Lynch, executive director of the Yonkers Industrial Development Agency. Officials at those companies could not be reached for comment.
Lynch said River Park Center, the mixed-use downtown redevelopment project planned by Struever Fidelco Cappelli L.L.C. that will require an extensive brownfield cleanup, also could be impacted by the deferred credits, which apply through the 2012 tax year and are projected to bring the state an additional $2.2 billion in revenue. SFC officials have said they hope to begin construction in 2011.
”˜It doesn”™t look good”™
At MetroPartners L.L.C. in Yonkers, principal Kenneth Dearden said his company did not exceed the $2 million cap on business credits for 66 Main St., a $50 million, 170-unit luxury apartment building that opened in early 2008. On nearby Buena Vista Avenue, the development partners expect to receive an approximately $15 million credit through the state”™s brownfields program as part of their planned $100 million project to erect a high-rise apartment complex on the site of the former Teutonia Hall and adjacent industrial parcels and restore a row of historic houses on the same block.
MetroPartners has submitted a draft environmental impact statement to the city planning board and hopes to have project approvals from the city by summer of 2011, when construction would begin, Dearden said. “I”™m hoping that three-year (deferral) period burns off before it”™s finished,” he said.
Dearden said MetroPartners and other developers could see more lasting and damaging effects from the state”™s revenue-saving action when seeking financing for their projects.
At 66 Main, “We were able to convince lenders that the state was going to stay behind its brownfield credits,” he said. The state program served to reduce the developer”™s project debt.
But lenders are not likely now to view state incentives as guaranteed in a financing package. “The impact going forward will be the viability of those credits to get those buildings built,” Dearden said. When the state goes back on its word, “It doesn”™t look good.”
Developers may sue
At One Point Street on the Yonkers waterfront, commercial real estate broker Paul Adler has overseen a $40 million cleanup of contaminated land on a former cable wire manufacturing site. An underwater dredging operation this year to remove toxic soil from the Hudson River is expected to cost the plant”™s former owner another $15 million to $20 million.
Adler, senior executive managing director at Rand Commercial Services in White Plains, is completing the sale of the 14-acre property to an undisclosed buyer for its New York City hedge-fund owner, Satellite Asset Management.
Adler said the credit deferrals and the governor”™s two-year-old cap on credits for developers “has dampened the climate to encourage people to do brownfield cleanups. It”™s a shame because these projects, which need to be repositioned, require that kind of incentive.”
Adler said the state”™s recent action will force developers to “re-order their priorities” and go back to lenders and tell them, “I”™m getting the same price; I”™m just not getting it at the same time” from the state.
Both Adler and Dearden said developers are likely to sue the state for breaching the contracts that developers on their end have upheld.
“I think it will take them a very, very long time to restore the faith that was built over the years,” Adler said.
For local economic development officials, said Lynch, “It”™s not just this particular negative impact, but it”™s the position it puts us in when we discuss state incentive programs with potential investors ”¦ The state has kind of proven that they can take it back, and they will.”