Town’s consultant questions economics of Reader’s Digest development proposal
February 8, 2008
by Christine Yeres
Consultants hired by the Town Board to review the economics of a proposal by developer Summit Greenfield for construction of 278 condo units on the Reader’s Digest property and rental of its office space to an unlimited number of tenants told the town board in a work session on Tuesday, February 5, that although its report is preliminary, so far the numbers don’t work.
John Alschuler, of HR&A Advisors, prefaced his report by reminding the town board that his firm’s charge had been to understand the economics of the developer’s plan, to calculate the financial impacts of the plan on the town and school district, and to help explore alternatives for the scoping document the town board is working to finish by its February 26, 2008 deadline.
Working with the developer’s published accounts of the projected sales prices, Alschuler said that he had a hard time seeing how the project could work. Pointing to recent increases in construction costs of 10 to 15% a year—as against housing prices that are no longer rising—he said that in the housing market’s “frothier” times it might have been easier for developers to expect to turn a profit. Alschuler said that his firm had asked for more financial materials from Summit, and that the picture his firm had outlined broadly tonight would evolve over time. For example, he told the board, so far he had been unable to tease out the fixed costs from the variable costs. He said that if more costs were to show themselves as “fixed” perhaps the project might be more financially positive.
Among the constraints the development faces Alschuler listed the absence of a sewer district, increased traffic in an already congested area, and issues of community character, telling the board that the density of the multifamily housing and the way it had been laid out is “very hard to screen.”
Will age restrictions hold?
Board member Michael Wolfensohn asked how the economics of the project might look if the age restrictions the developer counts on prove unenforceable. Alschuler answered that the board’s own lawyers would have to advise the board on enforceability, but if the development were to generate school children, it would be very costly to the school district. “A lot of this turns on whether there are children,” Alschuler declared.
Board member Elise Mottel asked why HR&A’s report hadn’t yet mentioned the 20% affordable housing component of the proposal. “It’s present,” said Alschuler, “We’ve assumed it.” He explained that normally “affordable happens” because the developer has been given a density bonus, and “it’s hard to make these deals work” if there is not one. Summit has claimed in its presentations to residents that its density bonuses entitle it to build twice the 278 units is seeks in its application. Residents who oppose the development argued during scoping sessions that although Summit limits itself in its application to 278 units, economic conditions might well cause the developer to make use of the density bonuses, as needed.
Character of the community
Supervisor Barbara Gerrard asked Alschuler what other “community character” issues he had considered in his report. He listed open space, architecture, massing, the relationship of buildings to sites, and natural features that typically offer screening between properties.
Alternatives to the proposal
Town administrator Jerry Faiella asked whether in some alternative plan the auditorium Summit has slated for removal might remain for town use, and Supervisor Gerrard had earlier mentioned “affordable senior” housing as consistent with the town development plan. The board’s counsel Clinton Smith reminded the board that Summit is not necessarily compelled to look at any alternatives the town proposes. To that, Alschuler added that developers sometimes feel that it is in their interest to show a willingness to look at alternatives a governing body might suggest, and sometimes not.