What Exactly is Going On at Willets Point?

willets-devwNew York City has approved a $3 billion plan to develop the area adjacent to Citi Field and has awarded the contract to Sterling Equities and the Related Cos.

Everything I keep reading about the project is about the merits, or lack of same, to building in Willets Point. Also, what does the Queens community need versus what is being built, all of which are fair concerns to the residents of the area as public subsidies are to be included in the deal. But what I have not heard discussed is how New York City could hand a contract this large to Sterling Equities at this time considering the history of the last Willets Point project that the City partnered with Sterling on, Citi Field.

The Request for Proposal from the City for the Willets Point Development Project, in May 2011, includes the following conditions in the Proposal:

“Each Respondent must demonstrate sufficient financial resources and ability to Execute its Proposal.”

“Each Proposal must include a description of the management and/or development team, including:

“If available, the latest credit report for each of the principals and any relevant business entities and the most recent financial statements for the purchasing entity and each of its principals. Certified net worth statements must be submitted for every participant in a partnership or joint venture”

“Any additional documentation or information evidencing the strength of the Respondent and its ability to complete the Project.”

This would indicate that in May of 2011 Sterling Equities and the Related Cos. showed sufficient financial resources and ability to execute a $3 billion proposal. That either means that Sterling Equities has plenty of available cash or it is all coming from the partner. This leads to two either/or questions that I think the City Council should have been asking:

1. If all of the capital is coming from Stephen Ross (who heads the Related Cos.) why is Sterling Equities needed as part of this transaction?

2. If Sterling Equities is providing capital to the project shouldn’t they also be providing additional capital to the failing Citi Field project?

The bonds used to finance Citi Field have had their credit rating lowered to junk bond status by Standard and Poor’s. That indicates that the Citi Field project continues to be on shaky financial footing. We all know why. Since 2009 the amount invested in the Mets has plummeted, attendance and revenue have cratered, and the profits needed to pay off the bonds are nowhere near the estimates that Sterling Equities provided to creditors to receive the financing of the park. This isn’t ancient history, it is happening before our eyes. With all of the potential developers that could be working on a Willets Point project, why would New York City pick one who is proving to be a bad credit risk?

Maybe there are good answers to these questions, but I have not seen them. I’m concerned that the City is using the Willets Point land and future public subsidies to bail out Sterling Equities from a mess they created for themselves by investing with Bernie Madoff.

A major development in Willets Point might be a good idea for New York City.

But what has Sterling Equities shown to our City to indicate they are a good business partner?

Fred and Bernie

 

 

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10 comments

  1. Patrick Boegel says:

    Sadly I think it comes down to the unfortunate answer of ugly cronyism. Which even in its most non-malevolent form Sterling is being given entry to be part of the building project to at least reap some benefits from presumably Ross’ good graces.

    In its most malevolent form it is blatantly the mix of horrible business with horrible governance.

    It is nearly impossible for me to believe it is not that latter. There is nothing that has occurred in the last five years that makes me believe the Wilpons and their company were the unfortunate victims of happenstance.

  2. James Preller says:

    Great post, Mike. Thanks for writing it.

  3. Flatulent Centerfielder says:

    How much do Mets fans know about what Sterling Equities does or is? I really think that articles like this, while well written, would be much different if the company was understood (especially as it relates to the assets and holdings of the company)…they have the $$$ to pull this off, and Sterling’s reputation at City Hall is still…well…sterling…

    • James Preller says:

      Here at “2 Guys,” we assume our readers are intelligent and can keep up. But if you’d like to fill in the blanks, go right ahead.

    • Patrick Boegel says:

      If their company was in such great shape, they would not need to keep putting off payments they owe and refinancing their other business venture. Particularly the parts of it that are Sterling Equity projects like Citi Field.

      It is one thing to be tired of this ongoing story, it is another to be a proverbial ostrich.

      I used to be one who gave the Wilpon’s a great deal of the benefit of the doubt. There is simply no conscious way that can be done any longer. They’ve done nothing for people to trust them, at all.

  4. Stubby says:

    If you think this is somehow unique to this particular project, if you think this is any different from the way any development project is done in America, then you just haven’t been paying attention. Developers own most of the cities and towns in this country. They are generally undercapitalized (though their owners are quite wealthy, thank you very much) and they are almost always coming off an unsuccessful project that was poorly constructed and didn’t generate the expected revenue. Politicians (Republican and Democrat, doesn’t matter) favor developers with whom they have a “working relationship”–which is to say developers who make large campaign contributions. Are there honest developers out there? Not many. And I think we all know how many honest politicians there are (rarer than unicorns). But this is the way it has been for many decades. Just because you’ve got a personal axe to grind with the current Mets ownership is no reason to suddenly be shocked, shocked that gambling is going on in the casino. Not that you can do anything about it anyway. I’ve tried, for years, to find just ONE politician in my little town who isn’t owned by the developers–one who will look around at all the empty strip malls and business fronts and decide we should stop building new ones until the last set of new ones are actually occupied–just one who will say “maybe its time we stopped the mindless expansion and did some planning first”–and I’m here to tell you that there isn’t even one. Not even some obscure third party guy or gal. Certainly not in my town. In New York? Ha!

  5. RAFF says:

    Well – Of course developers are in it for themselves, as are the politicians- No new ground being broken on that front. Personally, I am 100% opposed to sweetheart public funding deals for Stadiums for that reason and many other reasons. But the real problem with the Citi-Field project, from a purely financial standpoint, is the “performance” of the Mets ownership in the whole deal. Per Mike’s remarks- They’ve taken their foot off the pedal, and revenues are plummeting. OWNERSHIP has not held up their end of the bargain, and the ULTIMATE GUARANTOR- The Taxpayer, has NO SAY in the matter.

  6. […] have written about the questionable Willets Point project before. Not so much that redevelopment of this land is needed, most feel it is, but why would this […]

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