Friday, July 31, 2015

Atlantic Yards, Pacific Park, and the Culture of Cheating

I offer a framework to analyze and evaluate Atlantic Yards (in August 2014 rebranded as Pacific Park Brooklyn) and the Barclays Center: Atlantic Yards, Pacific Park, and the Culture of Cheating.

Note: this post is post-dated to remain at the top of the page. Please send tips to the email address above, rather than posting a comment here.

model shown to potential immigrant investors in China in 2014,
though not shown publicly in Brooklyn.

Hockey News: Islanders' deal in Brooklyn is unique, as arena guarantees annual sum; fan base shifting to Brooklyn (as with Nets)

The New York Islanders, from a business perspective, will not mirror the Brooklyn Nets, but they are reframing their fan base, as have the Nets, as the hockey team moves from Long Island. Not so many fans will move with them, but there are enough people in Brooklyn and New York City to pay new, higher ticket prices.

Essentially, the hockey team no longer administers or controls its own business operation, a highly unusual situation.
The agreement to move the franchise includes the provision that the arena pays Islanders ownership an annual sum to play at Barclays Center and, in exchange, Barclays Center acquired all ticket and suite sales, sponsorships, marketing and promotions and their revenue.
While Barclays Center (and Brooklyn Nets) CEO Brett Yormark confirmed that, the Islanders wouldn't comment. Nor would anyone confirm the sum, though last year the New York Post reported, using unnamed sources, that the guarantee was $50 million annually.

Reports Hackel:
“We did make a revenue guarantee – I’m not going to discuss what the number is – but the number, when we hit it, would only put us 20th in the NHL in revenue,” [Yormark] said.
If so, that number would be around $100 million, using Forbes’ most recent listing of the 30 NHL club revenues. After that number is reached, Barclays Center ceases sharing and keeps the surplus.
Glenn Gerstner, chairman of the Sports Marketing Department of St. John’s University in New York (and a longtime Islanders fan) told Hackel that Islanders owner Charles Wang has essentially outsourced his team’s business department, thus saving overhead.

Hackel suggests it's unclear how the arrangement will work for the team, especially since they can't raise ticket prices to pay for new players. (Current payroll is under $67 million.) Still, he notes that Forbes estimated the most recent team revenue figure at $83 million, with losses of $2.5 million, less than 2012 losses, according to the Times, of $8 million.

The $50 million is by no means the only team revenue. There's a TV deal worth an estimated $20 million a year, and rising, plus league revenues, perhaps $20 million a team, plus sponsorship and licensing fees. Thus, Hackel suggests, the $90 to $100 million annually would trump previous losses, as well as the previous $83 million, which counted overhead.

More expensive tickets, a new fan base

Reports Hackel:
Yormark says Islanders tickets at Barclays Center are roughly twice the price of a ticket at Nassau Coliseum, although the premium tickets include free food and other inducements.
That's a bit unclear, since the premium tickets are only a fraction of the total. About 25% of ticket sales "come from the established Long Island fan base, a larger percentage than he expected." (Maybe not a larger percentage than Islanders' fans expected?)

People from Brooklyn represent 33 percent of the total, with 21 percent from Manhattan. That's similar to the strategy with the Nets, which got a significant Brooklyn boost and fewer New Jersey fans than originally expected.

Indeed, unlike the family-friendly Nassau Coliseum schedule, with many games on weekends, the new schedule is oriented to weeknights--a corporate crowd, one expert tells Hackel--with four home games on Saturdays and three Sunday or holiday Monday matinees. 

That also cuts down on weekend traffic problems in Brooklyn but also kills some fan traditions.

The comments on Lighthouse Hockey's coverage included this message from a frustrated fan:
Abused By Barclay Already
I was a 25 yr Full Season Tix holder who got sucked into an 8 game package at Barclays. While I am not happy about it, I understand that I am paying $70 a game for the same seats that sell to full season tix holders for $55.HOWEVER, they never told me one of my 8 games would be an exhibition, excuse me, "preseason" game. That is BS!!! You can’t give those tickets away. I see them forcing the full season ticket guys into paying $55 for them but itSUCKS that they are ripping me off for $70. I see the legalese in my contract that says they may use a "preseason" games but I am not an attorney, I’m a Hockey Fan! But not a Barclays Fan! I am trying to get out of my contract, doubt they will let me, and I will never go again!!!!!. Already taking a lesson from Mr Dolan at MSG and abusing their most loyal fans…. I’m PISSED!!
by Dr Gary on Jul 20, 2015 | 12:29 PM 
Introducing the new home

The Times reported, 7/9/15, Islanders Still Touching Up Their New Home:
Water dripped from high above the ice on at least one row of the makeshift press area Wednesday, and the 10,000-square-foot space that will include the new locker room for the Islanders, who announced in October 2012 that they would begin playing in Brooklyn in the 2015-16 season, remains at least a month from completion.
Still, General Manager Garth Snow and Steve Rosebrook, the arena’s general manager, were beaming before the team’s rookie scrimmage as they led members of the news media on a tour of the still-under-construction rooms for the player lounges and fitness areas.
...Fans will need to carve out new routines. Saturday games — a Nassau Coliseum staple — will be nearly gone; the team has only four such contests next season, with two of them in early April, in the season’s closing weeks.
Most games will take place on weeknights, although there will be several Sunday afternoon games, including one against Edmonton on Super Bowl Sunday in February.
Then there are the quirks of Barclays Center, which features an off-center scoreboard, several hundred seats with obstructed views and the overall feel of a basketball arena.
...Barry Baum, Barclays Center’s chief communications officer, said 8,000 full-season Islanders ticket plans had been sold. On Thursday, tickets for all games go on sale to the public

Thursday, July 30, 2015

If first condo building will have private open space (maisonette court), what about the other three? Developer won't answer

I'll have a more extensive report from Tuesday's meeting of the Atlantic Yards Community Development Corporation (AY CDC) after Board Materials are posted. But the one agenda item up for a vote--to recommend minor changes in the open space design guidelines--passed uneventfully.

Well, we all know that the rendering below of the Atlantic Yards/Pacific Park open space is a bit fanciful, given that the concept plan from landscape architect Thomas Balsley Associates somehow includes street trees on the Sixth Avenue Bridge between Pacific Street and Atlantic Avenue, as well as the east side of Vanderbilt Avenue, which is outside the project boundaries.

At one point during the meeting Tuesday, Balsley--who made a presentation to the board that was well received--was asked by board member Jaime Stein, "Can you describe separating private space from public space?"

"There's no private space," Balsley responded, then corrected himself. "There is one maisonette that has private space shielded" from the public space. See item #25 in the schematic below--marked with the arrow--for a "maisonette court" associated with 550 Vanderbilt, the first of four condo buildings on the site.

A maisonette, according to StreetEasy, is a hot concept in real estate today:
By NYC standards, the current definition of a maisonette is a ground-floor or first-floor condominium or co-op apartment that has a street-level and private entry, thus affording celebrities or recluses a dwelling in which there’s easy and anonymous in-and-out access
In this case, it also has its own patch of green.

More maisonette courts coming?

If a maisonette is a profitable concept, and there are three more condo buildings coming, it seems likely that Greenland Forest City Partners is considering or planning maisonette courts for the three future condo buildings.

At the meeting, I posed that question: will that be the only maisonette court, or will other condo buildings have maisonette courts?

Forest City Ratner executive Ashley Cotton wouldn't answer, even after I rephrased the question to ask if they were ruling it out or in.

That non-response, to me, suggests there will be future maisonette courts. And the next iteration of Balsley's pleasant concept plan will need an update.

Deconstructing some Pacific Park puffery: not a park; not (mostly) over rail yard; not open 24/7

Solish (l.), via Bisnow
From the real estate publication Bisnow, 5 THINGS RESIDENTIAL DEVELOPERS SHOULD NEVER DO:
[Greenland USA director of development Scott Solish] also pointed out that Greenland’s Pacific Park project in Brooklyn will include an eight-acre park built above a former rail yard that’ll be open to the public 24/7 and help connect parts of the borough that had been cut off from each other, plus a new public school.
I don't know whether that sentence is verbatim Solish, or journalistic shorthand, but there are several errors.

Actually, it won't be a public park, but rather publicly accessible, privately managed open space. 

It won't be open 24/7--though there won't be gates, official hours, according to the project's Design Guidelines, will be open from 7 am to 8 pm (or sunset, if later) from Oct. 1 through April 30, and from 7 am to 10:30 pm from May 1 through Sept. 30. (By contrast, city parks are typically open far more hours, from 6 am to 1 am.)

Only pieces of the open space will actually be over the Vanderbilt Yard; the single largest component is the bed of Pacific Street, demapped between Carlton and Vanderbilt avenues.

Will the green space connect parts of the borough? Well, somewhat, but mapping new public streets--and open space at the street line, rather than behind buildings--would do more.

As for the new public school, it will only partly meet the demand caused by the new residential population.

Wednesday, July 29, 2015

Atlantic Yards Watch: neighbors notice after hours work at B14 site with late notice;

Well, neighborhood activists noticed the same thing I did, the belated notice for after-hours concrete pours at the B14 site, as Peter Krashes wrote Monday night on Atlantic Yards Watch, Late night work on 535 Carlton with late notice; cement truck down Carlton Avenue:
A cement pour continues to take place tonight at 535 Carlton Avenue. There was no notice of the late night work before the work took place -- I stumbled on it trying to identify where the noise was coming from. I documented it at 6:15 PM and again at 7:15 PM. You can see the fellow with the orange vest sending a text in the video below. A community notice from the Pacific Park Community Liaison, but not the State went out at 6:45.

I checked the construction update distributed last week and there is no notice of the late night work. The State has not given notice. That is surprising since Pacific Park's (late) notice warns of late night work all week. Such a meaningful amount of late night work ought to be included in a State construction update.

Here's the vieo:

Just after filming this, a cement truck came to the site via Carlton Avenue. The video camera in my phone stopped working unfortunately, so I was unable to capture it. The truck came down Carlton (not sure from what point, but certainly at least as far south as Bergen, maybe further south), and drove directly into the site. I asked if this had been happening all day. The construction worker manning the entrance said that it was happening because the Carlton/Pacific intersection gate was the only one open. The gate at Pacific and Vanderbilt was closed. I was able to take a still shot of the closed gate on Vanderbilt. It is attached. [Below]   HDR should be able to verify this. The truck that came down Carlton did so just after 7. What is the chance someone is logging trucks as they enter the site?
Complaint # for use of illegal truck route (residential street at least from Bergen Street to Pacific Street:

Tuesday, July 28, 2015

Today's AY CDC board meeting: presentation on open space, then a vote to endorse changes (where's the transparency?)

AY CDC responsibilities
Today will be an interesting milestone for the Atlantic Yards Community Development Corporation (AY CDC), established last year as a partial concession to community concerns about project oversight. (It was secondary to an agreement to set a new construction schedule.)

The AY CDC's responsibilities include monitoring developer compliance with public commitments, monitoring quality of life issues, and "reviewing proposed changes to Project plan and agreements, and advising ESD board accordingly in advance of votes."

So the latter is apparently on the agenda (bottom) for today's (hastily announced) AY CDC meeting.

Open space changes, and a fishy sequence

Not only will the AY CDC board observe a presentation about the "open space concept design" by landscape architect Thomas Balsley--not a "park," as I wrote 7/7/15--it also will vote on an authorization "to recommend" that the board of parent Empire State Development (ESD) approve modifications to the open space design guidelines.

That strikes me as fishy. First, the opportunity for public comment, as noted in the agenda, comes after this agenda item. If the board members are supposed to reflect or canvass public opinion, shouldn't they wait?

(Update: there was opportunity for public comment after each agenda item, as well as a general opportunity for public comment. Still, members of the public only learned of proposed changes at the meeting.)

More importantly, the proposed modifications have not been shared with the public--AY CDC board materials get posted after the meetings, though ESD board materials are posted very shortly before meetings.

So there's little chance board members have had an opportunity to get feedback. (Not that most board members have displayed significant engagement.)

If so, that suggests the AY CDC is being used as a rubber stamp.

Perhaps these changes are relatively minor but bureaucratically necessary. (Did they move up the AY CDC meeting from its tentatively scheduled August date to today in order to get the recommendation done before the next ESD meeting?)

But it suggests a worrisome pattern. When larger changes emerge, will they be sprung on the public with one day's hint and no opportunity for informed comment?

The agenda

At last minute, late-night work announced at B14 site through Friday; up to 20 trucks pouring concrete

At 6:42 pm last night--already after the 6 pm end time for standard construction hours--the Pacific Park Brooklyn Community Liaison Office sent a Community Notice:
Late night work (5) nights between Monday, July 27, 2015 and Friday, July 31, 2015
Temporary Late Night Work at B14 - 535 Carlton Avenue Site [at Carlton Avenue and Dean Street]

Please be advised that during the week of July 27 - July 31, 2015 contractors will be working until 9:00 pm.

Pursuant to their permit, contractors will be doing concrete pours and installing vapor barriers as part of the foundation work. The pours are expected to involve up to 20 concrete trucks, all of which will access the site via the Pacific Street gates. Truck staging will take place within the project site and/or along Pacific Street between Vanderbilt and Carlton Avenues.
Note that, while surely they had plans for this late night work, it was not announced in the most recent two-week Construction Update, issued just a week earlier, on July 20. (The Update did say that Saturday work would begin.)

Also note that the Community Notice came directly from the developer, Greenland Forest City Partners, not Empire State Development, the state agency that is supposed to oversee the project and which issues the Construction Updates (which are first prepared by the developer).

Monday, July 27, 2015

In modular tower dispute, judge mostly rejects Forest City effort to narrow Skanska's case for damages

Ruling in the preliminary stages of a bitter legal battle, state Supreme Court Justice Saliann Scarpulla rejected most of Forest City Ratner's efforts to narrow one of the three lawsuits between it and Skanska USA regarding their ill-fated and now dissolved partnership over the delayed modular tower known as B2.

Forest City Ratner and its affiliate Atlantic Yards B2 Owner aimed to get most of Skanska's lawsuit dismissed before the case moved further toward trial. The decision (see bottom), dated 7/16/15 and released on 7/20/15, mostly favored Skanska, although it's still early in the process and does not portend an ultimate victory. Forest City did win on a few arguments.

Neither side publicized the decision, perhaps because neither could claim unambiguous good news. But I suspect that had Forest City won more, given its aggressive press strategy, it would have pitched the news to a receptive reporter.

The background

Skanska agreed to lead the fabrication of the modules for B2, slated to be the world's tallest modular tower, and to construct the building, the first of what was purported to be a 100% modular buildout for the full Atlantic Yards project. A company affiliate, Skanska Modular, partnered with FCRC Modular, a Forest City affiliate to form FC+Skanska Modular, to build the modules.

After cost overruns, delays, and warnings about defects, Skanska closed the factory in August 2014, to Forest City's protest, with B2 having risen only about one third of the planned 32 stories. Forest City has since reopened the factory under its own management and is completing the building, which it owns 100%, after buying out partner Arizona State Retirement System.

However, Greenland USA, the new majority owner of the remaining Atlantic Yards/Pacific Park project, has decided that the next buildings would be built conventionally. Only after B2 is completed will we see whether the factory at the Brooklyn Navy Yard is used for other project buildings or other buildings in New York City.

Efforts to narrow the case rejected

The defense aimed to partially dismiss Skanska USA Building's second and third causes of action, as well as parts of the first cause of action. The first two causes of action each sought $30 million in damages.

In the first cause of action, Skanska claimed that the B2 Owner breached the Construction Management Agreement (CM Agreement) in seven ways, including by providing an incomplete design, failing to make timely payments, and failing to provide a factory and factory workers with sufficient skills. The defense argued that five of the seven breaches should be dismissed.

Regarding the alleged breach regarding insufficient and incorrect design, Forest City claimed the charges were vague. Scarpulla wrote that Skanska did provide sufficient specifics and that, contra Forest City's claim that Skanska waived any chance to protest against defects, the B2 Owner had agreed it would be liable to increased costs resulting from design flaws.

Scarpulla did not, however, grant Skanska's opposing request for summary judgment regarding these issues, instead leaving them for future court motions and a potential trial.

Regarding the alleged breach regarding the failure to issue change orders or directed changes for additional work or costs, Scarpulla agreed that the request for dismissal was "procedurally premature."

Regarding the alleged breach regarding Forest City's failure to make financial arrangements to fulfill its obligations, "B2 Owner fails to conclusively demonstrate that it provided financial assurances," wrote the judge, again leaving the issue for future legal jousting.

Efforts to narrow the case accepted

Regarding the alleged breach in failing to post a bond, the judge agreed that, in this case, there was no contractual provision that requires B2 Owner to comply with the Lien Law.

Regarding the alleged breach in failing to deliver a sufficient factory and labor force in a timely manner, B2 Owner cited a union agreement and a lease--and the judge agreed that the CM Agreement does not require a timely factory and adequate workforce.

Another route to damages OK so far

In the second cause of action, Skanska again charged  that it hadn't been paid on time and that B2 Owner had failed to issue change orders and pay for increases in costs caused by the owner.

The defense argued that this should be dismissed as duplicative, while Skanska said that this was an alternate theory, seeking common-law damages rather than those based on contract terms. The judge agreed that it was not entirely duplicative and did not dismiss it.

Piercing the corporate veil

In the third cause of action, Skanska aimed to "pierce the corporate veil," arguing that Forest City and its affiliates controlled B2 Owner, while that entity has no assets from which it can pay a judgment.

The judge denied Forest City's motion to dismiss, noting that Skanska showed that B2 Owner and other Forest City entities had overlapping ownership, personnel, and addresses.

 "Using underfunded subsidiaries or related single-purpose entities as a shield from liability arising from a construction contract is conduct that may support a claim for piercing the corporate veil," Scarpulla wrote.

Forest City keeps defense counsel

Skanska unsuccessfully tried to disqualify the defense counsel Troutman Sanders, saying that the firm represents another subsidiary of Skanska USA, Skanska Civil Southeast. According to the Rules of Professional Conduct, the judge wrote, a lawyer must get consent to represent a party adverse to the corporation's affiliates only when that affiliate "should also be considered a client of the lawyer."

Skanska and Skanska Civil, wrote Scarpulla, "do not have such an overlapping structure that Skanska should be considered a client of Troutman." For example, they have separate presidents and separate general counsels. There was no evidence that Troutman's role representing the Skanska affiliate could yield secrets related to the Skanska-Forest City dispute, she wrote.

Skanska also said the representation was adverse to a Skanska Civil director, Richard Kennedy, who is a defendant in a related suit filed by Forest City against Skanska. Troutman is not formally  involved in that case, but Skanska alleged that the firm is collaborating with the counsel of record, Kramer, Levin. The judge did not directly address that allegation but subsumed it, apparently, under her overall ruling regarding the issue of representation.

Sunday, July 26, 2015

CompassRock (Stuy Town) will manage two all-affordable Atlantic Yards/Pacific Park buildings

According to CompassRock, a real estate management firm that manages Stuyvesant Town/Peter Cooper Village in Manhattan, CompassRock Real Estate LLC Chosen to Manage Two Affordable Buildings at Pacific Park Brooklyn:
New York, NY (July 13, 2015) – Manhattan based property management company CompassRock Real Estate LLC announced today that it has been awarded management of two of the new rental residential developments within Pacific Park Brooklyn (formally known as Atlantic Yards) in Brooklyn, NY. The first of the new developments, 535 Carlton Avenue, is expected to open in the fall 2016, the second; 38 Sixth Avenue is expected to open in early 2017. Both buildings will be 100% affordable and will contain retail and commercial space.
“We are extremely excited to be working alongside such a well-respected partner as Greenland Forest City Partners. The entire CompassRock management team is looking forward to delivering the highest quality service for the owner of the buildings and future residents,” said David Sorise, CompassRock’s Chief Operating Officer.
CompassRock, apparently, will not be managing the luxury condo building coming at 550 Vanderbilt Avenue. Nor has a manager been announced for the 50% affordable/50% market modular building at 461 Dean Street.

From the CompassRock web site:
What We Do
CompassRock Real Estate provides multifamily property management services for approximately 30,000 units in major markets across the United States. We are primarily contracted by institutional owners, lenders and special servicers and manage all levels of apartment communities.
CRRE and the senior management team have developed a strong client list and relationships with many institutional owners, asset managers and financial institutions.
According to the company's web site, CompassRock does not currently manage any buildings in New York City outside Manhattan.

Saturday, July 25, 2015

Brooklyn Nets didn't make Forbes's 2014 list of 50 Most Valuable Sports teams. Now they're #24.

It's astounding, isn't it?

The Brooklyn Nets didn't come too close to making Forbes's list of The World's 50 Most Valuable Sports Teams 2014, in which #50, AC Milan, was valued at $856 million. 

(At the time, the Nets were valued at $780 million, more than doubling in two years.)

But they're now in the top half of the magazine's latest list, The World's 50 Most Valuable Sports Teams 2015, valued at $1.5 billion (since January).

That's not because the Nets started selling that many more tickets. In fact, some season ticket prices most recently went down.

Nor is it that the Nets stand to have a strong season, given that they're represented in the Forbes slideshow by the non-star Jarrett Jack and pundits at Sports Illustrated predict they'll be the league's fifth-worst steam.

New TV deal makes the difference

But, as Forbes reports, pro sports team owners are making big money from new media deals: 
The NBA inked a $2.66 billion-a-year deal in October with ESPN and TNT, which was triple the previous rate. 
So that's meant a re-set:
The world’s 50 most valuable sports teams are now worth $1.75 billion on average, up 31% from 2014. The minimum valuation to make the cut is $1.15 billion, versus $856 million a year ago, thanks largely to the soaring worth of NBA and MLB teams. The top 50 includes 22 baseball and basketball franchises, compared to only 10 in 2014.
So, not so bad a time for minority owner Forest City Enterprises to be selling the 20% share of the team owned by Nets Sports & Entertainment.

DNAinfo: Fifth Avenue BID installs sign to lure arena visitors

From DNAinfo, Lighted Sign Seeks to Lure Barclays Center Visitors to Park Slope's 5th Ave
PARK SLOPE — A merchants group is hoping a lighted sign over Fifth Avenue will make the street look more inviting to visitors from the Barclays Center.
The Park Slope Fifth Avenue Business Improvement District installed an arched sign with the words "Park Slope's Fifth Avenue" over Fifth Avenue and Dean Street on Wednesday, said the BID's executive director Mark Caserta.