Skip to main content

After Brennan's lawsuit, ESDC poised to release Ratner’s profit projections

Brooklyn Assemblyman Jim Brennan, joined by State Senator Velmanette Montgomery, has gone to court in an attempt to force the Empire State Development Corporation (ESDC) to answer his Freedom of Information Law (FOIL) request to see the projected costs, revenues, and profits for Forest City Ratner’s Atlantic Yards plan--a prelude to arguing for a reduction in the project’s size.

While Brennan's effort had been rejected by the ESDC under the administration of Gov. George Pataki, the New York Sun reports today that new Gov. Eliot Spitzer's administration has indicated that it's willing to comply--and the documents should be released shortly.

The ESDC, two months before it approved the Atlantic Yards project, last October rejected Brennan's FOIL request, though the ESDC later released a different fiscal document, regarding the plan’s projected fiscal impact, meaning the net new tax revenues to the city and state. (That number dropped dramatically in December.)

Brennan (right) last year sponsored an unsuccessful bill in the State Legislature to decrease the size of the project by 34% while adding affordable housing subsidies. The lawsuit, filed in state Supreme Court, states, “The purpose of the Requests is to enable the public to evaluate fully the relationship between such financial and business plans and the size of the Project, and whether the Project’s size and density could be reduced without endangering its economic viability.”

He said last October, “So that is a critical public question: how much money do they think they’re going to make on their market-rate housing, and how much money do they think the arena is going to make? How much money does the affordable housing need and where are they going to get it? Without that information, the public is shortchanged.”

What might the numbers say?

The question arises: Would the numbers support a downsizing? (Examining the plan before a recent 8 percent reduction in square footage, New York Magazine estimated Ratner's profits at up to $1 billion, or 25 percent.)

Or would they suggest that the “extreme density,” enabled by the state’s override of zoning, is necessary to a viable project? (If so, then should the city and state have punted on zoning--or made civic investments to ensure a more reasonably scaled project?)

[An interesting comment from developer Shahn Anderson on Brownstoner:
Forget about the big number that they will make (I'd estimate it at around a billion dollars), what is their real return on investment when they have been given atleast $300 million dollars up front from various city and state agencies to do the deal? Even if they end up spending $50 or a $100 million of their own equity outside of financing, at the end of the day, they will make 1000% to 2000% ROI from what they actually invested. ]

Legal requirements

Develop Don’t Destroy Brooklyn (DDDB) in September 2005 requested such a document of the Metropolitan Transportation Authority (MTA), noting that the agency, in its Request For Proposals for the Vanderbilt Yard, required that pro forma cash-flow statements, with documentation of fiscal assumptions for a 20-year period, be included as part of the bid. However, the MTA did not comply.

In rejecting Brennan's request, the ESDC stated that, according to the law, it may deny access to records or portions thereof that "are inter-agency or intra-agency materials which are not... statistical or factual tabulations or data." So the ESDC's rationale, Brennan said last year, must be that the business plan is not a statistical or factual tabulation.

The lawsuit reveals that Brennan’s internal appeal to the ESDC was denied, with an additional justification attached: the agency believed that the information could either impair ongoing negotiations or reveal trade secrets.

Given the “enormous socioeconomic impacts” on local constituents, the lawsuit states, “it strains credibility” that the requests would be exempt under FOIL, given that the law was enacted to support “the people’s right to know the process of governmental decisionmaking.”

Brennan has long called for a reduction in the project's size, along with several other Brooklyn Assemblymembers. Montgomery, along with City Council Member Letitia James, has more directly opposed the project.

FCR's defense

Last July, Forest City Ratner executive Jim Stuckey, speaking on the Brian Lehrer Show, was hit with a similar request, from Develop Don't Destroy Brooklyn spokesman Daniel Goldstein, and stood his ground.

He declared, “We’re not going to discuss the profit on a project that hasn’t gone through a public approval process yet. We’re a public company. We have annual reports…In order to get whatever profit we ultimately do make, we also have to spend a tremendous amount of money on infrastructure that the government isn’t paying for, and no one else has stepped up to the table to pay for, for many many years.

Actually, the project has since received public approval, by the ESDC and then the Public Authorities Control Board last December.

Stuckey, however, added another caveat, “At the end of the day, until this project is approved, until we see what the ultimate cost of the infrastructure will be, it’s very hard to make these determinations.”

Given the elastic cost of infrastructure, that day could be far off--unless the state (or a court) intervenes.

Comments

Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…

Former ESDC CEO Lago returns to NYC to head City Planning Commission

Carl Weisbrod, Mayor Bill de Blasio's City Planning Commission Chairman and Director of the Department of City Planning, is resigning,

And he's being replaced by Marisa Lago, currently a federal official, but who Atlantic Yards-ologists remember as the short-term Empire State Development Corporation CEO who, in an impolitic but candid 2009 statement, acknowledged that the project would take "decades."

Still, Lago not long after that played the good soldier at a May 2009 Senate oversight hearing, justifying changes in the project but claiming the public benefits remained the same.

By returning to City Planning, Lago will join former ESDC General Counsel Anita Laremont, who after retiring from the state (and taking a pension) got the job with the city.

Back at planning

Lago, a lawyer, in 1983 began work as an aide to City Planning Chairman Herb Sturz, and later served as the General Counsel to the president of the NYC Economic Development Corporation, Weisbrod himself.