Skip to main content

Cash flow docs mystery: missing revenues, missing subsidies

The three pages of cash flow documents regarding Atlantic Yards, drawn up by Forest City Ratner and released last week by the Empire State Development Corporation (ESDC), contain some significant gaps compared to a yet-unreleased review conducted for the ESDC by the firm KPMG.

Notably, the documents released by the state agency omit millions of dollars in revenue that the developer would receive from ownership of the Nets basketball team and also omit millions in subsidies not enumerated.

Neither set of documents provides a clear sense of the project bottom line; for that, we’d need a full accounting of “sources and uses” of the funds. However, the unreleased document—which I and some other reporters have acquired, though not via the ESDC—goes much farther than the document publicly released.

The three pages released by the ESDC were dated 10/10/06 and 10/11/06; the 24-page KPMG report was dated December 2006, with the notation that its statistics were as of 12/19/06.that it referred to “certain cash flows and assumptions” in connection with Atlantic Yards. In other words, the latter document is more current.

More Nets gains

Regarding the Nets, the document released last week (right) has some gaps. The KPMG document includes $33.5 million in annual TV revenue and $27 million in “other Nets-related revenue,” figures that do not appear explicitly on the document at right.

That suggests more than $60 million annually should be added to the bottom line—a significant gain, given that the developer’s obligation to pay for the arena would be less than $44 million a year. That sum refers to debt service on tax-exempt bonds; it would be higher if the state required Forest City Ratner to pay for the arena directly rather than have it be “publicly-owned” by a state subsidiary.

Condos nearly $1M, reaping $1.5B

The KPMG document shows that the price for condos would be $850/square foot, a sum surely to go up when constructed by 2009 or later. Given condo sizes ranging from 1008 to 1072 square feet, the cost would be from $856,800 to $911,200, with an average of $884,000.

There would be 1930 condos, but 200 would be subsidized, so let’s put them aside for now. At $884,000, 1730 condos would result in $1.53 billion in revenues. (The project would cost $4 billion, but it’s hardly clear how much the developer is putting up.)

Smaller rentals

Note that the market-rate and affordable rentals would be significantly smaller than the condos. The 2250 market-rate rentals would average 714 square feet. The 2250 affordable rentals would average 665 square feet. (See my report on apartment sizes.)

Housing (and other) subsidies

A big mystery regarding the Atlantic Yards project regards housing subsidies. City officials have refused to make them public and, indeed, Forest City Enterprises executive Chuck Ratner indicated on Tuesday that the numbers remain under negotiation.

However, the document last week, in a footnote (right), indicates $1.15 billion in tax-exempt bonds, based on the Housing Development Corporation’s (HDC) 50/30/20 mixed-income program.

The KPMG indicates that program and more. Along with HDC’s program, it delineates $95,000 to $165,000 in low income housing credits per unit. It includes a 25-year tax abatement for the condos, based on the city’s 421- program, which has been used to finance luxury construction around the city.

It includes tax abatements for the commercial space, value unspecified, and $10 million in commercial rent subsidies. As for city and state infrastructure support, it cites $200 million. Now we know that’s up to $305 million, and $100 million includes land acquisition costs.

Retail and laundry revenues

Omitted in the documents released last week was any indication of retail income. The KPMG document indicates 200,000 square feet of retail at $30/square foot, or $6 million a year in rent.

The KPMG document even estimates laundry revenue at $10 monthly per housing unit. Let’s assume that all 6430 units would spend $10 a month (though the condos might include washers and dryers). That would reap $771,600 annually.

The bottom line

The bottom line is simple. We still need a more accurate accounting of the sources of funds and subsidies for this project, and the potential revenues.


Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

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…

So, Forest City has some property subject to the future Gowanus rezoning

Writing yesterday, MAP: Who Owns All the Property Along the Gowanus Canal, DNAinfo's Leslie Albrecht lays out the positioning of various real estate players along the Gowanus Canal, a Superfund site:
As the city considers whether to rezone Gowanus and, perhaps, morph the gritty low-rise industrial area into a hot new neighborhood of residential towers (albeit at a fraction of the height of Manhattan's supertall buildings), DNAinfo reviewed property records along the canal to find out who stands to benefit most from the changes.
Investors have poured at least $440 million into buying land on the polluted waterway and more than a third of the properties have changed hands in the past decade, according to an examination of records for the nearly 130 properties along the 1.8-mile canal. While the single largest landowner is developer Property Markets Group, other landowners include Kushner Companies, Alloy Development, Two Trees, and Forest City New York.

Forest City's plans unc…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…