Thursday, April 19, 2007

Would stay on demolitions unduly delay arena? FCR is already behind pace for 2009 opening

In court papers filed earlier this week opposing a temporary restraining order to block demolitions on the Atlantic Yards site, Forest City Ratner VP Jim Stuckey says the developer would face significant losses even over a few months—and that a delay would jeopardize the planned 2009 opening of the arena.

However, as lawyers for the plaintiffs point out, the developer “appears to already have virtually abandoned the construction schedule” published in the Atlantic Yards Final Environmental Impact Statement that would lead to a 2009 arena opening

Indeed, according to the schedule (from the Final Environmental Impact Statement, Chapter 17), demolition of buildings on blocks needed for the arena was to begin 11/1/06. This page was dated 7/10/06 yet included in the FEIS released 11/27/06. Click on the graphic below to enlarge, or go to the original PDF.

The demolition was to be completed by 7/2/07. However, several buildings in the arena footprint undoubtedly will remain enmeshed in litigation well beyond that date.

Workaround?

Stuckey suggests that the developer is working around the buildings it doesn’t have:
The current work is proceeding in accordance with an intricate schedule that is intended to allow the new arena to be completed in time for the Nets to relocate there for the 2009-10 National Basketball Association season. FCRC’s construction schedule has been carefully drawn to allow the arena to be ready for the 2009-10 season by commencing work now on vacant properties that are owned by FCRC, the MTA and the City, with work on properties that are owned or occupied by other parties deferred until the pending judicial challenges to the Project have proceeded to a point where ESDC is in a position to actually use its powers of eminent domain to acquire title to and possession of those properties. Therefore, even a short delay in the ongoing work could jeopardize the arena’s availability for an entire season, and thus would expose the Nets to additional operating losses of about $35,000,000 a year.

In another filing, Forest City Ratner attorney Jeffrey Braun backs up Stuckey:
As the Stuckey affidavit points out, FCRC’s construction schedule is designed to complete the area in time for the 2009-10 basketball schedule by working on properties owned by FCRC affiliates, the MTA and the City now, while deferring work on other properties until later.

However, the construction schedule is clear. Workaround or not, demolitions are to be completed by 7/2/07.

$4.15M a month in losses

Stuckey cites the costs of carrying the property without generating income, the escalation of construction costs, and the prolongation of the Nets operating losses “arising from its use of the current inadequate arena in New Jersey.”

He states:
At this time, it costs FCRC about $2,400,000 per month to carry the real property that it has acquired for the Project and the overhead that is in place to work on the Project - a figure that does not include FCRC's legal fees and also does not include the operating losses that the Nets basketball team, which has been owned by an FCRC affiliate since early 2004, and continues to incur while it is based at its current venue in New Jersey. In addition, delay on a project such as this one probably would subject FCRC to significant escalations in its eventual construction costs. Given the active real estate market and the magnitude of the Project, FCRC calculates the escalation as equal to nearly $1,750,000 per month.

The same issue came up in February 2006, when Forest City Ratner was fighting an effort to block the emergency demolitions of five properties it owned. Then, when the developer presumably had less overhead, Stuckey in an affidavit claimed $2.5 million a month in carrying costs, plus $1.4 million a month in construction cost escalation.

The construction schedule
(click to enlarge or go to the original PDF)

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