Skip to main content

The Wall Street Journal, on real estate and AY, needs some footnotes

A Wall Street Journal real estate column (full text for subscribers only) today tagged BLUEPRINT/Brooklyn and headlined 'Dem Bums' No Longer: A Borough on the Rise, begins:
About five decades after the Brooklyn Dodgers moved to Los Angeles, some investors are betting that a planned arena for the Nets NBA team and a residential building boom will help clinch the borough's comeback--and push up its commercial real-estate values.

That's an odd formulation. In many ways, the borough has already come back--residential real estate values have rocketed and the question has been managing growth and maintaining affordability. And commercial real estate has been a sideshow, as both plans by the city and Atlantic Yards developer Forest City Ratner have changed dramatically.

But the column's about commercial real estate, and there's little room for complexity.

On to AY

More than half the article is devoted to Atlantic Yards, even though the project is less and less about commercial real estate:

Among the largest projects planned is the $4 billion Atlantic Yards project being developed by Forest City Ratner Cos., an affiliate of Cleveland-based Forest City Enterprises Inc. The mixed-use development was designed by Frank Gehry and is partially located over rail yards on the edge of downtown Brooklyn. It is planned to include more than 6,000 residential units and the arena for the Nets, who play in New Jersey. There also will be an office tower, dubbed "Miss Brooklyn" because Mr. Gehry's design is said to have been inspired by a bride. Forest City Ratner plans to begin construction on the arena this fall and have the Nets in Brooklyn for the 2009-2010 season.

Unmentioned: that schedule is highly unlikely.

How much office space, at what cost?

The article continues:
Miss Brooklyn is expected to command rents in the $50-to-$60-a-square-foot range, according to MaryAnne Gilmartin, executive vice president for Forest City Ratner. That is above the $30 average asking rent in Brooklyn, which has historically appealed to financial-services companies as an affordable back-office location that offers good value in comparison to Manhattan. But Glenn Markman, an executive director at Cushman & Wakefield, believes the borough will attract new types of companies, such as those in creative industries that will be willing to pay higher rates for a signature building.

Maybe. The New York Times reports today some comparisons:
Landlords are asking $36.85 a square foot on average for Class A office space in Jersey City now, up almost 14 percent from a year ago. During that time, average asking rents in Lower Manhattan rose more than 25 percent, to $50.59, according to Cushman & Wakefield, a real estate services company.

Actually, according to projections in a Forest City Ratner document released in response to the lawsuit by Assemblyman Jim Brennan and State Senator Velmanette Montgomery, Class A office space is expected to rent at $39 for the first five years, $42.90 for the next five years, $47.19 for the next five years. It would top $50, at $51.91, only beginning in year 16. (See p. 9 of this PDF.) Those projections are almost a year old, but Brooklyn still has a good amount of empty office space.

Unmentioned: the severe cutback in planned Atlantic Yards office space, from about 2 million square feet to 336,000 square feet, and thus a cut in projected jobs. While Brooklyn may attract creative industries, the justification for the Downtown Brooklyn rezoning, and the initial Atlantic Yards office space, was to meet the need for back office space--large floor plates in large building sites for non-creative industries like financial services.

Public opposition

The article continues:
The plan still faces opposition from area residents and legal challenges. Daniel Goldstein, a spokesman for a group opposed to the project called Develop Don't Destroy Brooklyn, says many residents are concerned their neighborhood will be changed for the worse by traffic generated by the arena and the nature of the overall development, which, they fear, will alter the diverse racial, ethnic and socioeconomic groups that make Brooklyn special.

Beyond that fuzzy summary, the challenge in state court takes on the government's dubious claims of blight, while the challenge in federal court argues that eminent domain must proceed via a more transparent and democratic planning process.

Developer responsiveness?

The article concludes by giving the developer the benefit of the doubt:
Ms. Gilmartin says Forest City has cut about one million square feet from the project and has worked with state, city and local leaders to address issues of scale and density. In addition, she says the project's location over one of the city's biggest transit hubs makes sense because it will give people access to public transportation, which can help limit traffic.

Gilmartin seems to be channeling her mysteriously-departed predecessor, Jim Stuckey: the project, in terms of square footage, is about the same size as announced, an issue that flummoxed the press nearly a year ago. Of course density is appropriate near a transit hub; the issue is not the prospect of density, but how much.


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…

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…

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…