Well, officials from parent Forest City Enterprises (FCE) didn't assert an arena timeline yesterday during a conference call with investment analysts. However, when one executive predicted that legal cases challenging the project likely would persist through the midpoint of 2008, he again provided evidence that contradicts the company's stated timeline, which assumed that arena block would be flattened by now.
[Update 12/30/07: Forest City Enterprises ends its fiscal year in January, so the end of the first half of FY 08 would be July 31, 2008]
Without resolution of the Atlantic Yards legal cases--a pending challenge to the environmental review in state court, and a federal eminent domain appeal to be heard on October 9--certain buildings can't be demolished and/or construction can't go forward.
Could the cases be closed in less then ten months? That's not implausible, but it's not a lock, either. It implies success at the appeals court level for the defendants in both cases and (likely) no final appeals to the U.S. Supreme Court or the New York State Court of Appeals. So further legal delays could push the timeline back even more.
Yesterday FCE's Bob O’Brien (right), Executive Vice President, Strategy and Investment Management, provided an overview of several projects, and got to Atlantic Yards at about 22:00 of the webcast:
We continue to move forward with our most visible and perhaps most ambitious project, Atlantic Yards. As we’ve indicated previously, we’ve acquired or controlled the vast majority of the land in Brooklyn necessary for this development. We’ve obtained all of the public approvals needed to proceed with this development. However, those approvals have been challenged in the courts. We are working with the support of the city and state and other interested public parties to defend and clear those lawsuits. We remain confident in our positions in all legal challenges and we are targeting resolution by the first half of fiscal year 2008.
Our long-term objective there is to build the Nets basketball team into a great franchise, relocate them to Brooklyn, a city of more than two-and-a-half million people, and develop a large-scale mixed-use project with the Nets and a Frank Gehry-designed arena as catalysts for the project and the further revitalization of downtown Brooklyn. Our commitment to build not only market-rate but also affordable housing as part of this development is one of the largest of its kind and addresses a significant housing shortfall for the people of New York.
Forest City CEO Chuck Ratner (right), at about 32:00, again spoke about how the developer's long-term commitment to projects ultimately pays off. He cited MetroTech in Brooklyn as among several "ten to 20-year projects, and all had significant uncertainty in a time of significant risks," but worked out well for the company and investors.
He was not quite so candid as he was last March, when he acknowledged:
We are terrible, and we’ve been a developer for 50 years, on these big multi-use, public private urban developments, to be able to predict when it will go from idea to reality.
However, the timeline flexibility he mentioned again suggested that Atlantic Yards likely would not take ten years, as planned.
One investment analyst pointed out that Forest City seemed to be putting more emphasis on retail and housing. What's the outlook for office space?
The New York portion of that answer was turned over to Joanne Minieri (right), the Executive Vice President and Chief Operating Officer of Forest City Ratner in New York. Her answer, at about 43:45, contained enthusiastic words but was delivered in a less authoritative tone, perhaps given the current slowdown in the Brooklyn office market, and the cut in projected Atlantic Yards office space.
We think it’s still a very strong office market, we continue to look for opportunities where they exist and as part of—some of the development in the Atlantic Yards project, there will also be some office opportunity there. Y’know, we’re very committed to the office development.
We believe New York is a strong market. We’re committed to the office business in the New York area. We’ll continue to look for opportunities to the extent they’re available. Land is difficult to find, but we keep our options open, and we’ll continue to produce that product here in the city.
Forest City Ratner has a considerable amount of land at Atlantic Yards for its office business. It just chose (for now) not to build office space, likely because housing is more lucrative and a switch from office space placated Assembly Speaker Sheldon Silver, who was concerned about competition with his Lower Manhattan district.
At about 47:50, Chuck Ratner talked about moving cautiously, and placed a special emphasis on Atlantic Yards:
As we’ve told you guys often, as a large developer, perhaps the more risky part of the real estate business, as opposed to acquisition, but the part where we think we can add more value, clearly you have to look to ways to moderate and manage your risks. And one of the ways we’ve learned that you manage and moderate your cost risks is by making sure you don’t start before you have complete plans and prices.
Particularly in a market with the kind of cost pressure that New York has and building a building with a signature architect like Frank Gehry, we’re being very cautious and careful that we know where we are before we start, and Joanne and her team have done a great job of managing this process.
Investor conference in NYC
On October 9, the same day the eminent domain appeal will be heard in federal court in New York, FCE will hold an "investor conference" during which analysts will get a closer look at the New York portfolio, including the site of the conference, the new Times Tower developed by Forest City Ratner along with the New York Times Company.
"It'll be a great day, an exciting day; you'll get to meet our New York team," said Chuck Ratner in closing the conference call yesterday.