Skip to main content

Forest City executive: AY lawsuits cleared by mid-2008

Could the planned Atlantic Yards arena (aka Barclays Center) open for the 2009-10 basketball season, as Forest City Ratner officially insists, even though the project is way behind schedule?

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.

AY overview

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.

(Emphasis added)

Long-term view

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.

Office market

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.

She commented:
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.

Moving cautiously

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.


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…