Skip to main content

Lessons not-so-new from the Newark arena: cost overruns, plan changes, and yet-unmet promises

The new Prudential Center arena in Newark has gotten high marks from those attending concerts and hockey games so far. As the first new arena in the New York area in more than a quarter-century, it offers state-of-the-art amenities—but likely will be surpassed if/when the Barclays Center arena, designed by Frank Gehry, is built as part of the Atlantic Yards project.

The larger story of the Prudential Center, however, may have some sobering if unsurprising lessons for Brooklynites. The arena cost the city more than expected, so far contains fewer neighborhood-friendly features than originally promised, and has yet to be accompanied by the development it was expected to catalyze.

The rendering from the official web site (above) looking west contrasts with the current view (right), given that the adjacent park and office building are some time away.

The Brooklyn parallels

Some parallels in Brooklyn are already evident. The price tag for the Atlantic Yards arena has already risen from $435 million to $555.3 million to $637.2 million, and the city and state contribution on top of that has risen from $200 million to $305 million. The city’s Independent Budget Office, which once calculated a modest gain for the city in new arena tax revenues, now acknowledges that may not occur.

Open space on the arena roof, which when announced in 2003 drew praise from New York Times architecture critic Herbert Muschamp, was deemed a security risk and made the private enclave of residents in the four buildings ringing the arena. And the development attached to the arena—the 16 towers of Atlantic Yards—would not necessarily emerge on schedule but depend on the developer Forest City Ratner’s calculations.

A one-third increase?

The Newark Star-Ledger, in a 10/15/07 front-page article headlined Additional projects boost overall tab for Newark arena: Road, pedestrian and park work hike the cost to a half-billion, concluded that the arena project would cost more than half a billion dollars overall, one-third more than the announced $375 million for construction costs of the building. By that logic, factoring in the cost of the site improvements, the Atlantic Yards arena might be more than $900 million in public and private (though tax-advantaged) funding.

(Photo from New York Times)

When announced three years ago, the Prudential Center was to cost $310 million. The New Jersey Devils put up $156 million. Newark, desperate for a big downtown project, put in about $220 million, not from taxpayers but funds from the Port Authority of New York and New Jersey, received in settlement of claims that Newark was cheated out of rent from its airport and seaport.

Not everyone was in favor of subsidies. A 5/25/04 Star-Ledger editorial, headlined Let Newarkers decide, suggested that city residents vote:
If, as the mayor says, the arena is a surefire winner and a catalyst for billions in private development, the Devils and other private investors should be eager to build the arena themselves and reap all those profits. Then Newark could use its $210 million to foster development around the arena and the rest of downtown with plenty left to revitalize the neighborhoods, create jobs and more.

Newark was paying for actual construction, along with infrastructure and land costs. New York City and State would be paying only for the latter at the Brooklyn arena—but the cost, even before construction, would be nearly as large as the entire payout in Newark.

Beyond that $375 million, however, the Star-Ledger calculated more than $125 million in related costs, including property acquisition, street improvements, and parks and walkways around the arena. The money quote came from Augusto Amador, the city councilmember from the East Ward, home to the arena, who said, "It didn't take a rocket scientist to understand there was a lot of work to be done adjacent to the arena that the city was responsible for."

(In Brooklyn, the $305 million already pledged would go to such ancillary projects.)

Changing claims

The Star-Ledger noted that Richard Monteilh, the city’s business administrator under previous Mayor Sharpe James, had claimed that the original $310 million would cover ancillary costs. But the newspaper pointed to at least $55 million more in projects from the start.

Some of those improvements have yet to arrive, such as a pedestrian bridge over Route 21 and Triangle Park, which will help connect the arena to the nearby Penn Station.
(Graphic from Star-Ledger. Click to enlarge.)

Then again, Monteilh argued that street improvements in general were necessary to help Newark thrive.

Police, sanitation, and more

Last year, Paul Fader, a former chief counsel to acting Gov. Richard Codey, observed that additional costs, including "signing, extra policing, trash removal, and liability issues," had not been calculated, according to the newspaper.

The Star-Ledger interviewed the ubiquitous sports economist Andrew Zimbalist, who said, "It's in the interest of arena or stadium proponents to make it look as cheap as possible…. I think the evidence out there is you don't get an economic benefit. That's a big question mark. The benefit comes in the form of social and cultural enjoyment, and cohesion."

Zimbalist, hired by Forest City Ratner to do an analysis, has said that Atlantic Yards is different, because the arena would capture revenues from New Jersey, and because of the attached mixed-use development. However, Zimbalist contradicted his own scholarship by downplaying costs regarding Atlantic Yards, assuming additional police costs to be “negligible” and asserting that additional infrastructure costs were “unlikely.”

Newark Mayor Cory Booker, who once called the arena ''a bad political deal” (according to a 5/12/06 Times article headlined An Arena, And Hope, Takes Shape In Newark) has had to embrace a project that already on the way. He told the Star-Ledger that “hidden costs,” such as sanitation and police, should have been considered. He said the city may assign ticket surcharges.

Longstanding hopes

Newark has sought an arena for more than three decades, according to the Star-Ledger. In 1975, a time of continued suburbanization, a Newark-commissioned study for a downtown arena was rejected by the state, leading to the arena at the Meadowlands. In 1997 Mayor James and state Sen. Codey asked, without success, that the New Jersey Sports and Exposition Authority move the Nets to Newark.
(Photo from New York Times)

In 1998, retired Wall Streeter Raymond Chambers organized a consortium to buy the Nets, aimng to build an arena in downtown Newark. In November 1998, Newark began the process to condemn 40 acres downtown—only to be met by lawsuits from homeowners and also Jerome Gottesman of Edison Parking, who had the largest holdings in the planned site.

In March 1999, Chambers and others revealed plans for both an arena and a soccer stadium (since ditched) plus $100 million in commercial development near the crossroads of Broad and Market streets. Not everyone agreed; the New Jersey Sports and Exposition Authority, operator of the Meadowlands, suggested a new arena in East Rutherford and then-Devils owner John McMullen suggested one in Hoboken.

In January 2000, Newark suggested a slightly different location, closer to Penn Station (site of photo above) and connected by an enclosed walkway. However, before the lawsuits proceeded, Newark gave up its plan; Edison Parking suggested the arena should be near Broad and Market. Eventually a plan emerged, in which a significant amount of arena land was achieved by swapping land with Edison Parking, allowing for other development nearby.

On 2/9/04, the city unveiled a new downtown redevelopment plan that included an official pledge by the New Jersey Devils to come to a new arena by the start of the 2007 season. That has been fulfilled, but most other elements of the new Downtown Core Redevelopment District, within walking distance of Newark Penn Station, are some years away, if at all.

It was to include up to 4 million square feet of office space; 500,000 square feet of new retail and family entertainment attractions; a full-service hotel with at least 300 rooms, “an arena component;” a new board of education and city municipal building; and new parking garages to accommodate 3500 cars.

In the city’s press release, heralding the arena was Newark-born entertainer Queen Latifah, as was the fish-out-of-water photo (above) of Mayor Sharpe James, an embodiment of the Newark black political machine (his followers characterized rival Booker as not black enough), wearing a hockey uniform.

The project was expected to create more than 13,500 permanent new jobs, plus thousands of construction jobs, as well as a $670 million return to the city over 30 years. The fuzziness of the numbers, however, was compounded, by a city fact sheet that claimed “[o]wnership of Arena at end of 30 years, estimated to be in worth of excess of $500 million.” Such a sum is questionable, given that arenas generally become obsolete.

Facing away from the crossroads

Star-Ledger art critic Dan Bischoff, in a 10/22/07 essay headlined An arena for TV fans, pointed out how the arena has yet to connect to Broad Street, a major (and downmarket) shopping street a block west:
While there are plans to take a row of mostly empty buildings facing directly onto Broad Street and turn them into an annex of commercial and community spaces, right now the arena turns the road between these structures and itself into an alley facing a long, blank metal wall topped by a vast brick curtain wall. Community space originally planned for the southwest corner (near the practice hockey rink facing Mulberry) was scrapped in favor of an indoor employee parking garage.

Indeed, columnist Paul Mulshine, in a 10/21/07 essay headlined Newark to become a 'burb?, observed:
Perhaps that's why the new Prudential Center faces away from Broad Street. The glamorous fa├žade with the four-story-high TV screen faces not Newark but Manhattan. Meanwhile the view from the Broad Street side of the arena is of the back of the parking garage.

The rationale was that the arena needed to compel commuters, many wary of the rundown city, who regularly use the train station facing the TV screen.

And what about the rest?

In a 10/11/07 Star-Ledger blog column headlined Pru Center: Hope and hazard, Diane Sterner observed:
The mayor must also remember, and continue to remind the stakeholders, that Newark was promised more than just a sports arena, imposing as that structure may be. The original proposal also included hotels, restaurants, retail stores, residential buildings and streetscape amenities, aimed at turning the downtown into a safe, lively 24-hour hub. Is that still going to happen?

Indeed, in a 10/8/07 article headlined Arena in Washington, D.C., means out with the old, in with the new, the Star-Ledger explained why the vacant lots around the Prudential Center might look different—eventually:
Newark is using its own carrot and stick approach: Property owners involved in complex land swaps with the city in a four-block zone around Prudential Center have five years to build residences, offices or retail complexes. They were put on the clock, under the threat of losing their land to eminent domain.

The zone to the south along Mulberry Street, however, is in limbo after a separate mostly residential redevelopment project was stymied by a court as a violation of eminent domain.
(The Mulberry Street building pictured is just north of that zone.)

The DC example

Sterner noted:
The Prudential Center is being compared to the Verizon Center in Washington, D.C. and how that sports arena has become a factor in its area's revival. But the Verizon Center's advent had some key advantages that the Prudential Center does not. The Verizon Center did not go up alone, but capitalized on and reinforced a redevelopment that was already under way, and it was slotted into an already viable, if unfancy, commercial area.

The Empire State Development Corporation has also compared Brooklyn to Washington, suggesting that the Verizon Center example shows how an arena can thrive in a mixed-use area. (Search on "Verizon" in the Response to Comments chapter of the Final Environmental Impact Statement.)

I’ll look at that another time, but for now consider the difference between Brooklyn, and Washington, and Newark: the Atlantic Yards site—heck, the MTA’s Vanderbilt Yard—is the last remaining site near a crucial Brooklyn crossroads, a “great piece of real estate” (to quote Chuck Ratner), not the longer shot that is the Prudential Center, and even more of a sure thing than the Verizon Center example.

(Map of planned streetscape improvements from the Newark Downtown District.)

The Star-Ledger sent reporters to other cities with sports facilities and came back with some interesting examples. In a 10/7/07 article headlined A Minnesota success story sparks hope for Newark's rising star, the timeline was seven years:
``My job is to bring 3 million people into Newark each year," said Devils owner Jeff Vanderbeek, whose team helped pay for and will run the arena. "If I can do that, with all the resources Newark has to offer, the rest will take care of itself. In seven years, you won't know this city."

St. Paul Ward 2 Councilman David Thune, who represents the area including the Xcel Center, warned against overexpectations:
"Cities ought to look at these arenas not as a single answer, but enhancing things they already planned on investing in," Thune said. "It's just one piece of the puzzle."

Indeed, there are only a few bars and restaurants open near the Prudential Center, in part because the arena comes with its own facilities and also because—unlike in Brooklyn—there is neither an attached residential development nor an immediately adjacent residential neighborhood.

In a 10/1/07 article headlined Businesses wait patiently for arena's hungry fans: Bar and restaurant owners gamble on big revival for quiet corner of downtown, the Star-Ledger quoted a city official as suggesting a two-year timeline:
"It's premature to see stores sprouting up in tremendous numbers, but once the arena arrives, we'll see additional openings occur," said Stefan Pryor, deputy mayor for economic development for Newark.

By 2009, he predicted the neighborhood would drastically change, including new residential buildings, a new hotel and possibly new offices.

A 6/19/07 Times article headlined Owners Push New Arena, But Residents Fear Change, explored the delicate issue of whether “Newark's largely poor and minority population” would benefit from the arena. The Devils worked out a mini-Community Benefits Agreement agreeing to hire locals for permanent jobs, and to provide some 5000 free tickets a season for local kids, plus $250,000 for youth sports and recreation.

The Times reported some progress:
Two hockey-themed taverns have opened in recent months, Hell's Kitchen and the Arena Bar, and a third, the Devil's Advocate, is under renovation in a nearby building used as a residence by Seton Hall students... A hotel is slated to be built on Mulberry Street across from the arena's main entrance, but ground is not expected to be broken until well after the arena opens.

Indeed, Hell’s Kitchen (right) is actually not so close—it’s across McCarter Highway in the already thriving Ironbound district, known for its Portuguese and Brazilian population.

An 11/4/07 New York Times article (in the Sunday New Jersey section) headlined Newark Arena’s Economic Impact Unclear reported on the skepticism and the hope. Two hotel deals are on the way, and the city will change zoning to ease conversions of commercial buildings into apartment.

The city has money for streetscape improvements and loans to small businesses, and expects "one small development — a restaurant and six apartments" open near the arena next year.

Newark, clearly, has taken a risk, but it also has had to make significant investments to transform a moribund downtown that for decades has mostly closed by nightfall.

Did Brooklyn need one arena mega-project to catalyze a revival? Could a rezoning have spurred development over the Vanderbilt Yard? And if the arena is built, would the rest of the Atlantic Yards project be built in the announced ten years or would interim surface parking persist?

There's nothing to keep Forest City Ratner from proceeding on a timetable that fits with their needs. In other words, despite the design for four (mostly residential) towers to wrap the arena, it's possible Brooklyn might have an arena bordered by some unfinished buildings and empty lots for quite a while.


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…