Skip to main content

Bait-and-switch from the start? Ratner knew office space projections were bogus

A day after the fourth anniversary of the announcement of the Atlantic Yards project, a look at a second dubious economic claim. Yesterday, it was that AY wouldn't "touch the existing tax base."

The mantra when the Atlantic Yards project was announced was impressive: 10,000 office jobs in some 2 million square feet of commercial space. It led to rhapsodies from columnists like Andrea Peyser and Denis Hamill.

It was dubious for multiple reasons, as I’ve reported in the past. Now there’s additional evidence, previously unreported, from the mouth of Bruce Ratner himself.

Forest City Ratner’s leader let slip to an interviewer two days after the project was announced that the office market was in trouble. That should've been reason enough for sharp-eared listeners to cast immediate doubt on the developer's rosy jobs projection.

Ratner also said that construction of the arena would be accompanied by a residential building—even though the arena block, as announced, was to include four office towers and no housing whatsoever.

In other words, despite the promise of jobs, the switch from office space to housing, officially announced some 18 months later, was apparently contemplated from the start. We got played.

Fudging space calculations and the market

A quick recap. Forest City Ratner repeatedly promised 10,000 office jobs, such as in a flier (above) issued in May 2004. A Project Overview press release, issued 12/10/03, stated:
Four office buildings surrounding the Arena will place 2.1 million square feet of commercial space within a few blocks of the mass transit hub, and allow the rest of the site to be occupied by residential buildings.

Brooklyn Atlantic Yards will bring a huge infusion of new jobs to the area—more than 15,000 construction jobs, over 10,000 permanent jobs created and/or retained in the commercial offices…

The construction jobs number of course refers to job-years--1500 jobs over a decade--and the office jobs number had several problems with it.

1) FCR could promise 10,000 jobs only by neglecting to factor in a vacancy rate and calculating 200 square feet per worker, while the industry standard is 250 square feet. In other words, the amount of space promised would accommodate only 8000 jobs under the industry standard, and a vacancy rate would lower the number further.

Keep in mind that, for the same amount of space, the business-friendly New York City Economic Development Corporation (NYCEDC) on 6/27/05 estimated 7100 jobs.

2) NYCEDC also estimated that only 30 percent of the office jobs would be new, rather than relocated from Manhattan.

3) Also, the market for office space was already shrinking. The city’s Draft Environmental Impact statement on the Downtown Brooklyn rezoning, completed in November 2003 a month before the Atlantic Yards project was announced, acknowledged that, while newly rezoned sites could accommodate 6.7 million square feet of office development, market conditions promised only 4.6 million square feet of such development over ten years. (That, of course, is further in doubt, given current office market difficulties, and housing rather than office construction continues.)

Still, publicly, Forest City Ratner promised all those jobs. They got sports economist Andrew Zimbalist, who generally questions sports facility deals, in 2004 and 2005 to blithely repeat statistics that suggested that the office market was growing.

Ratner on the office market

In a 12/12/03 interview on WNYC’s Brian Lehrer Show, Ratner (right) was more candid than his company’s press release two days earlier.

He told Lehrer, “It’s a very important project, we need housing in this city, we need office space, when the market comes back, for companies not to leave the city.”
(Emphasis added)

The implication was that the market was already tanking. If so, why was the developer promising 10,000 jobs? Maybe because it’s a nice round number.

Bruce on Phase 1

As for the timetable, Ratner told Lehrer, “And in about three to three-and-a-half years, I hope to have an arena up and the start of some residential development.”
(Emphasis added)

No mention of office jobs.

He seemed to be already modifying a statement in the Project Overview issued two days earlier, which promised office space from the start:
During Phase 1, the Arena and its rooftop public park will be constructed, along with 300,000 square feet of the commercial space, support space for the Arena and possibly one residential building. The complex has been planned to look whole and complete during each phase of construction.

That latter sentence is a jaw-dropper, since it would be tough for the arena block to look complete without the four buildings planned to ring the arena. However, given that the amount of projected office space has been cut from 2.1 million square feet to 336,000 square feet (and space for 1340 jobs, perhaps 375 of them new), maybe that statement was a warning.

Remember, the arena block was supposed to contain only office space. Could Forest City Ratner meant that a residential building would be built outside the arena block? Unlikely.

The “possibly one residential building” mention suggests that a switch from office space to housing was in the works from the start. Indeed, some condos were contemplated from the start, as shown by documents.

No government skepticism

Did the developer mislead the government, or was the government in on it?

In a 6/28/04 document (right) unearthed in the wake of the lawsuit filed by Assemblyman Jim Brennan and State Senator Velmanette Montgomery, Forest City Ratner apparently presented grand plans to the Empire State Development Corporation (ESDC), involving 2.5 million square feet of office space, and to the Department of City Planning (DCP), involving 2.1 million square feet of space.

Were ESDC and DCP informed of plans to cut office space? It doesn't look like it.

Still, the agencies could have expressed more skepticism about plans for office space rather than support the project with little or no public criticism. After all, they knew about the shrinking Downtown Brooklyn office market.

But the train had left the station and, nearly 15 months later, when the project Memorandum of Understanding was announced 3/4/05, the claim of 10,000 jobs persisted, endorsed by the mayor and governor, in a press release quoting not an independent analysis but Zimbalist's report, paid for by the developer.

Inconvenient truth

Explaining the shift from office space to housing, mysteriously-departed FCR executive Jim Stuckey famously told the unskeptical New York Times in November 2005, “Projects change, markets change.”

Sure, but evidence suggests the market had changed before the project was even announced. That inconvenient truth, however, would have dampened the predictions about jobs.

Only after the affordable housing deal was signed in May 2005 with ACORN, to great fanfare, did the developer announce it would trade office space for condos. Why? The unskeptical Times reported that “community leaders had pushed Mr. Ratner to include more housing in the project.”

"It’s Orwellian, almost" (to quote Stuckey again), that community leaders would have been plumping for luxury condos, that the Times would be so unskeptical, and that the chimera of 10,000 jobs hasn't gotten a closer look.


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…