Tuesday, March 31, 2009

At conference call, Forest City executives say "we are prepared to move forward" on Atlantic Yards arena

In a conference call with investment analysts today, Forest City Enterprises executives maintained optimism about the Atlantic Yards arena but also hedged with some of their language, saying "we are prepared to move forward" rather than committing with more certainty.

They were not asked any tough questions, such as whether architect Frank Gehry is actively working on the project.

Careful language on AY

CEO Chuck Ratner, in his prepared remarks, essentially repeated the message from yesterday's press release: "As you may have seen, we recently achieved another legal victory with the state appellate court upheld a prior State Supreme Court ruling related to public approvals and environmental review. We have one material lawsuit pending, and when we have cleared the legal hurdles, we are prepared to move forward with the first phase of development at Atlantic Yards."

He didn't predict a timeline.

Later, an investment analyst asked about the likelihood of Atlantic Yards, including potential alternatives or further revisions.

Joanne Minieri, president of subsidiary Forest City Ratner, responded, "As we’ve stated, once this litigation is resolved, this project is ready to go. We’ve worked diligently and actively on being prepared to proced with Atlantic Yards. We believe with respect to the arena there’s an opportunity in today’s market to finance it. We’ve done a lot of predevelopment work both on the site and in the soft cost area. On resolution of the litigation, we remain prepared to proceed."

There's also a lot of predevelopment work not done, since Forest City Ratner stopped working at the Vanderbilt Yard in December.

Long-term project

At various times during the call, Ratner alluded to the company's capacity to wait until the market improves. Citing the "development pipeline that we’re carrying," including Atlantic Yards, Ratner called the projects "relatively modest obligations... that we have a choice to make or not make."

It sounded a lot like Forest City's statement last November that "We control the pace" of projects like Atlantic Yards.

Later, Ratner grouped Atlantic Yards, along with projects like Denver's Stapleton and Chicago's Central Station, as among "great long-term opportunities."

In other words, the promise to deliver affordable housing and open space, among other benefits at the Atlantic Yards site, seems very unlikely to be fulfilled by the promised decade--2016 after project approval, and 2018 according to FCR CEO Bruce Ratner's pledge last year.

A "Bridge" showing losses

The developer today released an EBDT (Earnings Before Depreciation and Taxes) Bridge, which shows that the Nets contribute a significant slice of the company's losses--and is a reminder that the Brooklyn arena is seen as reversing losses and raising the value of the team.

(Click to enlarge)

Later, Ratner alluded to the significant drop in the value of the company's stock, down some 90% in the past year. "We do understand that our securities have performed poorly," he said. "We’re disappointed with that... and we remain, as you can hear, cautious but confident as we proceed.”

More calls to come

While Forest City has historically held earnings conference calls twice a year, last year the company held an unusual third-quarter call, and in 2009, Ratner said, calls will be scheduled quarterly.

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