Saturday, March 14, 2009

Three months after pledging commitment, Forest City pulls the plug on Fresno project

Though developer Forest City Enterprises (FCE) in December maintained it was committed to a $300 million housing and office project in downtown Fresno, CA, yesterday FCE announced it has abandoned the project.

The key issue, apparently, was the inability to secure state and federal subsidies, despite the developer's effort to make cuts.

The Fresno Bee reported:
The company has had an exclusive development deal with the city of Fresno since 2004, but was unable to close a $100 million gap in funding for the South Stadium project.
Support for the project was strong on the City Council, which in December agreed to extend its exclusive negotiation agreement with the Cleveland-based developer for six more months.

“After considerable analysis and collaboration with the Fresno Redvelopment Agency, it has become clear that the financial gap is simply too great to develop a high-density, mixed-use project at this time,” said Kevin Ratner, president of Forest City Residential West. “Despite our combined efforts, including scaling back the overall project, achieving design efficiencies, and identifying other sources of funding, the gap remains too large to justify further pursuit of the project.”


No subsidies

The city's new mayor, Ashley Swearingin, was no fan of the project, but the real gap seems to be the failure to find $100 million in state or federal funds to fill that budget gap. The Bee reported in December that the six-month extension gave the developer time to pursue state and federal money.

Forest City apparently has no spare cash; just this week reports emerged about the company's effort to sell 15 properties.

There's a subsidy gap for Atlantic Yards, as well. However, New York City, especially Brooklyn, is a core market for the developer, and there's a significant upside to AY--or, at least, the erasure of a significant downside: the massive losses suffered via ownership of the Nets.

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