Skip to main content

Reading the dailies on the eminent domain case: questions about groundbreaking, appeal timing, Gehry's role

OK, so when does Bruce Ratner promise a groundbreaking for the Atlantic Yards arena? This summer, according to the New York Daily News; in September (which could be this summer), according to the New York Post; or in October, according to the New York Times. This year, according to an official statement (available on the Barclays Center site but not yet the Atlantic Yards site).

Why does it matter? First, it suggests that Ratner can't get his story straight. Second, it assumes a certain time frame for a decision regarding an appeal of the eminent domain case announced yesterday.

Perhaps most importantly, it allows Ratner, at least for now, to continue to promise that the arena would open for the 2011-2012 season. I think that's highly unlikely, because Ratner already suggested the arena would take 30 months to build, and the environmental review said 32 months, but it's remotely possible that a stripped-down design could be completed faster.

The timing of an appeal

Plaintiffs' attorney Matt Brinckerhoff left open the possibility that current legal cases could be cleared by the fall: "At a minimum, if we lose every single thing imaginable, it's still going to take them four to six months," he told the Daily News. That would then lead to the effort to exercise eminent domain by the Empire State Development Corporation.

But if the eminent domain case appeal is heard, it could slow things down for another two years. That's important, because Forest City Ratner has until the end of the year to see tax-exempt bonds issued to fund arena construction, a savings of well over $100 million.

Appeal in EIS case

What about the pending request for an appeal in the case challenging the AY environmental review? The Post reports:
There is also a suit pending challenging whether the state conducted a proper environmental review before approving Atlantic Yards, but Ratner's staff said it feels construction could still begin while that case remains under appeal. Opponents, however, said they disagree.

Perhaps construction work might be able to go forward, but would bonds be approved (via a local development corporation set up by the Empire State Development Corporation) before that case was cleared? If that case goes forward and is successful, a revised environmental impact statement might be required, so the ESDC might want to wait until the case is resolved.

Forest City Ratner's role

"This is really the last hurdle that we have and now we can do what our company does best and build an arena and houses," Ratner told the Daily News.

The company has no track record building an arena and little track record building houses. Rather, as the company web site states, it "currently owns and operates, 11 million square feet of commercial property in the New York metropolitan area, including office, retail and residential."

Gehry: in or out

So, is Frank Gehry still on the project? According to the Post:
Ratner said a revised arena plan would be released at a later date and promised it would still be a Gehry-design that's top-notch.

According to the Times:
He has also said he wants to pare the projected $1 billion cost of the arena by about $200 million. He said he would decide within 60 days whether to keep the original design, by the architect Frank Gehry, or use another.

Gehry's participation is important, because the arena has been sold to sponsors as a Frank Gehry arena. Should Gehry no longer be involved, presumably they would be able to renegotiate their level of support. I predict that some hybrid will emerge, with Gehry's name--if not his and his firm's ongoing participation--attached to the arena.

Cost of arena going down?

The price tag had previously been stated at $950 million. Trimming $200 million would bring it to $750 million. Previously, the Times had reported that Ratner wanted to cut the price tag in half, and in February I expressed skepticism, pointing out that an arena in Orlando, where construction costs are much lower, has a $480 million price tag.

The cost is important because, the higher the price tag, the larger the amount of PILOTs (payments in lieu of taxes) and the larger amount of foregone property taxes. And that means that the arena site would have to be assessed--in echoes of the Yankee Stadium controversy--so the value is high enough to generate those PILOTs. Stay tuned for that controversy to emerge.

Misunderstanding eminent domain

The Times reported:
In its unanimous decision, the Appellate Division of State Supreme Court, Second Judicial Department, upheld a lower court ruling rejecting a challenge to the state’s use of eminent domain to obtain properties for the developer from owners unwilling to sell.

No, eminent domain cases begin in the Appellate Division, because New York State law tilts strongly in favor of agencies pursuing condemnation and no trials and fact-finding are allowed. That information was both in my report yesterday and in the Develop Don't Destroy Brooklyn press release.

It's dismaying that the Times, whose commercial real estate reporter Charles Bagli is generally quite able, can't accurately inform its readers about a basic tenet of New York's much-criticized eminent domain law.

Missing warnings

None of the dailies mentioned new warnings from Forest City Enterprises about additional real estate development risks faced by the project. Such warnings may seem to be boilerplate required by the Securities and Exchange Commission, but they're different from warnings filed just six weeks earlier.

One-building Phase 1?

The Forest City ratner press release stated:
FCRC expects to start at least one residential building during the first phase of construction. 

Only one? There initially were supposed to be four buildings around the arena, and another building at Site 5. The City Funding Agreement suggests that the developer can meet obligations without penalty by building three towers within 12 years after the exercise of eminent domain.

Job claims

According to the press release:
Ratner explained as well that the arena and larger development are expected to create 16,924 direct jobs and over 30,000 indirect jobs.

Well, that's construction jobs, and job-years, not jobs. And it refers to the entire once-planned build-out, while there's no indication that Forest City Ratner would build the project as approved. (The jobs figure was reproduced without skepticism by Crain's.)

The statement comes from the Final Environmental Impact Statement, Chapter 4: Socioeconomic Conditions (PDF):
As a result of the direct expenditures, the direct employment for constructing the entire Residential Mixed-Use Variation is estimated at 16,924 person-years of employment.


23rd decision?

Ratner called the decision "the 23rd in a row in favor of the development,” without citing examples. What about the Weinstein case? Or the rejected motion to dismiss the eminent domain case?

Comments

  1. so how bad is this? what about the state senate hearings, can they hae any impact at this point? (i'd think not.) i'm very unhappy about this.

    ReplyDelete
  2. As noted yesterday, there remain challenges in financing the arena even if legal cases are cleared. And if Gehry does not participate, that has an impact on sponsorships.

    As for the impact of the state Senate hearings, that's unclear, but I'll be writing more about it shortly.

    ReplyDelete
  3. sarah, don't despair. fight.

    i predict the state senate hearing will have an impact, perhaps legally and certainly public perception.

    ReplyDelete
  4. Bruce Ratner has run forest city into the ground and the company is now in pure survival mode.

    That's why forest city bailed out of it's fresno project, stopped beekman tower construction at the midway point, sold off key properties, laid off hundreds of employees and issued 45 million new shares of stock.

    Desperate times call for desperate measures, and forest city is as desperate as they come.

    ReplyDelete

Post a Comment

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…