DDDB’s Goldstein goes to annual meeting in Cleveland, publicly asks Forest City questions, gets shrugged off
Well, it sounded like a plan. Develop Don’t Destroy Brooklyn spokesman Daniel Goldstein, a shareholder in Forest City Enterprises, parent company of Atlantic Yards developer Forest City Ratner, went to the company’s annual meeting in Cleveland today to ask management some questions about the project. (It was webcast and will be re-broadcast.)
The meeting, held at the Tower City Center began at 2 pm, and it took an hour—after business presentations and reflections on the economy from the company’s patriarch, Sam Miller—before the floor was opened to questions.
[When does Goldstein speak? Depending on your player, I'm told, it's at either 59:11 or 1:33:18.]
Goldstein was the first and only questioner. He spoke respectfully but his words were not those of a happy investor but of a company critic. (Had he been speaking at last Friday’s oversight hearing, supporters orchestrated by Forest City Ratner would have quickly shouted him down.)
“My name is Daniel Goldstein. I am shareholder. Thank you for allowing me to speak,” he said, noting he’d have a comment and then some questions. [Goldstein bought a few shares earlier this year to be able to attend.]
Forest City, he noted, is losing some $30 million a year owning the New Jersey Nets. The AY project is being redesigned, faces new political approvals, and faces a “staunch and widespread opposition.” (Well, it also has a lot of political juice.)
He cited ongoing litigation, diminished political support, and an “extremely challenging economic environment for an $800 million arena and 6400 housing units.”
Yesterday, he noted, it became official that architect Frank Gehry was no longer designing the arena, thus raising questions about the $400 million naming-rights deal with Barclays and thus the arena revenue model.
Forest City doesn’t own the land it needs or have the financing it needs to start the arena, he pointed out. “Yet the company claims it will finance the project, break ground and open the arena in 2011,” Goldstein said, suggesting that losses will continue to mount.
Forest City has an end of year deadline for tax-exempt arena bonds that would save the developer at least $150 million, Goldstein said, then offering questions:
- Given all of these challenges, can you let Forest City shareholders know what contingencies you have if you can’t break ground in 2009 and can’t open the arena in 2011?
- And why has Forest City chosen this particular project, “fraught with so many major obstacles,” as the only development to begin vertical construction this year?
Of course ongoing litigation did not deter an announcement about Gehry yesterday.
Even if construction begins in this calendar year, Forest City can’t open the arena in 2011—Ellerbe Becket arenas take 27+ months to build—so that’s a question that should be asked again and again of those promoting the project.
Goldstein adds (6/6):
I did not go to the meeting expecting answers to questions. Forest City does not answer questions. I went to the meeting to raise the issues I raised with shareholders and board members based in Cleveland and those listening to the webcast. I went to challenge Forest City Ratner's assertions about their ability to start the arena construction in 2009, and open it in 2011. I did not expect any answers. And the answer given, that they don't discuss litigation, made no sense as I did not raise litigation as an issue.
"Hope" or "intend" to start AY?
Earlier in the meeting, Forest City Enterprises CEO Chuck Ratner used somewhat contrasting language regarding Atlantic Yards, calling it both “the major start we hope to accomplish in the near future” and something “we fully intend to start.”
In his closing remarks, almost certainly prepared without knowledge that Goldstein would attend, Albert Ratner noted that many of the company’s projects around the country had faced past opposition.
“We retain wonderful relationship,” he said, “even with the people who, over the years, thought they were not worthwhile projects.”
In Brooklyn, however, the jury's out.
The official transcript
DANIEL GOLDSTEIN, SHAREHOLDER, DEVELOP DON'T DESTROY: Hello, my name is Daniel Goldstein, I am a shareholder and thank you for allowing me to speak at today's meeting. I have a comment that will take two minutes and a few questions following the comment. My question is about the Atlantic Yards project in Brooklyn.
Forest City is losing $30 million a year, while the Nets stay in New Jersey, the project is being redesigned and faces on the new political approval process, staunch and widespread community opposition, ongoing and potential new litigation, diminished political support, and an extremely challenging economic environment in which to finance an $800 million arena and 5,400 housing units.
And just yesterday, it became official that architect Frank Gary will no longer be project's architect, which raises questions about Forest City's $400 million naming rights deal with Barclays Bank and the entire arena revenue model. Forest City doesn't own the land it needs or have the financing it needs to construct the arena, or the rest of the project, yet the Company claims that it will finance the project, break ground this year, and open the arena in 2011, which is already an impossibility.
This means that the losses from keeping the team in New Jersey in the Meadowlands will continue to mount. Forest City also has a looming end of the year IRS deadline to issue the taxes arena bond, and missing this deadline would cause Forest City an estimated $150 million to $190 million, which could be a big problem for the project.
Here are the questions; given all of these challenges, can you let the Forest City Enterprises shareholders know what contingency plans the management in Cleveland has, if and when you don't break ground in 2009 and can't open the arena in Brooklyn in 2011? And finally, the other question is, why has Forest City chosen this particular project, fraught with so many major obstacles to be the only vertical development as the Company transforms itself for now into a management company? Thank you.
ALBERT RATNER: Just two comments. The first comment is that the Company does believe that it will start the project during this year. The second comment is, we don't want to have a long discussion on the subject, because we do not discuss litigation issues. And since we still have litigation issues outstanding, it is not a discussion we want to have. If you want to talk to some of the people after the meeting, they will be happy to talk to you. Thank you for coming, and thanks for the questions.
ALBERT RATNER: Okay, anybody else have a question or comment that they want to make? All right. If not, I'm going to make a few comments and then we are ready to close the meeting.
A few weeks ago, I was thinking about the growing economic situation. And I was reflecting on the earliest years of Forest City and I suddenly realized that I am the only living institutional memory of Forest City. It used to be my mother and father and my aunts and uncles. My dad came to this country with my uncle, Harry, Bruce's father and the rest of the family by about 1920. And I was born in 1927 and from the time I was maybe four years old, I would go to the lumber yard with my mom and dad. And I suddenly realized that for that period until maybe 1945, I am the only person who remembers what happens.
And it really becomes relevant because of what they lived through and what happened today. In a way I feel like somebody who is at the airport listening to somebody complain about United Airlines, and remembering some people went from New York to Los Angeles in covered wagons -- very different kind of feeling in a very different kind of life. As a corporation, we are celebrating either our 80th anniversary or our 88th anniversary, depending on whether you listen to Max or Leonard as to when the business started; we're not sure who's right.
Over these 88 years, we have been through many cycles and while each cycle has been different, we have come through them because we have been consistent in three beliefs in three areas. The first one is our belief that we are a relationship company, that our business is built on relationships. The second is, that over that period of time, we have been very creative. We have been able to figure out what comes next. And, the third one is that we understand and have an ability to develop great real estate.
I learned about relationships in life very early at the lumber yard, when people came in and traded pickles and pastry and jell-o to get lumber because there wasn't a lot of money around. And, if somebody needed a door or window, they came in with whatever they had and we would exchange it.
My uncle Max was a lawyer, and part of the way we survived he had a law office in front of the lumber yard and he would give people free legal advice. He always said it was worth what they paid for it, but it is one of the services that we carried out. In those days, there wasn't a lot of business, so when it snowed, we would take the truck and run it through the lumber yard once, so it looked like the truck had been out on a job.
So they were some tracks within the lumber yard. In 1935, there were five houses built in all of [Tahoga] County. There were five mortgages given and we gave two of those mortgages; we had 40% of the mortgage business. And the way we did it was, a builder came to us and said, I know a fellow who has a lot, I'm a carpenter, your lumber doesn't do any good in the lumber yard. Give us your lumber, we will put it on his lot, I'll build the house and some day we will sell it, and that was the beginning of this Company.
For over 50 years, we have employees that have been with us, we have been partners with people for over 50 years, we have been at cities for over 50 years. As our business has grown, we got into larger projects, we began to deal with governments. It is very interesting, because of the question that was asked earlier. In almost every major project that we have been involved.
In urban areas, which has a lot of concentration of people we have found that we have had people who had objections and legitimate objections; people have every right to object to what you're doing. We've had at it MIT, we've had at MetroTech, we have had it at San Francisco Center. All are examples of wonderful projects in which came about despite the fact that there was opposition, but succeeded because of the importance of these projects to these communities.
And we retain wonderful relationships, yes even with the people who over the years thought that these were not worthwhile projects and shouldn't go ahead. We have partnered with cities, with states, with banks, our tenants. While real estate is a transaction business, our success is not on the individual transactions, but on our partnership relationships; as long as we remember that, we will always succeed.
We have been successful in this area savior because of three beliefs we have in this Company. We do not let others determine our behavior. We behave in what we think is a proper manner and no matter what others do to us, will continue to behave in that manner. Two, we don't always get to choose what happens to us, but we always get to choose how we will act when these things happen to us. And finally, we try to treat people fairly. As long as we conduct ourselves in this manner, we will continue to be successful.
We have always been creative, we have always been able to figure out what is next. Creativity comes from people and we have very creative people. We started out as garage builders, then we went under contract and retail lumber business. When World War II happened and you had no lumber to sell, we made boxes for munitions. We made triggers for rifles for the United States Army. When Sam came into the business, we went into the land business. When I joined the business, we became more active in the shopping center business.
In recent years, we have built biotech buildings, building systems, senior citizen's housing, military housing. Today, as we look to our future, there are opportunities in government and private sector services, energy, medical, and biomedical stuff. We believe in creativity and we're going to find out what happens next. You do not need all of your creativity in-house. You can go out and hire the best people in the world, but the great thing about creativity, it grows on itself. So, the combination of what we have in-house and what we get outside is what gives us the energy to do what we need to do.
And lastly, we basically are retail and our gift is development. And I know development today is a four-letter word. I would agree for the present and maybe for a little longer than present, there will be fewer new development projects that take place. But, what we have to do is take a look at the buildings we own that we have created, the MITs, MetroTechs, New York Times, San Francisco Center, Bayside Apartments, military housing, Sky55 -- wonderful buildings in great cities.
While our buildings under construction have the problems of the day and some of them were pointed out, none of them are simple, all of them are complicated. We take great pride in the fact that we're building Gulfstream and the Oakland Apartments and will be building Atlantic Yards, because they have a great future.
Finally, the thing that excites me the most about the projects that we're building are the ones that are yet to come -- the ones that are going to be expanded. The time is not today, but the Yards in Washington DC Central station, whether Chicago gets the Olympics, which if it does, is the best piece of land anywhere in the world, without it is still a great piece of land. Staple in Denver, Mesa Del Sol are here for the present as well as the future. We do know the real estate business, we have the best people in the business to execute the plans.
As I reflect on our future, I, like Sam and Chuck believe, that the best years for our company are ahead, and I base that on the fact that that I believe the best years of our country are ahead. We will grow 83 million more people, or have 83 million more people in this country over 30 years. Population drives development and above all, we are great developers. If we continue to understand the importance of our relationships, continue to be creative and continue to use our real estate knowledge, we have a bright future.
I want to tell you a story -- close by telling you a story of my uncle Max. When I started in the business, we started to do business out of town, and when I would come back, my uncle Max was always anxious to sit down with me to find out if we made a deal with a tenant. But the first question that he always asked me was not whether we did the deal. He would ask me, what did the person we met, that I met with, think of the Company?
And I would say, uncle Max, why do you ask what the person who we met with thinks of the Company? He said, because if they think we are a good company, we will do business with them. As long as we remember where we came from, we will always know where we're going.
I want to thank all of you for joining us today, and I now adjourn this meeting. Thank you very much.