Skip to main content

Forest City executives to investment analysts: everything's fine with AY

Forest City Enterprises officials, during a first quarter conference call (audio) yesterday with investment analysts, maintained their staunch support for Atlantic Yards while easily ignoring some inconvenient news, notably New York Times architecture critic Nicolai Ouroussoff's slam that morning.

The major players from FCE in the call--CEO Chuck Ratner, Executive VP Bob O'Brien, and Forest City Ratner President Joanne Minieri--participated not from the home base in Cleveland, but from Forest City offices in Brooklyn.

The focus on the FCE presentation was on corporate results, the recent issuance of more than $300 million in new stock, and debt and cash flow expectations.

"We have been saying for some time our highest priority is generating and preserving liquidity," Ratner said, noting that FCE had gone to the equity markets just three times in 50 years.

In fact, he said, members of the families that control FCE spent $20 million of their own "to show our confidence in the ability of the management team."

Update on AY

During the Q&A, about 30 minutes into the call, Analyst Sheila McGrath asked for an update on New York projects, including Atlantic Yards.

Minieri responded: As it relates to Atlantic Yards, yes, there’s been a lot of press on Atlantic Yards, but we maintain, we’re committed to the project. We’re targeting a second part of the year master closing. We’re moving toward finalizing all the necessary negotiations with the public parties. We’re working very closely with Barclays and Goldman [Sachs] on the arena bond financing that is anticipated to occur so that we can go vertical on the arena. You probably have read today that we’ve announced the new architects on the arena. We are moving quickly to complete the design and cost estimates for that. That will enable us to meet our timetable for a second-half master closing.

Not only were the new architects announced, they were denounced. Minieri did not mention that there would be a new General Project Plan, and that there are pending appeals and potential new lawsuits.

In previous conference calls, FCE executives have promised much more optimstic schedules about the start of construction. This time, the consequences for delay are more serious--there's a December 31 deadline for tax-free bonds.

Selling the Nets?

At about 42:50 of the call, Marc Heilweil of Spectrum Advisory Services asked: I just wonder if I can get a little bit more of an idea of the alternatives discussed before the equity offering was decided to go ahead. Were there some serious alternatives… was there any possibility of selling the interest in the team and the arrangement for the arena?… I have to say, as a very long-term shareholder, the amount of dilution that the company faced was not a pleasant thing to face… and I realize problems you’re facing, of course.

Chuck Ratner responded: It was not pleasant for everybody. No existing shareholder can be content or happy when a company dilutes to this level…. It’s a hard thing to do for sure.… But, as I said to everybody we spoke to during this process, in these circumstances--I’ve been here 44 years, never been though anything quite like this… I think liquidity trumps dilution.

As for alternatives, he said FCE didn’t want to add more recourse debt, so its option was to sell a line of business or to sell properties, and it's doing the latter.

He didn't mention the arena or Nets.

Heilweil followed up, asking Ratner if he had any comment on the Nets.

Chuck Ratner: As we’ve said many times… we’re fully committed to proceeding with the Atlantic Yards project, as Joanne said. As part of coming to the end that Joanne talks about, being able to start the arena by the end of the year, we have to get these various steps taken, and part of that crucially includes moving the team here, and we intend to do that.

What he didn't explain was that moving the team raises the value considerably; hence, it's their priority.

Morningstar's take

Morningstar commented:
Although performance held the line this quarter, we are expecting future weakness in the latter half of 2009 and early 2010 across the portfolio. Weakening consumer spending will likely weigh on retail and hotel performance, with rising unemployment affecting Forest City's office and residential segments. We anticipate that the company will face low-single-digit revenue declines and mid- to high-single-digit NOI declines sequentially through 2010. Although we think the company's May equity issuance--raising nearly $330 million in net proceeds--helps to shore up near-term liquidity, with nearly $1.9 billion in maturing obligations remaining through 2010 and almost $505 million left to finance, we still think it will be challenging for Forest City to manage these obligations. In our opinion, an additional equity issuance is possible during the next few years, as we think property sales alone will likely prove insufficient to cover the company's remaining debt maturities.

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

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…

So, Forest City has some property subject to the future Gowanus rezoning

Writing yesterday, MAP: Who Owns All the Property Along the Gowanus Canal, DNAinfo's Leslie Albrecht lays out the positioning of various real estate players along the Gowanus Canal, a Superfund site:
As the city considers whether to rezone Gowanus and, perhaps, morph the gritty low-rise industrial area into a hot new neighborhood of residential towers (albeit at a fraction of the height of Manhattan's supertall buildings), DNAinfo reviewed property records along the canal to find out who stands to benefit most from the changes.
Investors have poured at least $440 million into buying land on the polluted waterway and more than a third of the properties have changed hands in the past decade, according to an examination of records for the nearly 130 properties along the 1.8-mile canal. While the single largest landowner is developer Property Markets Group, other landowners include Kushner Companies, Alloy Development, Two Trees, and Forest City New York.

Forest City's plans unc…

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…