[John W. Waldeck, partner and chair of the Real Estate Group at the Cleveland-based law firm Walter & Haverfield] observed that the commercial real estate industry is in the midst of its third major crisis in 30 years (the first two being the period from ’77 to ’80 and again in the early ‘90s). “If you’re an entrepreneur, is this what you have to anticipate? That once every eight to 10 years the industry will go through the ringer?” The answer clearly being yes, he advised owners and developers to “build up a substantial war chest.”In other words, even industry peers might say that Atlantic Yards developer Forest City Ratner and the Empire State Development Corporation aren't realistic in anticipating a ten-year buildout for the project. I've suggested several reasons for skepticism.
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…