Thursday, March 11, 2010

"We still need more" subsidy, Forest City CEO said in April 2008, and they got it

Looking back, one of the most telling episodes in the Atlantic Yards saga came in a 4/2/08 earnings conference call that Forest City Enterprises (FCE) held with investment analysis.

As I wrote, in response to a question from analyst Rich Moore, FCE Chuck Ratner expressed satisfaction in the developer’s relationship with local government, and said he expects more subsidy.

Forest City Ratner, FCE's New York subsidiary, had gained $105 million in subsidy on top of the initial pledged $200 million, at the time of the call. Since then, FCR gained (beyond other stated subsidies and tax breaks):
  • a speed-up in delivery of pledged state and city subsidies
  • an additional $31 million for land purchase (allegedly from infrastructure funds)
  • a revised deal with the Metropolitan Transportation Authority for the Vanderbilt Yard, with only $20 million down (instead of $100 million), a smaller permanent yard, and a generous 6.5% interest rate
  • a Development Agreement with gentle penalties and generous deadlines (12 years for Phase 1, 25 years for Phase 2)
Upcoming--and hinted at in the call--is the developer's effort to corral scarce subsidies for affordable housing.

From the call

RM: You work very closely with the cities, they’ve always been a source of financing, in part…what are you hearing from them, in this whole thing, is there less desire to participate, or more desire—how do they look at it?

CR: That’s a very provocative question. We talked about it quite a bit at our last board meeting.. look at what [Forest City Ratner's] Joanne [Minieri] just shared with you, just in these past six or eight months, we got the various governmental agencies, state, city, borough, in New York, to increase their commitments to Atlantic Yards by 105 million dollars on top of the 200 [million] they committed. We still need more. So you look at New York and you realize it’s a huge city, with, obviously, huge challenges and issues, but there’s very few major things that are happening, that are gonna happen. We’re one of the few in these places that continue to offer opportunities for development, in these major urban markets. They clearly have the resources to support them and I think they’ll put them toward these projects. We found that to be true in MetroTech, over the 20 years we did it… so while they’ll have revenue challenges and tax-[inaudible] challenges, I think they have access to the capital to support development, where they think they need it. I think we represent places where they need it.

(Emphasis added)

Actually, it was just the city that upped its contribution. And it was hardly true that Forest City Ratner alone is offering "opportunities for development." Consider the number of bids for the West Side Yards in Manhattan, or for Willets Point, or Coney Island.

Minieri chimed in: With respect to New York, the city and the state, they really put an emphasis on affordable housing program… a project like Atlantic Yards, of such significance really furthers their commitment to the housing program. So as I said… we work very closely with them, because it’s a public private partnership that will enable us to all come together.

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