Wednesday, November 21, 2012

In lawsuit, Forest City claims arena, land around it worth far less than city assessments; can site for 32-story tower be worth just $6,000?

Could the lot for Forest City Ratner's planned 32-story, 363-unit first tower on the Atlantic Yards site be worth just $6,000?

That's what the developer is claiming, according to legal papers filed recently in state Supreme Court in Brooklyn. The city values the site at more than $400,000, calculating back from an ssessment, set at 45% of gross sales price, of $184,050.

(Documents filed with the Department of Buildings confirm that the site for the tower is Block 1127, Lot 56, or461 Dean Street.)

Could the Barclays Center and its land be worth just $111 million, while the city Department of Finance valued it at about $741 million, with an assessment (45% of value) at about $334 million, as reported by DNAinfo.com?

Remember, the Barclays Center is commonly called a $1 billion building but has been described by the developer as a $934 million project, involving "the cost of this building, the transit connection, the site work, etc."

In the 2009 Modified General Project Plan, Empire State Development, the state agency overseeing the project, said the arena would cost $772 million.

[Update] The New York Post reported:

A Forest City spokesman last night claimed the driving force behind the suit is that the city mistakenly included various properties near the arena on regular tax rolls when they should have been part of the arena’s tax-friendly PILOT program.

Lawsuit raises questions

In a scoop headlined Barclays Center Owners Say City Grossly Overvalued Arena, James Fanelli of DNAInfo reported yesterday on a series of suits (excerpts below) filed in state Supreme Court in Brooklyn, in which affiliates of Forest City Ratner are trying to get property assessments overturned:
The petition says Brooklyn Events asked the city's Tax Commission in the spring to have the property assessment lowered, but the appeal was denied. The petition calls the city's assessment "illegal" and "erroneous."
The whole enterprise is confounding on several counts, notably because Forest City doesn't pay taxes on the arena, only PILOTs (payments in lieu of taxes) to pay off arena construction via tax-exempt bonds.

And Forest City's justifications require a tax attorney to parse: the developer and its affiliates claim various exemptions and special provisions in the tax code beyond my expertise to assess. Forest City wouldn't offer any explanations for the lawsuit to DNAinfo, but the Observer followed up and got this quote:
“The city is still in the process of determining the assessment and until that is concluded we will not comment,” Forest City spokesman Joe DePlasco told The Observer when asked about the discrepancy.
Assessments out of whack, twice?

It is clear that the Department of Finance has both raised and lowered assessments significantly.

 For example, in the tax year ending this June, that Dean Street lot destined for the first tower was assessed by the city at $21,687 (45% of value), while Forest City claimed it was worth $6,000.

Now the assessment is $184,050, an increase of about 8.5 times.

Then again, as I reported in June 2009, the row house at 461 Dean was purchased by FCR on 6/2/04, along with a neighboring building, for $3.8 million, and demolished in the spring of 2006. In 2006, under classification C0 (three-family house), it had a market value of $1.148 million.

In the next year, the classification changed to V1, with a market value of $95,000; the land was assessed at $42,750. In 2008, those numbers rose to $143,000 and $64,350. In the third year, the numbers rose to $998,200 and $449,190.

Shouldn't the site for a 32-story tower be worth a heck of a lot more?

Ay Tax Petition

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