Skip to main content

Ratner steps back as Forest City CEO as Gilmartin steps up; remember how Forest City was restructured in 2006 so Ratner could do more philanthropy?

Matt Chaban, the new real estate reporter for Crain's New York Business (ex-NY Observer), has a scoop headlined Bruce Ratner to step down as Forest City CEO: Developer of the vast Atlantic Yards project in downtown Brooklyn will be succeeded as CEO by company's Executive Vice President MaryAnne Gilmartin:
Brooklyn's biggest developer, Bruce Ratner, is preparing to step down as chief executive of Forest City Ratner, the New York City subsidiary of his family's Cleveland-based Forest City Enterprises. Taking his place will be MaryAnne Gilmartin, who became executive vice president in 2007. The switch will elevate her to Mr. Ratner's clear No. 2, as he continues on in his role as chairman.
With no comment from inside Forest City and no explanation of exactly how much the 68-year-old Ratner will give up--and how that might reconfigure the executive chairs below Gilmartin--there's not much more to the story.

But it is true, as Chaban writes, that it has been a "banner 2012 for Mr. Ratner"--not just the opening of the Barclays Center and the groundbreaking for a modular tower, but (unmentioned in Crain's) the surprising coup of luring the New York Islanders to the basketball-focused arena, thus ensuring another 41+ dates a year for a not-always busy venue.

Also significant is the astonishing rise in value (according to Forbes) of the Brooklyn Nets, which will make it that much easier for Forest City Enterprises, Ratner's parent company, to sell their share in the team, as has been contemplated.

Ratner's accomplishments, and the help he got

A source tells Crain's, "He's done an incredible amount for the city, and he's got a great team in position to keep up that great work."

As I commented: 
Ratner has accomplished much, but didn't even the NYTimes describe him as having a "reputation for promising anything to get a deal, only to renegotiate relentlessly for more favorable terms"? 
The last time Ratner made a move: philanthropy

On 8/4/06, Lumi Rolley of NoLandGrab analyzed an 8/3/06  Forest City Enterprises press release headlined, Forest City Announces Negotiations to Restructure Forest City Ratner Portfolio:
Forest City Enterprises, Inc. (NYSE:FCEA) (NYSE:FCEB) today announced that it is negotiating with Bruce C. Ratner to restructure their combined interest in a total of 30 retail, office and residential operating properties and certain service companies that currently are owned jointly by Forest City and Ratner. All of the properties included in this portfolio except one are located in the New York City metropolitan area. Currently Forest City owns a majority interest in its New York portfolio. Upon closing of the proposed transaction, Forest City will be entitled to substantially all of the remaining economic benefits of the underlying properties. The parties also are negotiating the restructuring of certain jointly owned projects under active development which will be valued when each development is completed. Beyond these development projects, Forest City will have the right to all future development.
Rolley's take:
What the press release fails to state in layman's terms is that Bruce Ratner's company was just purchased and assimilated into the Cleveland mothership.
Read: Bruce leveraged himself to the hilt on Atlantic Yards and the NJ Nets, and had to sell his company in order to keep afloat a project that hasn't yet been approved....
The question of why he felt he had to sell his equity to FCE is a good one. All signs lead to FCE wanting to increase their ownership position in exchange for the increased exposure on Atlantic Yards.
Judging from the fact that the press release didn't come out and clearly state that FCR is being wholly acquired up by FCE, we may see some positive spin from the developer in the future.
On 8/11/06, Rolley wrote, The spin is in, showing how a helpful investment analyst told two reporters that Ratner was going to spend more time on philanthropy!

From The Real Estate Observer, Bruce Ratner, Philanthropist?:
"What happened was that Bruce was getting to the point in his life where he wants to do some philanthropy," Rich Moore, managing director at RBC Capital Markets, told us. "There is no liquidity to joint ventures because he has to sell a building in order to make any money."
From the NY Sun, Ratner To Cash In on Stake in His Company:
“It will be the same people, the same entities, the same decision makers. He will run FCR just as he ran it before,” Mr. Moore said. “Basically, this was more designed for Bruce personally to have more liquidity to make philanthropic donations.
“He is getting older, and it is time for him personally to do things a little differently,” Mr. Moore said.
As Rolley wrote, "It's practically as credible as, 'the Congressman will be leaving office to spend more time with his family.'"

Needless to say, Ratner has not focused on philanthropy in the last six-plus years.

The aftermath

Forest City Completes Restructuring of New York City Portfolio
CLEVELAND – November 8, 2006 – Forest City Enterprises, Inc. (NYSE:FCEA) (NYSE:FCEB) today announced that it has completed the restructuring of the Forest City Ratner Companies portfolio. The portfolio is composed of Forest City Enterprises’ and Bruce C. Ratner’s combined interest in a total of 30 retail, office and residential operating properties, certain service companies and seven identified development opportunities, as well as the pursuit of new real estate opportunities, all in the greater New York City metropolitan area.
As previously announced, Bruce Ratner has contributed his ownership interests in the 30 operating properties, the service companies and participation rights in all future developments (except those named below) to a newly formed limited liability company. Forest City paid $46.3 million in cash and issued 3,894,000 units in the new limited liability company to Bruce Ratner. These units may be exchanged (after a one-year lock-up period) for an equal number of shares of FCEA stock or cash based on the value of FCEA stock at the time of conversion. For the first five years only, units that have not been exchanged will receive their proportionate share of an aggregate annual preferred payment of $2.5 million plus an amount equal to the dividends payable on the same number of shares of Forest City stock. After five years, the annual preferred payment on the outstanding units will equal only the dividends payable on Forest City stock. In addition, Forest City will indemnify Bruce Ratner for any tax liability he may incur as a result of the sale of any of these properties during the 12-year period following the closing of the transaction.

The cash and units exchanged for Bruce Ratner’s interest are net of $42.5 million of preferred returns in favor of Forest City. This transaction also takes into account $384 million of non-recourse project debt (as of January 31, 2006) attributable to Bruce Ratner’s ownership. All but $16.8 million of this debt is already reported on the consolidated balance sheet of Forest City’s GAAP financial statements.
....Forest City will conduct its New York operations in the same manner as it has for the past 20 years. Bruce Ratner will continue to be president and chief executive officer of Forest City Ratner Companies. He will continue to lead the Atlantic Yards project, with responsibility for the successful execution of the planned redevelopment. Bruce Ratner’s economic interest in this development opportunity will be realized through his substantial ownership of the units described above. He will also become a member of Forest City’s Board of Directors by no later than February 1, 2007. 

Comments

Popular posts from this blog

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…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…

Former ESDC CEO Lago returns to NYC to head City Planning Commission

Carl Weisbrod, Mayor Bill de Blasio's City Planning Commission Chairman and Director of the Department of City Planning, is resigning,

And he's being replaced by Marisa Lago, currently a federal official, but who Atlantic Yards-ologists remember as the short-term Empire State Development Corporation CEO who, in an impolitic but candid 2009 statement, acknowledged that the project would take "decades."

Still, Lago not long after that played the good soldier at a May 2009 Senate oversight hearing, justifying changes in the project but claiming the public benefits remained the same.

By returning to City Planning, Lago will join former ESDC General Counsel Anita Laremont, who after retiring from the state (and taking a pension) got the job with the city.

Back at planning

Lago, a lawyer, in 1983 began work as an aide to City Planning Chairman Herb Sturz, and later served as the General Counsel to the president of the NYC Economic Development Corporation, Weisbrod himself.