Tuesday, March 11, 2014

Forest City finally changes Phase I definition in investor presentations, stressing intention to build on parking lot

I've written about how Forest City Ratner and Forest City Enterprises have given inconsistent and misleading definitions of what exactly constitutes Phase 1 of Atlantic Yards, using one definition for investors yet accepting another in government documents.

That has continued, in an odd way, as Forest City has belatedly changed the outline of the two phases in investor presentations. So now it signals investors that yes, it will be building sooner rather than later on the southeast block of the site, Block 1129, now occupied by a surface parking lot.

And it reminds us that, while Atlantic Yards was justified, in significant part, as removing the blight of a below-grade railyard between Pacific Street and Atlantic Avenue, that's hardly a priority.

A GIF version

The screenshots are further below, but first, a GIF.
From December 2013 and February 2014 investor presentations by Forest City Enterprises
In first, with light background, Phase 1 is west of Sixth Avenue; in second, Phase 1 has light blue back back shading


Officially, the division between phases is clear. According to the Empire State Development Corporation (ESDC, or ESD), in documents like the 2009 Modified General Project Plan, the "portion of the Project Site west of 6th Avenue" constitutes Phase 1. The site east of 6th Avenue would be Phase 2.

In the graphic at right, the outlines of Phase 1 and Phase 2 are indicated by horizontal lines at the top. I annotated the map in red to show how Forest City has said it considers Block 1129 the next development site after the arena block.

Thus, for Forest City's business purposes, it's become part of Phase 1, since it doesn't require significant infrastructure investment (new permanent railyard, deck) to build over the railyard north of Pacific Street.

Nor does it require the acquisition (potentially via eminent domain) of private homes to build Building 15, the solo tower just east of Sixth Avenue between Dean and Pacific Streets.

But no government document acknowledges that.

Forest City's statements

The first inkling came when Forest City Ratner executive MaryAnne Gilmartin in October 2012 told investment analysts "we have seven buildings that we will build before we commence construction on any platform buildings."

That  indicated that Forest City had no immediate plans to build over the below-grade railyard, the clearest evidence of blight, though blight removal was a main justification for the use of eminent domain.

In the FCE annual report 10-K filed in March 2013 with the Securities and Exchange Commission, the company offered a new interpretation of the Atlantic Yards phases. The annual report stated:
Phase I of Brooklyn Atlantic Yards is comprised of eight buildings totaling approximately 3.4 million square feet—four buildings on the Arena Block (adjacent to the Barclays Center ) and four buildings on Block 1129. Phase II consists of seven buildings totaling approximately 3.3 million square feet—three buildings on Block 1120, three buildings on Block 1121 and one building on Block 1128.
After I reported on this, the New York Observer got a convoluted explanation from Forest City:
“The four buildings on Block 1129 are still, as they have always been, part of Phase II,” spokesman Joe DePlasco told The Observer. Sequencing for Phase II, he added, had yet to be determined and would be discussed as part of the environmental impact studies.
But what of the seeming discrepancy between Block 1129 being designated as part of Phase I in the annual report?
Mr. DePlasco cited a tangle of legalese, but the takeaway was that different documents “have different descriptions for different purposes.”
In other words, they can say whatever they want.

Forest City's recent Form 10-KT annual report, filed 2/27/14, contained the same language about the two phases.

December 2013: Phase 1 west of Sixth Avenue

Oddly, Forest City neglected to update its investor presentations to conform with its rhetoric.

Slide presentations from October 2012, December 2012April 2013June 2013July 2013 as well as the slide below from December 2013, adapted the ESDC graphic, in which Sixth Avenue remained the dividing line.

Investor Presentation, December 2013
(Note the, while buildings at far west are in yellow, indicating office use, the buildings can become housing, as well.)

February 2014: Phase I leapfrogs to Block 1129

By contrast, the investor presentation released 2/27/14 looks different. The light blue background shading in the bottom right clearly indicates that Forest City considers Block 1129 to be part of Phase I.
Investor Presentation, February 2014
Block 1129 not in initial plans

One irony, of course, is that initial plans in 2003 for Atlantic Yards completely omitted the southeast block, as indicated in the graphic at right.

The site was limited to the arena block and then the two blocks to the east above Pacific containing the rest of the Vanderbilt Yard.

That block was added later, likely because Forest City needed space for construction staging and interim parking--and for even more development.

Early plans to build on Block 1129

Note that, while not part of the documents used in the official approval process, a plan to build on Block 1129 in Phase 1 has actually been contemplated by Forest City Ratner for a long time.

Consider the graphic below, from the Memorandum of Understanding the developer signed 2/18/05 with the city and state. (The yellow Phase 1 not only included the southeast block, it also included the Building 15 site, which was expected to provide construction staging for the arena block, and thus would have been available for rapid development.)

Phasing shifts

By June 2005, as indicated in the graphic below from the Atlantic Yards Community Benefits Agreement, the phasing shifted, with Sixth Avenue as the dividing line.

That dividing line persisted in all official approval documents, including the September 2005 Draft Scope of Analysis for an environmental impact statement:
As described earlier, Phase I would consist of development of the arena blocks (Blocks 1118, 1119, and 1127), which are bounded by Atlantic Avenue to the north, Sixth Avenue to the east, Dean Street to the south, and Flatbush Avenue to the west, and Site 5 (Block 927), which is bounded by Atlantic Avenue to the north, Flatbush Avenue to the east, Pacific Street to the south, and Fourth Avenue to the west. The blocks on the eastern part of the project site (Blocks 1120, 1121, 1128, and 1129) would be built out during Phase II. 
The official dividing line persists today.

But it's irrelevant to Forest City Ratner's business purposes.

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