Skip to main content

Forest City: despite B2 delay "disappointment," still bullish on Brooklyn apartment market, de Blasio policies; aim to sell Nets' share by end of year

Forest City Enterprises executives said yesterday that they remain bullish on the Brooklyn apartment market and think New York Mayor Bill de Blasio's affordable housing push will be good for them.

Otherwise, the commentary in the first-quarter conference call held with investment analysts pretty much matched that in the press release and other documents released the day before. And those analysts, as is typical, missed the chance to ask some tough questions.

Atlantic Yards apartments

CEO David LaRue expressed disappointment that the modular building, Atlantic Yards B2, would be a year late, but said the Brooklyn market is projected to stay strong. He said there was a fixed-priced contract but wasn't asked about the contractor, which is a Forest City joint venture.

Nor did any of the analysts note that the Greenland Group, Forest City's new joint venture partner/overseer, has decided to build the next towers using conventional means. Could it be that one reason Forest City sought new buyers--or that it sold at a discount--was because modular was struggling?

Is Forest City concerned "that too much product might be hitting the market in Brooklyn at the same time"?

LaRue said no, that "we think that the market strength is still there... The unique nature of this project, it’s location with regard to to public transportation, where it sits in the market, even with the new construction going on, will be beneficial to us."

He added that Atlantic Yards "is uniquely positioned" produce affordable housing de Blasio wants, "not only for the city but for ourselves and our partners. again, we are still very bullish on the market dynamics."

One analyst asked if Atlantic Yards towers would compete with each other.

LaRue said no. B2 would open at the end of 2015. "We're looking at two more buildings on the site… both a rental, and potentially even a condo, because of the flexibility in the zoning." Actually, there's no zoning. The state overrode zoning for Forest City. And Forest City told the Times it would start three towers, not two.

Even if the new buildings are rentals, they wouldn't compete with B2. He said that "because B2 is a 50/30/20 building [market/middle- and moderate-income/low-income], we think the absorption of that building, once it does open, will happen quickly, and we actually can get a nice flow into the market."

Does Forest City see a better environment for developers under de Blasio?

LaRue reiterated that Atlantic Yards "can be a major component" of the mayor's affordable housing goals. "We are pleased with the ongoing support from the city," he said. "The city has committed to making this work for all developers."

Unmentioned is that Forest City is apparently seeking new subsidies.

Arena boost

Given the boost in Barclays Center revenues, an analyst asked "if results are tracking to your expectations."

Yes, said LaRue, adding that they were focused both on event revenues and expenses, given that they no longer need to be "were welcoming new guests." Revenues are "in line with our expectations."

"We’re overall pleased with the acceptance of the arena in the New York market," he said, "not only the people who come to the events, but also the performers and other users of the facility."

He didn't mention--and nobody asked about--the green roof planned to both enhance views from apartments and tamp down the escaping bass.

Nets sale

Forest City, given its " focus is on accelerating vertical development," has recently retained advisors to help market its minority share in the Brooklyn Nets. Forest City is the managing member of Nets Sports and Entertainment, which owns 20% of the team, otherwise owned by affiliates of Mikhail Prokhorov's Onexim Group.

What's the balance they're carrying the Nets on, the executives were asked.

"We’re carrying the Nets at zero, we’ve written it down," responded Chief Financial Officer Bob O'Brien.

I've estimated the sale might be worth as much as $150 million.

How long will it take?  "The efforts really just started, it’s pretty early," said O'Brien. But if they identify a buyer, he said, they'd expect to reach agreement on price by the end of the year.

Next come are approvals by the NBA, he said, which are "a little harder to predict."

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…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…

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…