Skip to main content

Missing from Bruce Ratner's softball WSJ interview: the modular mess, his Atlantic Yards deceptions, the complications of the Greenland deal

Forest City Ratner Chairman Bruce Ratner yesterday appeared in the Wall Street Journal feature BOSS TALK, headlined With Brooklyn’s Barclays Center, Builder Takes Global Stage: Forest City Ratner Negotiates a Deal With Unit Owned by Chinese Firm.

He talked about the decline in needed office space per person--no longer 225 to 250 square feet--the poor future for retail beyond cities, and touted the opportunities in residential and hotel real estate as well as a Democratic National Convention in Brooklyn.

About housing

Asked if New York City Mayor Bill de Blasio’s goal of building 80,000 new affordable housing units in ten years was realistic, Ratner responded:
He's got to build 8,000 a year. That’s hard to do. But I think it is attainable. I’ll tell you something else: It’s an absolute necessity. When you look at the housing, we’re in the process of having a housing crisis in the city only equaled by after World War II.
The city will grow, most studies show, from now through about 2035 to 9.3 million people. Now it’s 8.3 million, 8.4 million. That’s 50,000 new people a year.
Notably, Ratner failed to mention that his company's modular building plan might be a solution. Were the B2 tower not stalled at ten (of 32 stories), amid a bitter set of lawsuits, surely Ratner would have been talking up modular as a way to save money and time.

Naturally, Ratner was not asked about the lawsuit or, say, the claim in an affidavit from Skanksa's Richard Kennedy:
In early 2014, Skanska Building attempted to engage in constructive conversations with Forest City to resolve issues. Forest City's responses ranged from hostile to inattentive and accusatory. For example, at a meeting on January 28, 2014 when William Flemming, the President of Skanska Building, mentioned that design issues existed, Bruce Ratner's response was to use a vulgar street epithet followed by "I don't care if it costs you fifty million to finish the project ... I'll see you at the grand opening."
Rationalizing an unaffordable building

Asked why he came to housing relatively late in his career, Ratner responded:
Mr. Ratner: I come from a very social Democratic, left background. For many years, the idea of being a residential landlord was never appealing.
From my days as commissioner of consumer affairs [in New York City], I rationalized the big-box retail development. It turns out a family will save thousands of dollars shopping at a larger store. That’s like giving people raises. I loved the idea that by doing big-box stuff, I was saving people money.
One of the first residential projects we did was 20% affordable [housing] and I could handle that. Before that I did one that was half low income and half middle income and I could handle that one too. The first one I had to really rationalize was when I did the Gehry building [a 76-story apartment building in downtown Manhattan that hit the market in 2011] because it did not have any affordable housing.
He had to rationalize the Gehry building? In 2012, interviewed by Charlie Rose, Ratner was more smooth:
First of all, the way I think about myself as a developer is as a civic developer. We do a lot of civic projects. And every project that we do has to have some civic component. It can be architecture. It can be economic development. Or it can be something like the arena, where we're providing entertainment, where it's in some sense a public building.
As I wrote at the time, Ratner's been using the word civic a lot, but it's a weasel world. It means "relating a city," or to citizenship, but it does not necessarily denote the public interest. Ratner seems to be saying that, as long as he's building in the city, he's somehow helping the city. The reality is a bit more complicated, having to do with things like public subsidies, tax breaks, and eminent domain.

Ratner's colleagues, in a 4/7/08 conference call with investment analysts, were less reticent after analyst Sheila McGrath brought up the tower.

Forest City Enterprises CEO Chuck Ratner asked executives Bob O'Brien and Joanne Minieri to “give Sheila a little color” regarding the “tremendous demand on the part of the banks” for the tax-free Liberty Bonds.

JM: Like a billion-two demand for the 204 [million] that we put out there.

SM: And are all the units in that building, they’re all market-rate units?

JM: That’s correct, Sheila.

BO: That’s the beauty of the Liberty Bonds, tax-exempt rates and all market-rate units.

CR: Thank you, Bob.

SM: Gotta like that.

Massaging Atlantic Yards history

The Journal asked, "How did you feel when you came under attack for the Atlantic Yards development?"

Ratner's response:
In the beginning it was a little difficult. I was personally vilified.
Then I got used to it and I said, “You know what, I am who I am. I believe in what I’m doing. I’ll try to do the best I can do and people who know me, know me.”
The "they know me" response is remarkably Markowitzian. As I've written, among other reasons for criticism, Ratner made two self-sabotaging statements that back up charges of cheating:
  • he repudiated the ten-year timeline to build the project previously endorsed by his company and the state
  • he claimed that high-rise, union-built affordable housing isn't feasible, even though that's what he long planned and the state approved twice
The Greenland deal

Ratner was asked a general question how the deal with the Greenland Group to take 70% of the Atlantic Yards project going forward evolved. His response:
The infrastructure for Atlantic Yards [now known as Pacific Park] was very, very costly. We’re a nice size company, but we had to put in $500 million to $600 million of equity. That was a big number. We made a decision to take a partner, which we really don’t do as a company, but this time we decided to.
Greenland showed interest last summer. Over two days we negotiated a term sheet with the chairman. It’s a state-owned enterprise, but it’s run like a private company. They already have six to eight people in our office and will eventually build up to substantially more.
Actually, Forest City regularly does take partners, just minority ones. What's unusual in this case is that Greenland has a majority stake, and if the parties hit a deadlock, can buy out Forest City. Also, it looks like Greenland got a bargain, since Forest City got less than book value.

And the joint venture may be precarious. As I wrote in January, according to a 12/13/13 memo to the "Atlantic Yards file" by Empire State Development VP of Planning and Environmental Review Rachel Shatz, a five-person board of directors was to be established, with Greenland appointing the Chairman, CEO, and CFO, and Forest City Enterprises appointing Vice Chairman and President.

Decisions of particular importance, including starting a new building, require a majority vote, including a vote from one appointee from both, which "in effect requires that both Greenland and FCRC agree to such decisions," according to Shatz.

Day to day operations would be the responsibility of a Management Team and a Development Team, both led by Forest City. The agreement provides for a possible buy-out in the event of a deadlock among the members of the Board of Managers and it also provides for a dilution of a member's interest if it fails to meet certain obligations.

"Accordingly, it cannot be assumed that the 30%-70% divisions of interests described above is a permanent arrangement," Shatz wrote.

So stay tuned.


Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

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…