Skip to main content

Forest City: decline in Barclays Center revenue part of "overall review" and recognition of "steady-state concert schedule"

In the wake of an announcement of losses and plans to sell 32.5 million shares of stock, Forest City Enterprises stock went down 3.82% yesterday, a not insignificant if hardly crushing hit, closing at $23.17.

Perhaps the dramatic changes were why Forest City scheduled its quarterly earnings conference call for 8 am (as opposed to the usual late morning), before the market opened.

Decline in arena revenues

Executives answered several questions about the Barclays Center and Atlantic Yards/Pacific Park. Following up the announcement that they had downgraded expected net revenues for the Barclays Center from $65 million to $55 million, CEO David LaRue stated, "Our New York team and the management of the property have done a good job bringing the expense side of the arena into line but based upon our experience to-date we now believe the annual NOI [net operating income] of $55 million at full stabilization is the right level for this property."

Note that a "good job" is not a "great job" and the "right level" is essentially an admission that their previous forecasts were bunk.

"Certainly that downward revision is disappointment," LaRue continued, echoing previous prepared remarks, "but Barclays Center continues to be a great anchor for Pacific Park Brooklyn project and a source of pride and an important economic driver for the entire borough."

Pride and claimed "economic driver," however, don't get the company too far.

Was the decline in income, one analyst asked, due to a reduction in sponsorships?

LaRue said the revision could not be attributed to "any particular area," whether it be sponsorships or food and beverage: "it was an overall review in each of the product lines as we again gain that experience and knowledge of how the arena is going to operate." 

He cited "more of a steady-state concert schedule"--essentially an acknowledgment that big-name concerts were one-offs.

The Nets, LaRue said, "had a great run at the end of the year and ended up being in the playoffs which was a positive for the arena, but in those early parts of the year they did have more of a difficult season and some of that translated down each of those line items."

Again using a phrase (by corporate standards) of faint praise, he said, "Brett Yormark and his team continue to do a very good job in regard to all of those revenue areas."

Selling assets

Asked how they were marketing assets, including their share of the Brooklyn Nets and the Barclays Center operating company, CFO Bob O'Brien said that, despite no visible signs of progress, like a duck, they were "paddling like crazy below the surface."

LaRue said Forest City was "working cooperatively" with Mikhail Prokhorov's Onexim, which owns 80% of the team and 45% of the arena operating company. He noted reports that Onexim was not aiming to sell completely but "looking to monetize a portion of their asset."

Update on modular tower

Asked for an update on the B2 modular tower, LaRue said Forest City has been "actively manufacturing and assembling the mods in the factory," working with Turner Construction, aiming to get a sufficient inventory of completed modules.

Field assembly should begin in the next 30 days, and it should continue through the balance of this year. Once that is done, they will make final connections at the site, aiming to complete the building by the third quarter of 2015.

"Right now we are on track with that schedule, and feel comfortable with respect to where we stand now," LaRue said, acknowledging there are risks in this new business. He made no mention of the stated plan to realign modules.

The litigation over B2 with former partner Skanska is ongoing, he said, but didn't disclose details of any progress.

O'Brien said that a forbearance agreement regarding $45 million in bonds for the building has been extended again by the Bank of New York. "The intent is to work out a permanent solution" to fund construction, he said.

Comments

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…

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…

So, Forest City has some property subject to the future Gowanus rezoning

Writing yesterday, MAP: Who Owns All the Property Along the Gowanus Canal, DNAinfo's Leslie Albrecht lays out the positioning of various real estate players along the Gowanus Canal, a Superfund site:
As the city considers whether to rezone Gowanus and, perhaps, morph the gritty low-rise industrial area into a hot new neighborhood of residential towers (albeit at a fraction of the height of Manhattan's supertall buildings), DNAinfo reviewed property records along the canal to find out who stands to benefit most from the changes.
Investors have poured at least $440 million into buying land on the polluted waterway and more than a third of the properties have changed hands in the past decade, according to an examination of records for the nearly 130 properties along the 1.8-mile canal. While the single largest landowner is developer Property Markets Group, other landowners include Kushner Companies, Alloy Development, Two Trees, and Forest City New York.

Forest City's plans unc…

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…