Skip to main content

Posts

Showing posts from February, 2015

A new push to end use of tax-exempt federal support for sports facilities

I'm just catching up on how the worm is just starting to turn, regarding how federal taxpayers help build new sports facilities and fuel owners' profits.

From Think Progress on 2/4/15. With Obama Budget, Your Federal Tax Dollars Won’t Pay For Sports Stadiums: President Obama’s most recent budget proposal takes aim at a tax exemption that has helped drive an explosion in publicly-financed sports facilities across the United States, a move that would end federal taxpayers’ role in subsidizing the construction of stadiums and arenas that often provide little economic benefit to their cities and states.
As it stands now, cities and states can help pay for stadiums by accessing tax-free government bonds that have below-market interest rates subsidized by the federal government. The budget Obama released Monday, however, repeals the tax-exemption from the bonds that finance sports facilities if more than 10 percent of the arena or stadium is dedicated to private business use.
Becau…

In discussing future of modular construction, panel mostly avoids B2, though architect implies largest Atlantic Yards towers too tall for modular

The highest-profile effort at modular construction in New York has been Forest City Ratner's ill-fated B2 tower, stalled at ten stories but slated to resume construction this spring.

Despite the presence of an architect who worked on B2, the tower got virtually no mention on a 2/2/15 panel, Edge Construction: The Future of Modular, sponsored by the American Institute of Architects' New York Chapter.

But there were some interesting observations on the need for dramatic change in the industry--implicitly not accomplished by the now-sundered collaboration between Forest City Ratner and Skanska, now mired in lawsuits--to move modular construction from theory to practice.

And SHoP Architects principal Chris Sharples, whose firm worked on B2, offered an interesting aside suggesting that 30 to 40 stories might be the limit for now.

While that implies record-setting heights--the 322-foot B2 would be the world's tallest modular tower--it does not encompass four other towers in the …

Forest City: arena income boost still expected by 2016 (?); increased B2 impairment related to delay; arena/team sale now aimed at 2015

Forest City Enterprises acknowledged this week that reaching "stabilized operations" for the arena--$65 million in net operating income (NOI)--"is taking longer to achieve than originally anticipated," something of a euphemism for a gap of nearly $25 million between current revenues and the 2016 goal.

Despite that gap, company officials professed confidence in a conference call yesterday with investment analysts.

Analyst Sheila McGrath of Evercore (which is helping Forest City sell the Nets) noted that the quarterly NOI "has been bouncing up and down," a reference to the fact that the fourth quarter of 2014 brought fewer revenues than the same period in 2013.

McGrath, typically a chummy sort, then asked a potentially tough question quite casually: "I was just wondering if you, y'know, still feel pretty good about stabilization once the [New York] Islanders come into the mix?"

CFO Bob O'Brien attributed the income "bumpiness" to…

Barclays Center still well behind income goals, according to 2014 results

Thee Barclays Center is still well behind its plan to boost Net Operating Income (NOI) to $65 million by 2016, earning about $40.5 million in 2014.


While 2014 represented a better year financially for the arena than 2013, according to 2014 financial results released yesterday by Forest City Enterprises, which owns 55% of the arena, the Barclays Center actually did better in the 12 months ending in the first half of 2014.

As I reported, total revenues for that split-year period were $120.4 million, with operating expenses of $74.5 million, leaving NOI of $46 million. (After payments in lieu of taxes to pay off the construction loan, that left $17.5 million in profit, some of which went to additional interest.)

In an 8-K document filed yesterday with the SEC, Forest City reported $116.7 million in revenues in 2014, with expenses of $76.1 million. In 2013, according to the company's filing, the arena earned $111.5 million, with expenses of $77.7 million.

Net Operating Income for 2014,…

Forest City: stalled B2 modular tower represents $146 million write-down

Announcing 2014 fourth-quarter and year-end results, Forest City Enterprises reported a better 2014, but a big hit from the stalled B2 modular tower at Atlantic Yards/Pacific Park, now facing an impairment--a write-down of the asset--of $146 million.

Though the modular factory has been restarted, Forest City acknowledged the possibility it may have to fund the completion of the building from equity if a mortgage loan cannot be extended.

Forest City also pointed to a better potential economic result: it is also trying to recover damages from former partner Skanska; both companies have sued each other.

Net Earnings/Loss

From the press release:
For the three months ended December 31, 2014, the company had net earnings attributable to common shareholders of $69.2 million, or .31 per share, compared with a net loss of $207.7 million, or $1.05 per share, for the fourth quarter of 2013. For the full year of 2014, the company had a net loss attributable to common shareholders of $7.6 million, o…

Construction worker dies at Barclays Center; crushed by steel beams brought for green roof (updated)

Updated 7:55 am Feb. 25

The Brooklyn Paper, in Green roof grief: Barclays ironworker crushed to death by beams, had the early details on a tragic story that emerged this afternoon:
An ironworker died on Tuesday afternoon when steel beams fell on him as he worked to install Barclays Center’s new green roof, according to a police spokesman.

The 52-year-old was an employee of a Massachusetts steel company contracted by Hunt Construction Group... The worker, a member of the Ironworkers Local 361 union, was crushed by four steel beams when they rolled off a truck before they could be attached to a crane, police said. Cops and paramedics responded at 1:33 pm and found the man lying in the loading dock on Dean Street, where he was pronounced dead, according to a report. Greenland Forest City Partners issued a statement:
The iron worker who was killed was involved in the installation of the green roof on the arena. We are all devastated by what happened. All of us at Greenland Forest Cit…

Barclays Center numbers to look for in Forest City Enterprises annual results, coming at end of day

Yesterday how I reported on some 12-month financial figures for the Barclays Center, ending 6/30/14.

Today, at the end of business, Forest City Enterprises will report 2014 annual results.

It will be interesting to see how much the Barclays Center numbers change. (They overlaps for six months, of course.)

The numbers are, for the 12 months ending in the first half of 2014:
Total Revenues: $120.4 millionTotal Operating Expenses: $74.5 millionNet Operating Income: $46 millionNet Income After PILOT payments: $17.5 million Remember, Net Operating Income is supposed to reach $65 million by 2016, and Net Income After PILOT payments was supposed to hit $47.2 million last year.

After an overstaffed first year, ending in September 2013, the arena was supposed to save money via new efficiencies. It's not clear how much that was accomplished in the year ending 6/30/14.

Truck protocols for railyard work, green roof work, construction of B11 and B14 towers

Empire State Development posted the following documents yesterday, which indicate the protocols required of trucks working on the Atlantic Yards/Pacific Park site, notably the routes to and from the work site.

Railyard Truck Protocol, Atlantic Yards/Pacific Park

Arena Green Roof Truck Protocol, Atlantic Yards/Pacific Park

B11 Truck Protocol, Atlantic Yards/Pacific Park

B 14 Truck Protocol, Atlantic Yards/Pacific Park

Barclays Center profit some 63% behind expectations; key debt service statistic drops 43%

The Barclays Center's gotten much notice for its awards and its high rank nationally in tickets sold and concert revenues.

That has not translated to profit.

In fact, the arena--according to the most recent 12-month report--is about 63% behind its profit goals, reaping just $17.5 million (after expenses and bond payments) in the year ending June 2014.

Its debt service coverage ratio--the net revenue available to pay back the construction bonds--was originally judged by ratings agency Moody's at a comfortable 2.85.

It's now at 1.61--a 43% drop.

No wonder Forest City Ratner CEO MaryAnne Gilmartin told the Commercial Observer recently:
Of course, it’s not yet stabilized financially. If you were to look at the numbers and research it, you would learn it’s still a work in progress. It takes awhile to get an asset like that to its stabilized, operating income. Sure, but the "work in progress" lags well behind projections, which casts doubt on Forest City's pledge …

For the Barclays Center, "Actual Taxes" are $41 million (and not paid)

Here's a question: what are the property taxes associated with the Barclays Center?

Answer: 0.

Here's another way to phrase the question: what are the Actual Taxes?

Answer: $41 million.

Does the arena pay those Actual Taxes?

No.

"It's Orwellian," sort of.

Drilling down

See, to enable the arena, a complicated series of transactions, with a fig leaf of public ownership, allowed the issuance of tax-exempt bonds, which have a lower interest rate. (The bondholders don't pay tax on interest received, so they accept a lower rate.)

The tax-exempt financing on $511 million of arena bonds saves arena developer Forest City Ratner and partners perhaps $150 million, with the hit going mostly to federal taxpayers.

As explained in the Atlantic Yards 2009 Modified General Project Plan, Empire State Development Corporation owns the land, and a subsidiary, the Brooklyn Arena Local Development Corporation (BALDC) owns the arena, thus exempting it from taxes.

The BALDC then leases …

Decoding Ratner's role in the dispute over the Museum of Jewish Heritage's future

A 2/8/15 article in the Wall Street Journal, Museum of Jewish Heritage Faces Struggle Over Pace of Change, places Bruce Ratner front and center, and leaves a hint about how he's dealing with the press. From the article:
When Bruce Ratner took over as chairman of the Museum of Jewish Heritage in June, he and museum officials expressed optimism that a new era was beginning for the 17-year-old institution perched at the tip of lower Manhattan.
Nearly eight months later, there is little disagreement over direction. The museum, which explores Jewish life before, during and after the Holocaust, needs to boost annual attendance, which is far below that of comparable city institutions, despite a respected collection. It must stabilize its balance sheet, which has been in the red five of the last six years. And it needs to undertake significant projects, such as reimagining key sections of its core exhibit.
But a deep divide has emerged between Mr. Ratner, a prominent real-estate developer…

What's different here? Mayoral administration issues RFP to study possibility of railyard development, in Queens

The Vanderbilt Yard is 8.5 acres. The Sunnyside Yards occupy some 200 acres.

There's another difference. The Metropolitan Transportation Authority didn't issue a request for proposals (RFP) until after Forest City Ratner announced its Atlantic Yards plan.

Now there's increased consciousness of the need for a fairer playing field--as well as the need to avoid lawsuits.

So the administration of Mayor Bill de Blasio, via the New York City Economic Development Corporation, has requestedan RFP for consultants to study development in Sunnyside, at least over the portion owned by the federal Amtrak, since Gov. Andrew Cuomo has resisted such plans for the MTA-owned portion.

Yormark credits "Brooklyn" for arena success: "Most importantly, it was free" (but now?)

Given that we now know that neither the Barclays Center nor the Brooklyn Nets are doing as well as they had in their big debut year, it's worth looking back just a few months on some more optimistic coverage.

Adweek on 9/9/14 published Brooklyn Nets Launch 'We Are Brooklyn' Campaign Will it solidify fans in the fickle borough?:
And to cement its stake in Brooklyn, the Nets are launching a multichannel campaign dubbed "We Are Brooklyn" that spans out-of-home, TV, web and social media content. New York residents and visitors might spot ads on subways, buses, taxis and MetroCards. In 2012, the "Hello Brooklyn" campaign helped launched the team as a lifestyle brand, while last year’s "Are You Ready" effort was more product-focused.
"Year three is a combination of both," [team/arena CEO] Yormark said. "Our fan base has evolved from being a little more casual to a little bit hardcore." Most of that fan base resides in the borough,…

Plans for 23-story B3 tower at Sixth and Dean are filed

From The Real Deal: Forest City moves to build 23-story resi building at Pacific Park: Greenland Forest City Partners — a joint venture between Greenland USA and Forest City Ratner Companies — filed plans to build a 23-story building at 30 Sixth Avenue in Prospect Heights, according to property records filed with the city today. The 341,595-square-foot building will include 321,337 square feet of residential space span across 305 units. The building will include a more than 20,000-square-foot commercial component. The plans also call for a health care facility on the second floor, as well as a 73-car parking garage to go with the property. SHoP Architects is the architect of record.  The building has to start by June. It will not be modular, as originally planned.

Note that the application oddly and inaccurately claims this is 461 Dean Street, the site of the B2 modular building, but the business name is PACIFIC PARK 30 SIXTH AVENUE,LLC.

Should modular factories be required to use licensed firms? Op-ed warns of "dangerous lower standard"

The battle over the appropriateness of modular construction--or, at least, the presence of licensed union specialists and the attendant firms, is continuing. 
Remember, a lawsuit charging that the Department of Buildings inappropriately allowed Forest City Ratner to proceed with its cost-saving modular plan without licensed plumbing contractors and fire suppression contractors was dismissed in December 2013. It's under appeal, and those appealing have just made the case in an op-ed.
The op-ed posted today in the Commercial Observer, A Dangerous Lower Standard, is by Stewart O'Brien, Executive Director of the Plumbing Foundation of New York and former First Deputy Commissioner and Acting Commissioner of the New York City Department of Buildings,  and Tony Saporito, executive vice president of the Mechanical Contractors of New York, Inc., argues that a reduction in safety code provisions will lead to danger.
They write: The city’s building code requires two separate and distinct…

Second thoughts on Prokhorov's Nets: necessary marketing efforts or failure to rebuild? (plus low TV ratings)

Now that the Brooklyn Nets have added one player, Thaddeus Young, trading Kevin Garnett, ESPN's Mike Mazzeo wrote:
1. It’s crazy to think that in June 2013, the Nets traded three unprotected first-round picks (2014, 2016, 2018) and the right to swap firsts in 2017 to the Boston Celtics in exchange for Garnett and Paul Pierce [and Jason Terry]. As of Feb. 19, 2015, they have Young. Not a good look.

Still, Garnett, 38, appeared to be on the significant decline...The Nets are stuck in a bad place, wrote Devin Kharpertian of the Brooklyn Game.

And the second thoughts have begun.

As Capital New York's Howard Megdal wrote 2/17/15, The end of Prokhorov’s Nets experiment, into the Brooklyn Nets' third season, billionaire owner Mikhail Prokhorov has fallen far short of his promise to win a title in five years, and are now back in the bottom half of the NBA in attendance.

Marketing move?

The publication of the paperback edition of Brooklyn Bounce led to further reconsiderations by a…