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Showing posts from February, 2017

Will progress on 421-a move Pacific Park housing forward? Not necessarily

During a conference call yesterday with investment analysis, Forest City Realty Trust executives were asked if an apparent agreement to reinstate--not quite; it's pending--the 421-a tax break "changes your view on the potential sale of your interest in Pacific Park or the timing of potential starts there"?

David LaRue, CEO of FCRT, did not say anything about the potential sale of the company's interest. (Note that three development sites are up for sale. I don't know if the question related to that announced sales effort or, as it seemed, the potential for Forest City to exit Pacific Park on a greater scale.)

LaRue said 421-a "is a very important component for any residential developer... especially if you're going to build any level of affordability into the building."

"We don't decide to go forward with buildings just based on 421-a, that helps," he continued. "But I think, as we look at where the market today.... there's st…

As of Feb. 20, 461 Dean was 19% leased: 69 apartments (though probably more below-market)

So, how full is 461 Dean (aka B2)? According to Forest City Realty Trust's Form 10-K annual report, issued yesterday and submitted to the Securities and Exchange Commission, it was 19% leased, as of a week earlier, 2/20/17.

The building has 363 units, so that means 69 apartments. However, since leasing started first for the "affordable" units, which represent half the building, it's likely that a disproportionate number are below-market. Forest City Ratner surely worries more about leasing up the market-rate units to deliver returns.

Last June, Forest City claimed 140 units at 550 Vanderbilt in contract. Now they claim only 167 sold.

In a 6/29/16 article, Forest City Ratner told the Real Deal that 140 condos at 550 Vanderbilt, the first fully market-rate building at Pacific Park, were in contract for blended average of $1,500 per square foot.

I noted that, nine months earlier, it was said to be more than 30% sold, with more than 80 residences in contract. That suggested a pace of 60 units over nine months, or less than seven per month.

If they're still using the same metrics--"in contract" means "sold"--well, they're not doing so well. (Note that "in contract" does not mean "closed.)
This afternoon, during a conference call with investment analysis, Forest City CFO Bob O'Brien said that 167 apartments had been sold by the end of January 2017, saying pacing was "modestly slower" than anticipated.
"Modestly slower"? That's just 27 more units over seven months. That's a pace of less than four per month and a sell-through rate of 60.3% in the…

Updated and corrected: Forest City aims to sell *share* in Site 5 to joint venture, says plans unchanged

Updated and corrected 2 pm: A Forest City spokesman says: Your story interpreted the investor document to mean that FCR is selling site V instead of developing it. In actuality what it means is that FCRT would sell its interest in the property as part of the process for the Joint Venture to develop Site 5 at Pacific Park.

Correction: I got that wrong. I had proceeded under the assumption that Greenland and Forest City were already partners in Site 5, as with the rest of the project, but in this case Forest City must first move the retail project from its books to the joint venture. The plan for a development there is unchanged.

It's a startling disclosure buried in a document (see Retail Portfolio Overview) just posted for investors by Forest City Realty Trust.
The company--presumably with Atlantic Yards/Pacific Park joint-venture partner/overseer Greenland USA--lists "Atlantic Center Site V" as among "likely dispositions," or sales, even before a giant and likel…

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…

So, how much did Barclays Center pay the Islanders? $53.5 million? $45 million? $37.5 million?

In the unusual deal between the Barclays Center and the Islanders, in which the arena takes over the team's business arrangements in exchange for tickets, suites, and sponsorship revenue, the base payment from the arena to the team is supposed to be $53.5 million.
That's not what Barclays paid the Islanders, however, because there's a $2 million annual license fee required of the Islanders, plus additional costs described, variously, as "certain actual expenses and costs," "certain non-game day operating costs," "expense reimbursements," an "operating expense reimbursement," and "certain adjustments."

It's not so easy to get a consistent or definitive number. Though Newsday previously reported what seems to be the most accurate figure--$37.5 million--it's worth seeing the way the number has been presented.

$45 million, from Official Statement?

Consider: according to the screenshot below from the August 2016 Official…

When Barclays Center came clean: FY 2016 financial document, unlike 2015 version, cited Islanders opt-out

Something very interesting becomes clear when comparing the annual financial reports for the Barclays Center operating company covering fiscal years 2015 and 2016, which end June 30. (The documents were each released about six months later.)

Passages regarding the New York Islanders stand out, because only in the 2016 document--which appeared, of course, after talk of the Islanders leaving the arena surfaced--was the team's opt-out clause mentioned. That's not very transparent.

From the 2015 document
Agreement with the Islanders
Brooklyn Arena, LLC and Subsidiaries Notes to Consolidated Financial Statements
On October 24, 2012, the Company entered into a licensing agreement with the Islanders whereby the Islanders have certain and exclusive rights regarding the use of the Arena and the Arena is entitled to certain revenues. The term of the agreement is for 25 NHL seasons commencing on the first home date during the initial season, which is expected to be the 2015/2016 season. T…

Wait, did the Islanders draw only 10,200 *paid* attendees in first season (rather than 11,200 total)?

I wrote last August--that the New York Islanders, rather than drawing the announced attendance of 13,900 fans, actually averaged just 11,200 in their first season in Brooklyn. See screenshot below right.

But was that correct?

The source was a market study included in the Official Statement aimed at buyers of the refinanced Barclays Center bonds

I just noticed another passage in that market study, produced by Conventions, Sports & Leisure (CSL), which states that first-year attendance was "approximately 10,200 paid attendees on average." See screenshot at bottom.

So, was one of those numbers a typo? Or, perhaps, an admission that they comped 1,000 people a game? After all, 10,200 paid attendees is different from 11,200 attendees. If it was not a typo, then maybe the team was doing even worse than we think.

(I reached out to the arena and CSL, but didn't hear back. Maybe by publishing this some clarification may emerge.)

Legal case involving B15 progresses, though school construction timing unclear; project update at March 7 meeting

The legal case involving Greenland Forest City, owners of the stalled B15 site (aka 664 Pacific) and neighboring property at 497 Dean seems to have progressed, which raises the likelihood of construction.

At least one element of the dispute, according to the eCourts web site, has been settled, as shown in the screenshot at right.

But the overall case remains listed as active, with a "control date" (conference) set for 5/4/17, so it's unclear whether the dispute is fully resolved, and construction of the 27-story tower can proceed and ultimately bring market-rate apartments and a middle school. I queried both sides but didn't hear back.

However, given that pre-construction activities were delayed until this year, at least and the projected time for pre-construction and construction is four years, unless construction goes faster than expected, the promised middle school won't arrive until 2021, rather than 2018 or 2019, as once projected. The school has been dubbe…

From TreeHugger: The World's Tallest Modular Building and the Phantom 20 Percent Savings

From my article in the environmental publication TreeHugger, The World's Tallest Modular Building and the Phantom 20 Percent Savings, "Astoundingly, some recent press accounts claim that the use of modular techniques purportedly allowed Forest City to save 20 percent on the 32-story, 363-unit tower, which contains half market-rate units and half "affordable" ones.@TreeHugger@bruteforceblog this is a much needed dose of reality— Mark Hogan (@markasaurus) February 22, 2017Innovation welcomed

A commenter on the article:
L'audace, l'audace, toujours l'audace. I am very grateful for builders who take risk to pioneer new and better ways to do things.
If they did not realize any savings, it is more likely that the successors will learn from their mistakes and eventually achieve savings (and enhancement in quality that comes from factory construction).Well, OK, innovations can in fact face bumps in the road, and succeeding projects can build on them. But not only…

Are the Brooklyn Nets really worth $1.8 billion, as per Forbes? Nope. (And why credit arena to team value?)

Sorry, Forbes, I'm not buying it. I can't believe, as published recently, that the Brooklyn Nets are valued at $1.8 billion, the 7th most valuable team in the NBA, up from $1.7 billion in 2016 and $1.5 billion in 2015.


The reason? Well, just a year ago, the team plus the arena were valued at $1.7 billion.

How do I know? Well, when Forest City Realty Trust sold its 20% interest in the Nets and 55% in the Barclays Center operating company to Mikhail Prokhorov's Onexim Sports & Entertainment, the announcement said the team was valued at $875 million and the arena at $825 million, for a total of $1.7 billion, as shown in the screenshot below.



Sure, it's possible that Forest City, constrained by a deadline to become a real estate investment trust and a league that wanted one owner for the team and arena, did not get as much for those assets as it had hoped.

But optimistic estimates--considered a stretch--only reached $1.9 billion.

The team--and the arena


Turns out, Forbe…

Forest City/ESDC predicted 224-250 events at Barclays Center; first three years averaged 180-200

How many events were there annually at the Barclays Center, starting in 9/28/12 and until the New York Islanders arrived three years later?

Only 180 to 200 a year, which is fewer than predicted many times by arena developer Forest City Ratner, governmental allies, ratings agencies, and consultants, we now know.

The lesson, yet again, is to take self-serving predictions with a large grain of salt. (Note that, as detailed below, the New York City Economic Development Corporation and the New York City Independent Budget Office more accurately predicted numbers under 200. )

The new information comes in a consultant's report in the August 2016 Official Statement sent to potential buyers of the refinanced arena bonds. (See screenshot at left.)

The arrival of the New York Islanders hockey team means the Barclays Center did finally host 240 events in the fourth year of operation. (Given the timing of the Official Statement, I'm assuming they counted the fourth year as beginning at th…

Newsday: entertainment complex around Nassau Coliseum stalled

Nassau Coliseum entertainment complex on hold, Newsday's Robert Brodsky reported yesterday:
Construction of an 11-acre retail and entertainment complex next to the Nassau Coliseum is on hold as Nassau County Executive Edward Mangano and arena developers consider a new plan for the site that could include housing.
Mangano said Nassau began examining housing after the Empire State Development Corp. approved an $85 million grant in October for construction of two parking garages on the Nassau Hub site. The garages would have 3,400 spots and free up 19 acres of blacktop, originally designated for surface parking, to be used for housing. So the arena, which opens in April after renovation, will not have any new retail or entertainment for at least a year.

 And Mangano gave Nassau Events Center, which was formed by Forest City Ratner but now controlled by Russian billionaire Mikhail Prokhorov's Onexim Sports & Entertainment, more time to build the planned "188,000-square-foo…

Crain's: BAM-area retail is hottest corridor (so what about Site 5?)

Crain's New York Business reported 2/16/17 Brooklyn's hottest intersection for retail:
Commercial brokerage firm CPEX Real Estate last month designated six Brooklyn corridors as the borough’s next retail hot spots. No. 1 on the list? The intersection of Lafayette Avenue and Fulton Street, which sits at the crossroads of the growing Brooklyn Cultural District and Fort Greene.
CPEX’s reasoning was simple: The nearby blocks are teeming with new development, including 3,800 residential units, 900 hotel rooms and highly anticipated retail locations such as Apple’s second Brooklyn store and the first city outpost of Whole Foods’ 365, a new chain of lower-priced stores. 
All are interwoven into the booming cultural district, anchored by the Brooklyn Academy of Music, that includes new public plazas and parks. The interior retail space at One Hanson, the former Williamsburgh Savings Bank building, is facing alteration.
So, the question for the developers of Atlantic Yards/Pacific Park…

The scalping scene outside the Barclays Center seems unmolested (at least for the Nets)

Gothamist had a very intriguing article 2/10/17, The Hard Life Of An Old School Scalper In The Age Of StubHub, with a cameo played by "Michael," a scalper at Nets home games.

He gets his inventory from brokers or fans with extra tickets. One example: he bought a ticket for five dollars, and sold it for ten. From Carter Maness's article:
Michael periodically huddled up with other scalpers to compare inventory, but mostly worked his turf alone. There were approximately 15 others posted near the arena's entrances, and they were careful not to step on each other's toes. NYPD vans lined the perimeter. Security guards were fanned out among the crowd, but they studiously looked away from any transactions.
"It's a violation, not a crime, most of the time," Michael said. "As long as you're not directly in front of the venue, it's usually not a problem. But you can get a summons. Sometimes, if they have warrants, people go to jail." Anyone w…

Gilmartin: number of affordable applications "reaffirmed urgency" of building 2,250 units (so where are they?)

I missed this 12/28/16 end-of-year wrap-up by Curbed, which had a quote from Forest City Ratner CEO MaryAnne Gilmartin, "[o]n realizing a Brooklyn megaproject in 2016."

Her statement:
“Pacific Park may have had the longest beginning of any project in city history, and no one, including us, could have anticipated how this project would fundamentally transform Brooklyn. 2016 was certainly a banner year for the project. Six Pacific Park properties are now under construction, and our affordable housing lotteries attracted tens of thousands of applicants. Last month, 461 Dean became Pacific Park’s first residential property to open. After a decade of planning and building, it would be hard to overstate the emotions we feel that families now call Pacific Park home.”
“We knew there was an affordable housing crisis in Brooklyn, but we were floored by the number of applicants we received for below market-rate units at Pacific Park. Over 84,000 applicants applied for 181 units at 461 …

City Council Watch: Cumbo had (former/potential) rival Fox fired

Seth Barron of City Council Watch has good sources, but this also doesn't have comment from the principals, so it's not ironclad, but he reports that 35th District Council Member Laurie Cumbo had former rival Ede Fox fired from her Council job, claiming that Fox was doing opposition research.

Fox, according to Kings County Politics, has formed a campaign committee (though her name doesn't yet appear on the city's Campaign Finance Database).

Gilmartin's goal: "deliver to Brooklyn" (er, investors) an iconic office tower

Yesterday, the Commercial Observer posted a video interview (also below) with Forest City Ratner CEO MaryAnne Gilmartin. And while Max Gross's questions were softball, some news emerged.

Notably, Gilmartin has a clear focus on "an iconic office building" at Site 5 that's an analogue to the Time Warner Center, which will require state approval, after a public process not yet initiated, to move approved bulk from the arena plaza across the street to the site currently occupied by Modell's and P.C. Richard.

That would create a building more than twice the bulk, at some 1 million square feet--and perhaps triple the height, nearing 800 feet--previously permitted, across the street from row houses. (My coverage.)

So stay tuned for arguments about jobs, architecture, and the need to preserve that "public plaza" at the entrance to the Barclays Center, which just happens to be branded by a casino.

Given the history of the project, the gubernatorially-controlled…