Atlantic Yards/Pacific Park Report

"Different opinions," Empire State Development Corporation (ESDC) Senior Counsel Steve Matlin said on September 17, contrasting the KPMG market study commissioned by the ESDC (and just released yesterday) with a report , commissioned by the Council of Brooklyn Neighborhoods (CBN), that was far more pessimistic about the prospect of the Atlantic Yards residential towers being built in the promised ten-year timetable. Yes, different opinions, but also different facts. Below I'll discuss some major omissions in the KPMG report, but first consider that KPMG's facts regarding the sales/pre-leasing percentages of several major buildings were wildly off the mark --and easily checkable online. "Affordable" units above market rents As noted in the Kahr report from CBN, 450 of the 2250 subsidized "affordable" units were to rent at $40/sf, while another 450 were to rent at $32/sf. The KPMG report ignores these numbers, so there's no attempt to assess t...

So what do the attorneys for the Empire State Development Corporation (ESDC) say when faced with legal papers calling attention to a blatant lie from consultant KPMG regarding condo sales in Brooklyn? They question the conclusion, call it trivial, and say it's belied by other evidence. It's quite a strained performance, given that current prices at the Oro development are less than half the prices Forest City Ratner expects for condos coming on line in five years. Timetable issues The statement comes in a motion (below) arguing that Supreme Court Justice Marcy Friedman should not reopen the case in which she dismissed a challenge to the ESDC's 2009 approval of the Modified General Project Plan, though she criticized the ESDC’s “deplorable lack of transparency." One of the key issues is whether it was reasonable for the ESDC to assume a ten-year timetable for the project and thus evaluate environmental impacts based on that scenario, an issue seemingly belied b...

In court June 29, Empire State Development Corporation (ESDC) attorney Philip Karmel said that "probably the most important factor" in the ESDC’s decision to assume a ten-year buildout for Atlantic Yards was not the Development Agreement that provides 25 years without sanction but a KPMG report that backs the timetable. The KPMG report got very little discussion, but it contains lies-- blatant, checkable lies --about condo sales. And, as I discovered when I took another look, it contains more than two pages of shameless borrowing--plagiarism that is not diminished by a vague footnote. Borrowing from Corcoran The entire section on New York City Market Dynamics is cribbed from The Corcoran Report(s) for Manhattan and Brooklyn for the second quarter of 2009. Yes, there's a footnote to the section headline that cites "The Corcoran Report--2nd Quarter 2009" as a source (click to enlarge), but there's no indication that nearly all the text--with the slightest o...

There's even more evidence that the report (dated August 31, posted below) that KPMG delivered to the Empire State Development Corporation on the housing market in Brooklyn contains lies. KPMG claimed that the Oro Condos in Downtown Brooklyn were 75% sold. That didn't ring right. The evidence mounted. In September, Crain's reported that prices at Oro had been slashed 25%. On 1/31/10, the New York Times reported that the building was 44 percent sold. By March, 50% And yesterday it hit the halfway mark. A press release dated March 29, headlined Oro Condominium in Downtown Brooklyn Hits 50% Sold Mark , stated: Downtown Brooklyn's Oro condominium, the 303-unit luxury building at 306 Gold Street, has reached the 50-percent-sold milestone with more than 152 units sold. Sales have soared at the 40-story property with 61 deals made since September 2009. Much of the recent sales success can be attributed to Oro's new marketing strategy developed by Rose Associates whe...

Now that we know the KPMG Atlantic Yards market study for the Empire State Development Corporation (ESDC) takes a far more optimistic approach than the report by consultant Joshua Kahr for the Council of Brooklyn Neighborhoods, the question is: did KPMG consider Kahr? "Can you explain, did the KPMG report respond specifically to the Joshua Kahr report?" I asked ESDC Senior Counsel Steve Matlin after the September 17 ESDC board meeting. "The KPMG report was commissioned before we--certainly before I saw the Kahr report," Matlin said. "We did share it with KPMG. To what extent they looked at it and--they certainly didn't respond to it directly, but I'm sure they looked at it." Both issued August 31 Well, as the screenshots below show (click to enlarge), they were both dated August 31, 2009, so there was no way KPMG could officially consider Kahr's conclusions. Nor are there any references to Kahr's report. Perhaps KPMG looked at the report ...

Today, the Atlantic Yards legal saga hits another flashpoint, with oral argument at 2:30 pm in state Supreme Court in Manhattan, combining two similar cases, one brought by groups led by Develop Don't Destroy Brooklyn (DDDB) , and another brought by groups in BrooklynSpeaks . The last major case to go before a judge--though there could be more--challenges the Empire State Development Corporation's (ESDC) September approval of the Modified General Project Plan (MGPP), in part because the ESDC board was not (allegedly) told the details of how the deal for the Vanderbilt Yard was renegotiated, thus creating a 22-year timetable. And while the case cannot formally stop the (now- postponed ) condemnation plans, at least not without a stay or preliminary injunction, success could delay or even doom the project. The case will be heard by Justice Marcy Friedman . "Rational" agency? As I noted last week, the ESDC in court papers relies on a set of documents that has not be...

There's yet another reason not to trust the report (dated August 31) that KPMG delivered to the Empire State Development Corporation on the housing market in Brooklyn. Remember, the report claimed that Richard Meier's On Prospect Park was 75% sold. However the New York Times reported September 27 that the developer asserted that half of the units had been sold and the web site StreetEasy.com documented only 25 closings. KPMG also claimed that the Oro Condos in Downtown Brooklyn were 75% sold. That didn't ring right. In September, Crain's reported that prices at Oro had been slashed 25%. And yesterday the New York Times reported that the building is 44 percent sold. (Click on graphics to enlarge.) From the KPMG report From the Times Why it matters Why does this matter? Because the ESDC relied on the "expert" KPMG to validate its dubious estimate that the Atlantic Yards housing could be absorbed in a decade, a crucial defense in the case challenging the ES...

I was looking up some background on the accounting/consulting firm KPMG, notorious for its dubious (and secondhand ) work predicting the Brooklyn housing market on behalf of the Empire State Development Corporation. Was this part of any pattern? Well, the web site Cheating Culture , founded by David Callahan, author of The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead , has posted KPMG: A History of Abetting Fraud : While KPMG has avoided the fate of fellow auditing giant Arthur Anderson, it has primarily done so through quick settlements that prevent its numerous cases of fraud from ever reaching court. Though most of the focus of the financial crisis of 2008 has been placed upon the nation's big financial institutions such as Goldman Sachs, J.P. Morgan and Citibank, more evidence is arising over the role of auditing firms throughout the subprime loan disaster. KPMG was the first "big-four" firm to be hit with a lawsuit, accused in 2009 of "g...

A dozen business days after September 17, when the Empire State Development Corporation (ESDC) approved the 2009 Modified General Project Plan, the ESDC has still not released the KPMG report that provided the basis that a ten-year timetable for the project is "not unreasonable." In a brief press conference after the board meeting, as shown in the video below, ESDC Senior Counsel Steve Matlin said that the ESDC would look at the issue of releasing the report "in the next few days." Also in the interview, Matlin said he could not describe potential penalties facing Forest City Ratner if it didn't meet the project timetable because the issue was still under negotiation. And he acknowledged a tension between a project timeline would last well beyond ten years, but an official timetable of a decade "that we expect to achieve, we want to achieve." The official word According to a memo to the ESDC board: Corporation staff has regularly reviewed the financi...

New information gives even more reason to question the KPMG report for the Empire State Development Corporation (ESDC) on the housing market in Brooklyn, a report that asserted that there was sufficient demand for the planned Atlantic Yards luxury condos for the entire project to be completed in the announced decade. So far, judges have deferred to the ESDC's "experts," but the expert is not very reliable. Remember, KPMG last August 31 claimed that Richard Meier's On Prospect Park was 75% sold; however, the New York Times quoted the developers as saying half the units have been sold and that StreetEasy.com documented only 25% the units as sales. Now, the developer counts 54 units sold, with--after the consolidation of some units to make larger apartments--42 yet unsold, according to a New York Times Real Estate section article headlined Larger Units for a Richard Meier Condo . That's still way under 75%. (StreetEasy counts 38 recorded sales.) Prices goin...

Does the Empire State Development Corporation (ESDC), as it approved the Atlantic Yards project, have a rebuttal to the statement by real estate analyst Joshua Kahr, who, in a report commissioned by the Council of Brooklyn Neighborhoods, emphatically declared that "the project cannot be completed anywhere near 2019." (That's backed up by further analyses and even a comment by then-ESDC CEO Marisa Lago, who in April said the project would take "decades.") Well, sort of, but it wasn't exactly emphatic. ESDC Senior Counsel Steven Matlin told the board this morning, "In addition, under separate cover, we’ve provided the directors with a confidential report prepared by KPMG with respect to the development model and the potential absorption of the residential component of the project during the development period. KPMG has concluded that it’s not unreasonable to assume that the housing units to be developed can be absorbed in the marketplace during the pr...

How much will Forest City Ratner earn on the project? The KPMG audit gives some hints. From coverage in the Times : “Our role is not to measure the profits that the private investors will make,” Mr. Silver said yesterday. “Our role is to make sure that state liability on the project will be limited to what they say it will be. And we were satisfied about that, plain and simple.” According to a KPMG audit commissioned by the Empire State Development Corporation, a copy of which was provided to The New York Times, Forest City estimated that the overall rate of return on the $4 billion project, excluding the arena, at about 10 percent over 30 years. The accounting firm estimated the return at about 7 percent. Indeed, Forest City's estimates are considered optimistic, according to KPMG's Review of Certain Cash Flows and Assumptions in Connection with Forest City Ratner Companies Development of the Atlantic Yards . Arena estimates KPMG aimed to reconstruct the models that Forest Ci...

In  How Ivanka Trump and Donald Trump, Jr., Avoided a Criminal Indictment , a collaboration between The New Yorker, ProPublica, and WNYC published 10/4/17, we learn a very troubling story. As Andrea Bernstein, Jesse Eisinger, Justin Elliott, and Ilya Marritz reported, the Manhattan District Attorney’s office pursued but ultimately dropped an investigation into whether the Trump children criminally misled potential buyers in the Trump SoHo, a condo hotel: The evidence included e-mails from the Trumps making clear that they were aware they were using inflated figures about how well the condos were selling to lure buyers. What were the statistics? From the article: Business was slow, but the Trump family claimed the opposite. In April, 2008, they said that thirty-one per cent of the condos in the building had been purchased. Donald, Jr., boasted to The Real Deal magazine that fifty-five per cent of the units had been bought. ...None of that was true. Accordi...