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From Forest City Enterprises' annual report: optimism and caveats

In the front narrative of Forest City Enterprises' 2005 annual report, there's an optimistic take on the Atlantic Yards project, with hints that it could stimulate further development. This document, like the 10-K document referenced below, refers to the year ending 1/31/06, though the latter was signed 3/28/06:
In Brooklyn, we acquired much of the land for the development of our Atlantic Yards mixed-use community, which is expected to include a new arena for the Nets basketball team, in which we are an investor. As expected, the team operated at a loss, but our long-term objectives are to build a great franchise, move it to Brooklyn (a city of 2 million people), and develop a large-scale, mixed-use project with the Nets and a Frank Gehry-designed arena as catalysts for the project and the further revitalization of downtown Brooklyn.

In the attached 10-K filing, where the company must disclose risks, the language is, as is typical in such disclosures, far more sober:
Brooklyn Atlantic Yards. We are in the process of developing Brooklyn Atlantic Yards, a $3.5 billion mixed-use project in downtown Brooklyn expected to feature an 800,000 square foot sports and entertainment arena for the Nets. The acquisition and development of Brooklyn Atlantic Yards is subject to the completion of negotiations with local and state governmental authorities, including negotiation of the applicable development rights, the satisfactory completion of due diligence, the receipt of governmental and non-governmental approvals and the possible condemnation of the land needed for the development. The negotiations relating to the acquisition and development rights for Brooklyn Atlantic Yards may not be successfully completed, the acquisition and development rights may not be obtained or completed on the terms described above and the Brooklyn Atlantic Yards may not be developed with the features we anticipate. The development of Brooklyn Atlantic Yards is being done in connection with the proposed move of the Nets to the planned arena. While we are part of an ownership group that acquired the Nets on August 16, 2004, any movement of the team is subject to approval by the NBA commissioner and the owners of the other NBA franchises. If we do not receive this approval, we may not be able to develop Brooklyn Atlantic Yards to the same extent or at all.
Even if we are able to continue with the development, we would likely not be able to do so as quickly as originally planned.

Caveats about the Nets

The disclosure continues:
We Have Limited Experience Participating in the Operation and Management of a Professional Basketball Team, and Future Losses Are Expected for the Nets
On August 16, 2004, we purchased a legal ownership interest in the Nets. This interest is reported on the equity method of accounting as a separate segment. The purchase of the interest in the Nets is the first step in our efforts to pursue development projects at Brooklyn Atlantic Yards, which include a new entertainment arena complex and adjacent developments combining housing, offices, shops and public open space. The relocation of the Nets is, among other items, subject to approval by the NBA commissioner and the owners of the other franchises, and we cannot assure you we will receive these approvals on a timely basis or at all. If we are unable to relocate the Nets to Brooklyn, we may be unable to achieve our projected returns on the related development projects, which could result in a delay, termination or losses on our investment. The Nets are currently operating at a loss and are projected to continue to operate at a loss as long as they remain in New Jersey. Even if we are able to relocate the Nets to Brooklyn, there can be no assurance that the Nets will be profitable in the future. Losses are allocated to each member based on an analysis of the respective member’s claim on the net book equity assuming a liquidation at book value at the end of each accounting period without regard to unrealized appreciation (if any) in the fair value of the Nets. Therefore, losses allocated to us may exceed our legal ownership interest.

The Operation of a Professional Sports Franchise Involves Certain Risks
Our investment in the Nets is subject to a number of operational risks, including risks associated with operating conditions, competitive factors, economic conditions and industry conditions. If we are not able to successfully manage the following operational risks, we may incur additional operating losses, which are allocated to each member based on an analysis of the respective members’ claim on net book equity assuming a liquidation at book value at the end of the accounting period without regard to unrealized appreciation (if any) in the fair value of the Nets:
--Competition with other major league sports, college athletics and other sports-related entertainment;
--Dependence on competitive success of the Nets;
--Fluctuations in the amount of revenues from advertising, sponsorships, concessions, merchandise and parking, which are tied to the popularity and success of the Nets;
--Uncertainties of increases in players’ salaries;
--Dependence on talented players;
--Risk of injuries to key players; and
--Dependence on television and cable network, radio and other media contracts.

Cautions about the Times Tower

There's been a recent report about leasing Forest City Ratner's 40% share in the new Times Tower, but the 10-K document, finished before that report, states:
Our New York Times building in Manhattan is expected to open in the second quarter of fiscal 2007 with 734,000 square feet of office space. To date, we have not been able to secure any tenants to lease space in this property. If we are not able to lease space in this building or if we lease space at rates below expected levels, the profitability of this property will be adversely affected.


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