Skip to main content

Thousands of million-dollar condos, the AY scale, and FCR's bottom line

Forest City Ratner executive Jim Stuckey, in a radio interview Monday, defended the size of the Atlantic Yards project, saying "Unfortunately, if you want to build on this site, the infrastructure costs and the land costs are so significant that it does require that you build to a certain scale."

His unverifiable statement raises several questions about costs and revenues, statistics that Forest City Ratner won't discuss publicly. But some back-of-the-envelope calculations suggest that just the housing revenues could go far toward recouping the costs of the project.

First, the most expensive arena ever obviously drives up the project cost. Second, the cost of acquiring and operating the Nets. Third, the cost of land acquisition includes a relatively inexpensive price for the 8.3-acre railyard ($100 million), and some relatively expensive deals for specific buildings occupying smaller plots on the 22-acre site, such as $44 million for two properties. Note that the longer the project is delayed, the more construction costs increase.

Beyond the infrastructure and land costs, Stuckey left out the discretionary costs for public relations, professional talent (Frank Gehry must cost a bit more), and even support for community groups, among other things.

The switch from "jobs" to condos

When the project was announced, it was to contain some 2 million square feet of office space, enough to accommodate 10,000 jobs, according to FCR's calculations, using 200 square feet per worker. (Calculations using the more standard figure for office space, 250 square feet per worker, would suggest a cap of 8000 jobs.)

However, last year, Forest City Ratner increased the size of the project and also traded some two-thirds of that planned office space for luxury condos. As the New York Times reported:
Officials of Forest City Ratner said they eventually realized that they would have to reduce the amount of commercial space, to accommodate condominium units that would help pay for the project, including the below-market rental housing

Given that condos are apparently a better economic bet for the developer, theoretically Forest City Ratner could elimininate all the office space, now projected to accommodate 2500 office jobs, and trade it for condos. It could even shrink the project somewhat, given the higher rate of return for condos. But that would be lousy politics, especially since politicians and editorialists endorsed the project early on because of the promise of jobs.

Million-dollar condos

The fact is, until and unless Forest City Ratner releases its pro forma economic projections, as rival bidder Extell did, we're in the dark about Stuckey's claim. And the infrastructure costs and land costs cited by Stuckey certainly deserve more scrutiny.

But it is clear that FCR could create some very valuable condos. Waterfront condos in Williamsburg at Schaefer Landing, according to the Village Voice, are bringing "owners $1000 per square foot for top-floor apartments with views of the river and the Manhattan skyline—far more than anyone, developers and investors included, originally anticipated." Indeed, last September, The Real Deal quoted developer Elon Padeh as saying that the $1000 per square foot level would be reached in five years.

Similar prices would be likely at Atlantic Yards, where condos, under the best scenario, wouldn't be occupied for three years. Should present trends continue, it's reasonable to assume that condos at the Atlantic Yards project could easily be sold for $1000 a square foot, thanks to the upper floor views as well as the Frank Gehry imprimatur. So a 1000-foot condo could sell for $1 million. Or larger condos on lower floors might fetch a slightly smaller price per foot but still reach $1 million.

(Extell estimated an average size of 1500 square feet, and a price of $700 per square feet.)

$440 million off the table

Still, $1 million is a nice round figure to work with. Forest City Ratner had planned 2800 market-rate condos. At $1 million each, that's $2.8 billion in revenue. In scaling back the plan at the end of March, FCR eliminated 440 condos; 2360 condos would equal $2.36 billion.

In other words, Forest City Ratner just took $440 million in revenue--gross, not net (since they'd save something on construction)--off the table. So the configuration of the project is obviously flexible. If it would cost $3.5 billion to build--though FCR wouldn't be putting up that total, given various subsidies--then $2.36 billion in condos would constitute two-thirds of the cost.

New rental income

Beyond that, there would be significant revenue from the rentals, even the subsidized affordable rentals. Each of the 2250 renters in the affordable space would pay 30 percent of their income in rent. If those renters have an average income of about $55,000 (a rough estimate), that's $16,500 a year, or a total of $37.1 million.

The revenue would be much greater from the 2250 market-rate rentals; at a guesstimate of $3000 a month, the rentals would reap $36,000 a year per unit, or $81 million a year.

So, rental income from the 4500 units would represent about $118 million a year, or nearly $1.2 billion over just ten years. Add that to the condos and the sum approaches $3.5 billion fairly easily, without even counting revenue from the arena, hotel, retail, and office space.

Assumptions--and disclosure

Of course these numbers include assumptions and speculations and omissions, and I've left out the cost of borrowing and operations, as well as the value of subsidies.

But the bottom line is this: Forest City Ratner stands to reap a lot of revenue. If Stuckey says the current scale is dictated by the costs, the developer must back it up with some disclosure about its costs and its plans.


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…

No, security guards can't ban photos. Questions remain about visibility of ID/sticker system.

The bi-monthly Atlantic Yards/Pacific Park Community Update meeting June 14, held at 55 Hanson Place, addressed multiple issues, including delays in the project, a new detente with project neighbors,concerns about traffic congestion, upcoming sewer work and demolitions, and an explanation of how high winds caused debris to fly off the under-construction 38 Sixth Avenue building. I'll have more coverage.
Security issues came up several times at the meeting.
Wayne Bailey, a resident who regularly takes photos and videos (that I often use) of construction/operations issues that impact residents, asked representatives of Tishman Construction if the security guard at the sites they're building works for them.
After Tishman Senior VP Eric Reid said yes, Bailey asked why a guard told him not to shoot video of the site, even though he was on a public street.

"I will address it with principals for that security firm," Reid said.
Forest City Ratner executive Ashley Cotton, the …

Atlantic Yards/Pacific Park graphic: what's built/what might be coming (post-dated pinned post)

This graphic, posted in November 2017, is post-dated to stay at the top of the blog. It will be updated as announced configurations change and buildings launch. Note the unbuilt B1 and the proposed shift in bulk to the unbuilt Site 5.

The August 2014 tentative configurations proposed by developer Greenland Forest City Partners will change. The project is already well behind that tentative timetable.

How many people are expected?

Atlantic Yards/Pacific Park has a projected 6,430 apartments housing 2.1 persons per unit (as per Chapter 4 of the 2006 Final Environmental Impact Statement), which would mean 13,503 new residents, with 1,890 among them in low-income affordable rentals, and 2,835 in moderate- and middle-income affordable rentals.

That leaves 8,778 people in market-rate rentals and condos, though let's call it 8,358 after subtracting 420 who may live in 200 promised below-market condos. So that's 5,145 in below-market units, though many of them won't be so cheap.


Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

The passing of David Sheets, Dean Street renter, former Freddy's bartender, eminent domain plaintiff, and singular personality

David Sheets, longtime Dean Street renter, Freddy's bartender, eminent domain plaintiff, and singular personality, died 1/17/18 in HCA Greenview Hospital in Bowling Green, KY. He was 56.

There are obituary notices in the Bowling Green Daily News and the Wichita Eagle, which state:
He was born in Wichita, KS where he attended public Schools and Wichita State University. He lived for many years in Brooklyn, NY, and was employed as a legal assistant. David's hobby was cartography and had an avid interest in Mass Transit Systems of the world. David was predeceased by his father, Kenneth E. Sheets. He is survived by his mother, Wilma Smith, step-brother, Billy Ray Smith and his wife, Jane all of Bowling Green; step-sister, Ellen Smith Alexander and her husband, Jerry of Bella Vista, AR; several cousins and step-nieces and step-nephews also survive. Memorial Services will be on Monday, January 22, 2018 at 1:00 pm with visitation from 10:00 am to 1:00 pm Monday at Johnson-Vaughn-Phe…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…