Skip to main content

Bait-and-switch from the start? Ratner knew office space projections were bogus

A day after the fourth anniversary of the announcement of the Atlantic Yards project, a look at a second dubious economic claim. Yesterday, it was that AY wouldn't "touch the existing tax base."

The mantra when the Atlantic Yards project was announced was impressive: 10,000 office jobs in some 2 million square feet of commercial space. It led to rhapsodies from columnists like Andrea Peyser and Denis Hamill.

It was dubious for multiple reasons, as I’ve reported in the past. Now there’s additional evidence, previously unreported, from the mouth of Bruce Ratner himself.

Forest City Ratner’s leader let slip to an interviewer two days after the project was announced that the office market was in trouble. That should've been reason enough for sharp-eared listeners to cast immediate doubt on the developer's rosy jobs projection.

Ratner also said that construction of the arena would be accompanied by a residential building—even though the arena block, as announced, was to include four office towers and no housing whatsoever.

In other words, despite the promise of jobs, the switch from office space to housing, officially announced some 18 months later, was apparently contemplated from the start. We got played.

Fudging space calculations and the market

A quick recap. Forest City Ratner repeatedly promised 10,000 office jobs, such as in a flier (above) issued in May 2004. A Project Overview press release, issued 12/10/03, stated:
Four office buildings surrounding the Arena will place 2.1 million square feet of commercial space within a few blocks of the mass transit hub, and allow the rest of the site to be occupied by residential buildings.

Brooklyn Atlantic Yards will bring a huge infusion of new jobs to the area—more than 15,000 construction jobs, over 10,000 permanent jobs created and/or retained in the commercial offices…


The construction jobs number of course refers to job-years--1500 jobs over a decade--and the office jobs number had several problems with it.

1) FCR could promise 10,000 jobs only by neglecting to factor in a vacancy rate and calculating 200 square feet per worker, while the industry standard is 250 square feet. In other words, the amount of space promised would accommodate only 8000 jobs under the industry standard, and a vacancy rate would lower the number further.

Keep in mind that, for the same amount of space, the business-friendly New York City Economic Development Corporation (NYCEDC) on 6/27/05 estimated 7100 jobs.

2) NYCEDC also estimated that only 30 percent of the office jobs would be new, rather than relocated from Manhattan.

3) Also, the market for office space was already shrinking. The city’s Draft Environmental Impact statement on the Downtown Brooklyn rezoning, completed in November 2003 a month before the Atlantic Yards project was announced, acknowledged that, while newly rezoned sites could accommodate 6.7 million square feet of office development, market conditions promised only 4.6 million square feet of such development over ten years. (That, of course, is further in doubt, given current office market difficulties, and housing rather than office construction continues.)

Still, publicly, Forest City Ratner promised all those jobs. They got sports economist Andrew Zimbalist, who generally questions sports facility deals, in 2004 and 2005 to blithely repeat statistics that suggested that the office market was growing.

Ratner on the office market

In a 12/12/03 interview on WNYC’s Brian Lehrer Show, Ratner (right) was more candid than his company’s press release two days earlier.

He told Lehrer, “It’s a very important project, we need housing in this city, we need office space, when the market comes back, for companies not to leave the city.”
(Emphasis added)

The implication was that the market was already tanking. If so, why was the developer promising 10,000 jobs? Maybe because it’s a nice round number.

Bruce on Phase 1

As for the timetable, Ratner told Lehrer, “And in about three to three-and-a-half years, I hope to have an arena up and the start of some residential development.”
(Emphasis added)

No mention of office jobs.

He seemed to be already modifying a statement in the Project Overview issued two days earlier, which promised office space from the start:
During Phase 1, the Arena and its rooftop public park will be constructed, along with 300,000 square feet of the commercial space, support space for the Arena and possibly one residential building. The complex has been planned to look whole and complete during each phase of construction.

That latter sentence is a jaw-dropper, since it would be tough for the arena block to look complete without the four buildings planned to ring the arena. However, given that the amount of projected office space has been cut from 2.1 million square feet to 336,000 square feet (and space for 1340 jobs, perhaps 375 of them new), maybe that statement was a warning.

Remember, the arena block was supposed to contain only office space. Could Forest City Ratner meant that a residential building would be built outside the arena block? Unlikely.

The “possibly one residential building” mention suggests that a switch from office space to housing was in the works from the start. Indeed, some condos were contemplated from the start, as shown by documents.

No government skepticism

Did the developer mislead the government, or was the government in on it?

In a 6/28/04 document (right) unearthed in the wake of the lawsuit filed by Assemblyman Jim Brennan and State Senator Velmanette Montgomery, Forest City Ratner apparently presented grand plans to the Empire State Development Corporation (ESDC), involving 2.5 million square feet of office space, and to the Department of City Planning (DCP), involving 2.1 million square feet of space.

Were ESDC and DCP informed of plans to cut office space? It doesn't look like it.

Still, the agencies could have expressed more skepticism about plans for office space rather than support the project with little or no public criticism. After all, they knew about the shrinking Downtown Brooklyn office market.

But the train had left the station and, nearly 15 months later, when the project Memorandum of Understanding was announced 3/4/05, the claim of 10,000 jobs persisted, endorsed by the mayor and governor, in a press release quoting not an independent analysis but Zimbalist's report, paid for by the developer.

Inconvenient truth

Explaining the shift from office space to housing, mysteriously-departed FCR executive Jim Stuckey famously told the unskeptical New York Times in November 2005, “Projects change, markets change.”

Sure, but evidence suggests the market had changed before the project was even announced. That inconvenient truth, however, would have dampened the predictions about jobs.

Only after the affordable housing deal was signed in May 2005 with ACORN, to great fanfare, did the developer announce it would trade office space for condos. Why? The unskeptical Times reported that “community leaders had pushed Mr. Ratner to include more housing in the project.”

"It’s Orwellian, almost" (to quote Stuckey again), that community leaders would have been plumping for luxury condos, that the Times would be so unskeptical, and that the chimera of 10,000 jobs hasn't gotten a closer look.

Comments

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…

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 Matzav.com 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…

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…

Not quite the pattern: Greenland selling development sites, not completed condos

Real Estate Weekly, reporting on trends in Chinese investment in New York City, on 11/18/15 quoted Jim Costello, a senior vice president at research firm Real Capital Analytics:
“They’re typically building high-end condos, build it and sell it. Capital return is in a few years. That’s something that is ingrained in the companies that have been coming here because that’s how they’ve grown in the last 35 years. It’s always been a development game for them. So they’re just repeating their business model here,” he said. When I read that last November, I didn't think it necessarily applied to Atlantic Yards/Pacific Park, now 70% owned (outside of the Barclays Center and B2 modular apartment tower), by the Greenland Group, owned significantly by the Shanghai government.
A majority of the buildings will be rentals, some 100% market, some 100% affordable, and several--the last several built--are supposed to be 50% market/50% subsidized. (See tentative timetable below.)

Selling development …

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

"There is no alternative": DM Glen on de Blasio's affordable housing strategy

As I've written, Mayor Bill de Blasio sure knows how to steer and spin coverage of his affordable housing initiatives.

Indeed, his latest announcement, claiming significant progress, came with a pre-press release op-ed in the New York Daily News and then a friendly photo-op press conference with an understandably grateful--and very lucky--winner of an affordable housing lottery.

To me, though, the most significant quote came from Deputy Mayor Alicia Glen, who, as the Wall Street Journal reported:
said public housing had been “starved” of federal support for years now, leaving the city with fewer ways of creating affordable housing. “Are we relying too heavily on the private sector?” she said. “There is no alternative.” Though Glen was using what she surely sees as a common-sense phrase, it recalls the slogan of a politician with whom I doubt de Blasio identifies: former British Prime Minister Margaret Thatcher, a Conservative who believed in free markets.

It suggests the limits to …