Skip to main content

Forest City's tanking stock price; an impact on AY?

Most people who have money in the stock market are taking a hit, so it's no surprise that Forest City Enterprises (FCE), parent company of Atlantic Yards developer Forest City Ratner, is also suffering big-time.

Still, its decline is pretty dramatic: it closed yesterday at $19.79, near the low point of its 52-week range: $18.84 - $60.36. (Five-year chart at right, from October 2003, two months before the project was announced.)

AY impact?

What does that mean to the company? Well, a month ago, even before the market tanked, President and CEO Chuck Ratner told investment analysts, "To a great degree, our pipeline gives us the ability to pull back on slow projects as markets weaken or, if the outlook improves, to move projects at a faster pace. Clearly, from everything that we see, this is a time to pull back and that’s exactly what we’ve done."

While FCE has already "pulled back" on the Atlantic Yards towers, it wants to break ground on the arena as soon as possible--and waiting has its costs, in terms of carrying costs for the property and, most importantly, the losses suffered by the New Jersey Nets.

Assuming legal challenges are overcome (and that's not a given), the developer sure would build the Atlantic Yards arena if tax-exempt financing becomes available. Ditto with the first two towers, assuming tax-exempt housing bonds become available.

Yes, everything's delayed--the best-case scenario for the arena is most likely 2012, not 2011, as I wrote in this week's Brooklyn Downtown Star. And the Nets can't really "over-deliver," as No Land Grab's Lumi Rolley pointed out.

Still, I take issue with claims (from the Brooklyn Paper and DDDB) that the project is "shaky." The developer might be hurting, and the project way delayed, but that still wouldn't stop the project--it just means Forest City Ratner might build the arena and then go at its own pace.

Crunch time coming?

At some point, however, the team's losses, if coupled with delays in getting tax-exempt bonds, may cause some rethinking.

I'm hardly privy to all the factors that go into decisionmaking, but consider some numbers. FCE's net earnings were $52.4 million in the year ending 1/31/08, in contrast with $177.2 million in the year ending 1/31/07. That was a good year: net earnings were $83.5 million in the year ending 1/31/06, $85.2 million in the year ending 1/31/05, and $42.7 million in the year ending 1/31/04.

They undoubtedly will go down.

Meanwhile, as Sports Business Journal reported 7/7/08, the New Jersey Nets reported a quarterly operating loss of $7.2 million for the three months ended April 30--more than double for the same period last year. Forest City Enterprises is responsible for about one-third of those losses, so consider that a $10 million a year loss to absorb.

The New York Times 4/11/06 reported that Bruce Ratner had been trying since May 2005 to find new equity partners to contribute at least $60 million.

I don't know if such partners were found. Still, at some point, the losses must be weighing on the owners, including those in the ownership group outside of FCE and Bruce Ratner.

Financing success

Even in this market, some things will get built. Keep in mind that two weeks ago, FCE closed on $250 million in construction financing for the initial phase of its Waterfront Station project in Southwest Washington, D.C., which will include office, residential and retail components. The site is adjacent to the Waterfront/Southeastern University MetroRail station.

The financing includes the project's first two buildings, totaling 628,000 square feet of office and ground-level retail space--about the size of the first two housing towers planned for Atlantic Yards, after the arena.

Unlike with the unscheduled B1 office tower at Atlantic Yards, the office component in the DC project is fully leased--nice deal if you can get it--to the District of Columbia for various governmental offices.


  1. Stock prices never have too much of an impact on a project's financing, unless one can make the case that the price reflects investors' opinion on the project, rather than their worries about the business' outlook in general. As far as I can tell, the cash equity that FCR will need to contribute to the financing is fairly small.


Post a Comment

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 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 …