A "great piece of real estate": Real Deal suggests Ratner got a good deal on the railyard because of financing, not price
The deals were selected based on interviews with real estate professionals, published reports from the past year, research and an informal survey.
Best: Bruce Ratner's pending purchase of the Vanderbilt Yards site in Brooklyn from the MTA for $100 million
Instead of charging developer Bruce Ratner $100 million in one lump sum for the right to build over Brooklyn's 8.5-acre Vanderbilt (Atlantic) Yards site, as originally agreed, the MTA announced in June that Ratner could pay just $20 million upfront to close on the portion of the rail yards beneath his planned arena for the Nets. Payments for the rest of the property, if he continues building, could be spread over 20 years, starting at $2 million a year in 2012 and jumping to $11 million in 2016 at an implied 6.5 percent interest rate, according to financial services firm Keefe, Bruyette & Woods.
The original $100 million purchase price was already far below the yard's appraised value, which the MTA justified by the additional $345 million Ratner promised he would make in infrastructure improvements. Under the new agreement, however, Ratner is not obligated to spend as much on those upgrades.
[David Schechtman, senior director for Eastern Consolidated, a real estate investment services firm] said that while the purchase price of the land may be high in today's market, "the built-in financing over a 20-year period, at a time when there is an absolute absence of construction and land financing, makes this a real coup."
A "great piece of real estate"
It's interesting that, while everyone agrees that the financing was a good deal for Ratner, Schechman suggests that the purchase price may be high in today's market, even though it's well under the appraised value.
Sure, prices have declined and it's hard to get loans. But this is a "great piece of real estate," in the words of Forest City Enterprices CEO Chuck Ratner.
So maybe the appropriate lens is not today's market but, as the New York Times suggested in 1994 in an analogous situation:
A rebounding economy will likely increase its value. It is wiser to walk away than stumble into a giveaway.