Less than meets the eye: decoding Forest City's announcement of new MetroTech leases

I've highlighted a few parts of a 6/15/11 press release from Forest City Enterprises, otherwise reproduced verbatim:

Forest City Announces 570,500 Square Feet of Leases in Downtown Brooklyn Properties

CLEVELAND, June 15, 2011 /PRNewswire via COMTEX/ --Forest City Enterprises, Inc. (NYSE: FCEA and FCEB) today announced new or renewal leases for six tenants totaling 570,500 square feet of space at the company's MetroTech Center office campus in Brooklyn, New York. Three office tenants and two restaurants have committed to new or expansion leases at Two MetroTech Center, and Morgan Stanley has renewed for a substantial block of space at One Pierrepont Plaza. MetroTech Center is a commercial, academic, and high-technology office campus on a 10-block, 16acre site in Downtown Brooklyn.

"The interest of these tenants and their commitment to our Brooklyn portfolio is confirmation of the strength of the New York office market and the quality of our MetroTech assets," said David J. LaRue, Forest City president and chief executive officer. "We thank these tenants for choosing Brooklyn and MetroTech, and I congratulate Bruce Ratner and our New York team on the relationships they have developed with these tenants that led to the execution of these leases."

The office leases at Two MetroTech Center include:

• Polytechnic Institute of New York University, which signed a 15-year lease for 90,000 square feet of additional office space beyond what it already occupies at MetroTech;
• The City of New York, which signed a 20-year lease for an additional 155,000 square feet of office and data center space for the City's Department of Information Technology and Telecommunications (DOITT);
• and The General Services Administration, which signed a 10-year lease for 120,000 square feet to house the Internal Revenue Service.

In addition to these office tenants, two restaurants, Five Guys Burgers and Fries and a new, locally owned and operated French-American bistro and patisserie concept, have signed new leases in Two MetroTech for a total of 5,500 square feet. The eateries will serve office tenants, neighborhood residents and visitors staying in nearby Downtown Brooklyn hotels. Collectively, these leases at Two MetroTech account for the entire space previously occupied by SIAC/NYSE, and leave only the eighth floor vacant.

At One Pierrepont Plaza, Morgan Stanley has committed to a 10-year lease renewal for 200,000 square feet of space on the building's second through fifth floors. The renewal takes effect when Morgan Stanley's current lease for approximately 450,000 square feet expires in 2013.

Looking more closely

[Updated and clarified] The 365,000 square feet taken at Two MetroTech--thanks significantly to government tenants (275,000 square feet)--may not quite make up for the departure of SIAC/NYSE, which, according to Crain's, lost 387,000 square feet.

Yes, the 22,000 square feet remaining to lease is relatively small, but, at least according to that January 2011 Crain's report, J.P. Morgan Chase also left about 352,000 square feet at 4 MetroTech. No wonder Forest City Ratner was trying to recruit Panasonic.

At One Pierrepont Plaza, Morgan Stanley is set to renew less than half the space it leases, leaving a gap of 250,000 square feet.

It still does not bode well for the office space planned for the Atlantic Yards site.

We don't know what the tenants paid, but consider that Polytechnic--which was earlier reported as taking 120,000 square feet--was said (by an outside broker) to have gotten a very good deal.