At Forest City Enterprises conference call, CEO claims first Atlantic Yards residential tower "clearly meets" marketplace demands, doesn't mention modular plan (or EB-5)
However, at a conference call yesterday (transcript) with investment analysts, David LaRue, CEO of parent Forest City Enterprises, talked up the first Atlantic Yards tower without mentioning modular.
“I want to reiterate our goal to move forward with the construction of the first residential tower in 2012," LaRue said. "This is a very important project for Forest City, and clearly meets demands reflected in the marketplace.”
Well, there's surely demand for housing, but not at the costs Forest City Ratner told government officials it expected. LaRue reiterated a "goal," not a plan. None of the analysts asked a question about it.
Nor did Forest City Enterprises executives, while talking about lowering the cost of capital and refinancing loans, talk about FCR's efforts to raise $249 million from immigrant investors via the EB-5 program.
"Work continues at the Barclays Center at Atlantic Yards, and the arena is on schedule for opening in September 2012," LaRue added, reprising information in the third-quarter earnings announcement. "More than 90% of steel erection has been completed and installation of the roof deck has begun. Interior buildout is under way on all levels, and the structure is expected to be fully enclosed and water tight in the first quarter of 2012.
“Approximately 56% of forecasted contractually obligated revenue for the arena is currently under contract,” he said. “This is flat with what we reported at the end of the second quarter, but we expect activity to regain momentum once the NBA season starts.”
One analyst asked, "What level of projects under development would be a comfortable level over next two or three years?”
"What will be comfortable, again, without getting into the specific dollars, will be projects meeting demand in the marketplace. We look at the opportunities and entitlements we have," La Rue said. "We are looking at starting construction on multifamily product that are smaller than 8 Spruce [Street, aka Beekman Tower in Lower Manhattan], for example, where we had over $800 million invested. So these buildings in these core markets are going to be in the $150 million range, 350 units or so."
Those are buildings the size of two of the first three residential towers on the arena block.
"And once we open the Barclays Center and finish opening [the] Ridge Hill [project in Yonkers], and complete the projects that are already under development," he continued, "we would be down to about approximately $500 million of projects under construction. It’s actually developing where we think we can create value in terms of the market opportunity. Again, as Bob [O'Brien] has said many times... we’re going to have a limit on how much that’s going to be. It’s going to be. no more than 15% of our balance sheet... We believe our portfolio, based on its makeup, the development opportunities, will allow us to develop in that range, but no more than 15%."
That implies a fairly modest schedule.
Office space in Brooklyn
Returns on office space, LaRue said, were "down modestly, as expected, primarily due to the timing of lease expirations vacancies in two Brooklyn offices properties, Two MetroTech and One Pierrepont.
A signifiant portion has been re-leased and will be coming back onto line.”
Later, O'Brien said that most of the vacant office space at Two MetroTech has been re-leased, while at One Pierrepont, "about half of what’s rolled over has been addressed."
He said "there’s better demand than we would have guessed 12 to 18 months ago," he said. "In Brooklyn, we’ve been pleasantly surprised with the rent we’ve been able to achieve on recent leases."