Skip to main content

Uncounted savings on the Barclays Center: perhaps $131 million in free land for developer Forest City Ratner

Today, Mayor Mike Bloomberg delivers his final State of the City address at the new Barclays Center arena, chosen because it has generated “unprecedented economic activity in the area.”

He may even salute some well-publicized elements: an award to the 1 millionth visitor, a new gallery honoring black basketball in Brooklyn, a mural at the Dean Street entrance.

Surely he won't specify how much the arena has cost city taxpayers, and whether that money might have been directed at real public goods, things like open libraries and Head Start.

The city acknowledges $179 million in direct subsidies for land and infrastructure. But the city contribution is far greater than previously analyzed.

As I detail below, free land for the project has been vastly undervalued or not even counted, adding up to nearly $80 million, at least, and likely more than $124 million. The beneficiary: developer Forest City Ratner.

(Update 9/8/16: Note additional $7,168,750 for Pacific Street streetbed as described below. That would boost the total saved to nearly $131.3 million.)

The first two lines in the graphic above regard property the city had long planned to give away. The third line--the streetbed of Pacific Street between Carlton and Vanderbilt avenue--was supposed to be paid for, at least initially. Now, neither the city nor Forest City Ratner will say whether anything was paid.

Beyond that, of course, there are numerous other public subsidies and tax breaks, including $100 million from the state, tax-free bonds, and the rights to develop the MTA's Vanderbilt Yard well below the appraised value, with the cash component of the bid well below that of the one rival bidder.

What we know: from IBO

Yes, people have a vague idea that something's wrong. Just yesterday, New York Times columnist Jim Dwyer made light of the fact that the Barclays Center, which is tax-exempt, was incorrectly listed on city tax rolls. (The New York City Independent Budget Office, or IBO, first pointed that out.)

From IBO 2009 report
How much might the arena cost the city? The best effort--though somewhat dated--to reckon with the arena's fiscal impact came from the IBO in September 2009.

It concluded that the arena would be a net loss to the city over 30 years, as the costs to the current budget--including direct subsidies used for land and infrastructure--would exceed expected tax revenues by $39.5 million.

Beyond that, the city would lose $180.5 million in opportunity costs--mainly from unpaid property taxes on the arena.

That $180.5 million total includes $9.7 million in city property and streets transferred to Forest City. I estimate that number instead at $124.1 million, which would make the opportunity cost total $294.9 million.

Update needed

That report surely could use an update. For one thing, the IBO overestimated the savings--mainly on federal taxes, not city ones--to Forest City Ratner on tax-exempt bonds, because only $511 million in bonds were issued, as opposed to a projected $678 million.

From IBO 2009 report
Also, given the number of expected arena events should increase significantly with the move of the New York Islanders in 2015, local revenues should rise.

Costs missing

Then again, some significant costs were ignored or downplayed.

As the graphic at right indicates, the IBO valued the transfer of city property to Forest City Ratner at $6 million and city streets at $3.7 million.

Those numbers, as I explain below, significantly undervalue the properties. Moreover, the IBO made no attempt to assess the value to Forest City of other city streets transferred to the developer, because the IBO assumed that Forest City would pay fair market value for the land.

There's no evidence Forest City did so.

(Forest City's partnership with Russian billionaire Mikhail Prokhorov, who owns 45% of the arena operating company, means that the Russian oligarch now shares some of the costs and benefits.)

Valuable land, big savings

New York City Economic Development Corporation President Seth Pinsky, in testimony at a May 2009 state Senate oversight hearing, claimed, “Finally, the city has committed to contribute to the project at agreed-upon discounts certain real estate assets for which there are unlikely to be other opportunities for monetization."

Forest City paid dearly for property on the site, and the city just gives it away? Land on the arena block was very valuable--as detailed below--and land nearby is also valuable. Retail rents are skyrocketing. Consider that, as the Wall Street Journal reported 9/16/12:
RedSky Capital LLC paid $4.1 million, or $900 a square foot, for the building at the intersection of Flatbush and Fifth avenues that's housed Triangle Sports a retailer of shoes and sporting goods.
Divide that sum by $900 and the total is about 4556 square feet over three stories, which suggests the plot itself is 1500 square feet. That suggests $300/sf for land. But you can't build high-rise there.

How much is land worth?

Land on the project site is likely worth well more than $300/sf.

At Floor Area Ratio (FAR) of 10--the same FAR used for the appraisal of the Vanderbilt Yard--and a price of $75 per buildable square foot (the assumption in the Vanderbilt Yard appraisal), the land is worth $750/sf.

Both those numbers need adjustments. The approved FAR of the arena block, according to the Land Use chapter of the Atlantic Yards Final Environmental Impact Statement (FEIS), is 8.6, including the streetbeds.

And land is no longer worth $75 per buildable square foot. In 2008, one developer said, the price per buildable sf (PBSF) sought by the city was $150. In 2008, a real estate professional told me, the PBSF was between $110 and $200.

In 2011, according to an analysis from TerraCRG, the PBSF for residential land in Downtown Brooklyn was $161, with an average of $125 for the overall category of Downtown Brooklyn and Park Slope. In 2012, according to TerraCRG, the numbers were $113 and $147, respectively.

Let's use $125 PBSF, a relatively conservative assumption given that the Atlantic Yards site is likely more valuable given its proximity to transit. That suggests land on the arena block is worth 8.6 times $125, or $1075/sf. For convenience, let's round down to $1000/sf.

The MOU's promise

From MOU
According to the 2/18/05 Memorandum of Understanding (MOU) between the city, state, and Forest City, the ESDC--and thus the developer--was to get the "City Properties and the City Streets underlying the arena for just $1. (The full MOU is at bottom.)

Initially, the city property on the arena block underneath the adjacent "commercial office building sites"--now, mostly, housing sites--was supposed to generate cash.

Maybe. The MOU cited payment "fair market value... based on an independent appraisal," which took into account "any extraordinary cost" to the developer. In other words, a potential wash.

The IBO, in its first report on Atlantic Yards, in September 2005, low-balled the value of the property under the arena, valuing the streets at only $56,400, based on $20/sf Department of Finance values applied to adjacent land, applied to an area--clearly undercounted--of approximately 2,820 square feet.

The other land on the site, including city properties and streetbeds, was supposed to reap fair market value.

That didn't last.

The deal changes

From 2006 GPP
According to the July 2006 Atlantic Yards General Project Plan (GPP, below), as approved by the Empire State Development Corporation (ESDC), the equation changed somewhat. Property under "the Arena" apparently encompassed the entire arena block. There was no mention of the land underlying the adjacent "commercial office building sites" generating revenue to the city.

However, the other city property within the Atlantic Yards site--the bed of Pacific Street between Carlton and Vanderbilt avenue-- would be acquired "at their fair market appraised value," paid by Forest City.

That didn't last, either.

The deal changes, again

In 2009, Forest City Ratner asked the MTA to revise the Vanderbilt Yard deal and asked the ESDC to agree to acquire the Atlantic Yards site via eminent domain in stages, thus saving the developer on land it didn't need.

From 2009 MGPP
Also, a subtle but key change in the June 2009 Modified General Project Plan (GPP, below) likely hid an additional subsidy.

No longer would the other city property--the aforementioned streetbeds outside the arena block--be acquired "at their fair market appraised value." Alternatively, the payment would be for "such other value as shall be agreed to by the City and FCRC."

How much was the saving on arena block streetbeds? 

Forest City wasn't saving just $56,400 on those streetbeds. In September 2009, the IBO updated its analysis:
The city will provide some property for the project at no cost. According to the latest modified project plan, this will include the street bed of Fifth Avenue between Flatbush and Atlantic Avenues and the street bed of Pacific street between Flatbush and Sixth Avenues, as well as a small traffic triangle at the intersection of Fifth Avenue and Pacific street. Based on recent sales prices in the area, IBO estimates that the 2010 sales value of this property is $3.7 million.
How was that calculated? The IBO said:
The property amounts to approximately 61,625 square feet. The value is based on a price of $60 per square foot, which takes into account the citywide drop in property prices.
In IBO’s 2005 fiscal brief a calculation error led to a significant underestimate of the value of street beds to be transferred.
The calculation error related to the square footage. But the valuation surely was a lowball figure, geared to a city assessment rather than any recognition of the market.

As stated above, the value was likely closer to $1000/sf, given the FAR of 8.6 and the $125 PBSF.

With property covering 61,625 sf--a bit more than 1.4 acres--that suggests the savings on streets is $61,625,000.

What about the other properties?

There were other properties on the arena block. The 2005 IBO report described the transfer of an FDNY site at Block 1127, Lot 33, valued at $93,800 by the Department of Finance.

City property records indicate that the plot was 25 feet x 110 feet, or 2750 square feet. Multiple that by $1000/sf, and the value is $2,750,000.

That sum doesn't looks out of line when compared with that another small property on Block 1127, Lot 20, purchased by Forest City Ratner for $3 million in 2006. (The payment was reimbursed via city taxpayers' $100 million subsidy for land.) Lot 20 looks marginally wider but not as deep.

A footnote in that first IBO report stated that  another city-owned parcel at the tip of the site (Block 1118, Lot 6) was part of Phase 1, but appeared to "be outside the arena building footprint" and thus would be sold at fair market value.


The 2009 IBO report acknowledged that the latter property would be included in the city's giveaway, and nudged up the value of the first site. It stated:
The city will also transfer two city-owned parcels to the Empire State Development Corporation (ESDC) at no cost, which will then be leased to FCRC, that appear to be included in the arena site. The first (Block 1127, Lot 33) is valued by the Department of Finance at $124,000 on the current tax roll, and the second (Block 1118, Lot 6) has a reported full market value of $5.8 million.
Based on these market values, the value of the subsidy from ignoring the opportunity to sell these properties is $6.0 million.
That deserves an adjustment. Block 1118, Lot 6, according to property records, covers 13,500 sf, or about .31 of an acre. It's the tip of the arena plaza and the future tip of the area in front of the flagship office tower. It's a prime site.

Even the city, when it assessed the property at $5.8 million, valued it at nearly $430/sf. It's likely worth more. At $1000/sf, given the FAR, it's worth $13,500,000.

Adding it up

The savings on these two city properties is estimated at $16,250,000,

The savings on the streets is estimated at $61,625,000.

Estimated Phase 1 total savings: $77,875,000.

What about Pacific Street in Phase 2?

Another key piece of land is Pacific Street between Carlton and Vanderbilt avenues, demapped for construction staging (trucks line up there), access to the adjacent surface parking lot, and, ultimately, open space to serve the towers surrounding it. This is part of the Phase 2 site but integral to arena operations.

The approved FAR for the project site east of 6th Avenue (Phase 2) is 7.4, including the streetbeds, according to the Final Environmental Impact Statement. Multiply that by $125 PBSF, and the value is $925/sf.

How big is that stretch of Pacific Street (outlined in red)?

It seems roughly commensurate to the Phase 1 streetbeds (blue + yellow) that total 61,625 square feet.

However, just to be conservative, let's call Pacific Street 50,000 square feet, or about 1.15 acres. Multiply that by $925, and the estimated value is $46,250,000. (See update below.)

Total estimated savings: $77,875,000 +  $46,250,000 = $124,125,000.

Of course, a different PBSF would adjust the numbers. Consider: a 20% decrease, with a value of $100 PBSF, would mean total savings of $99.3 million. A 20% increase, with a value of $150 PBSF, would mean total savings of $148.95 million. Also, of course, an adjusted total of Pacific Street square footage would tweak the formula.

Update 9/8/16: the actual size of the streetbed, according to a June 2013 Forest City presentation, was 57,750 square feet. So if we multiple that additional 7,750 square feet by $925, we should add $7,168,750
How much did Forest City pay?

We don't know exactly what happened with this Phase 2 property. (That street was indeed condemned, addressed in a 9/17/09 board memo and a later legal petition.)

According to the 2005 GPP,  other city property within the Atlantic Yards site was to be acquired "at their fair market appraised value." However, the 2009 MGPP offered a loophole, allowing payment for "such other value as shall be agreed to by the City and FCRC."

What was that value?

It's a mystery. My queries to the mayor's press office, the New York City Economic Development Corporation, and Forest City Ratner have been ignored. A Freedom of Information Law (FOIL) request to the Empire State Development Corporation returned no relevant documents. Other FOIL requests remain pending.

Maybe another city agency, or elected officials, can probe further.

For now, however, my working assumption is that Forest City didn't pay and that the developer, with its allies in the Bloomberg administration, has assumed no one would check.

Atlantic Yards General Project Plan, July 2006 by


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…

No, security guards can't ban photos. Questions remain about visibility of ID/sticker system.

The bi-monthly Atlantic Yards/Pacific Park Community Update meeting June 14, held at 55 Hanson Place, addressed multiple issues, including delays in the project, a new detente with project neighbors,concerns about traffic congestion, upcoming sewer work and demolitions, and an explanation of how high winds caused debris to fly off the under-construction 38 Sixth Avenue building. I'll have more coverage.
Security issues came up several times at the meeting.
Wayne Bailey, a resident who regularly takes photos and videos (that I often use) of construction/operations issues that impact residents, asked representatives of Tishman Construction if the security guard at the sites they're building works for them.
After Tishman Senior VP Eric Reid said yes, Bailey asked why a guard told him not to shoot video of the site, even though he was on a public street.

"I will address it with principals for that security firm," Reid said.
Forest City Ratner executive Ashley Cotton, the …

Atlantic Yards/Pacific Park graphic: what's built/what might be coming + FAQ (post-dated pinned post)

This graphic, posted in February 2018, is post-dated to stay at the top of the blog. It will be updated as announced configurations change and buildings launch. Note the unbuilt B1 and the proposed--but not yet approved--shift in bulk to the unbuilt Site 5.

The August 2014 tentative configurations proposed by developer Greenland Forest City Partners will change. The project is already well behind that tentative timetable.

How many people are expected?

Atlantic Yards/Pacific Park has a projected 6,430 apartments housing 2.1 persons per unit (as per Chapter 4 of the 2006 Final Environmental Impact Statement), which would mean 13,503 new residents, with 1,890 among them in low-income affordable rentals, and 2,835 in moderate- and middle-income affordable rentals.

That leaves 8,778 people in market-rate rentals and condos, though let's call it 8,358 after subtracting 420 who may live in 200 promised below-market condos. So that's 5,145 in below-market units, though many of them won…

The passing of David Sheets, Dean Street renter, former Freddy's bartender, eminent domain plaintiff, and singular personality

David Sheets, longtime Dean Street renter, Freddy's bartender, eminent domain plaintiff, and singular personality, died 1/17/18 in HCA Greenview Hospital in Bowling Green, KY. He was 56.

There are obituary notices in the Bowling Green Daily News and the Wichita Eagle, which state:
He was born in Wichita, KS where he attended public Schools and Wichita State University. He lived for many years in Brooklyn, NY, and was employed as a legal assistant. David's hobby was cartography and had an avid interest in Mass Transit Systems of the world. David was predeceased by his father, Kenneth E. Sheets. He is survived by his mother, Wilma Smith, step-brother, Billy Ray Smith and his wife, Jane all of Bowling Green; step-sister, Ellen Smith Alexander and her husband, Jerry of Bella Vista, AR; several cousins and step-nieces and step-nephews also survive. Memorial Services will be on Monday, January 22, 2018 at 1:00 pm with visitation from 10:00 am to 1:00 pm Monday at Johnson-Vaughn-Phe…

Some skepticism on Belmont hockey deal: lease value seems far below Aqueduct racino; unclear (but large?) cost for LIRR service

As I wrote for The Bridge 12/20/1, The Islanders Say Bye to Brooklyn, But Where Next?, the press conference announcing a new arena at Belmont Park for the New York Islanders was "long on pomp... but short on specifics."

Notably, a lease valued at $40 million "upfront to lease up to 43 acres over 49 years... seems like a good deal on rent for the state-controlled property." Also, the Long Island Rail Road will expand service to Belmont.

That indicates public support for an arena widely described as "privately financed," but how much? We don't know yet, but some more details--or at least questions--have emerged.

An Aqueduct comparable?

Well, we don't know what the other bid was, and there aren't exactly parcels that large offering direct comparables.

But consider: Genting New York LLC in September 2010 was granted a franchise to operate a video lottery terminal under a 30 year lease on 67 acres at Aqueduct Park (as noted by Gov. Andrew Cuomo).


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…