From Forest City's SEC filing: the missing office tower, and acknowledgment of the extension to build new permanent railyard

There are a few nuggets in the Form 10-Q filed yesterday by Forest City Enterprises, parent of Brooklyn-based Forest City Ratner, with the Securities and Exchange Commission (SEC). First, the missing office tower:

We are in the process of developing Brooklyn Atlantic Yards, which is comprised of two phases. Phase I is comprised of the Arena and eight buildings totaling approximately 3.4 million square feet. Phase II consists of seven buildings totaling approximately 3.3 million square feet.

While this isn't new--it appeared in previous SEC filings--it again suggests that Forest City has dropped plans for the flagship office tower, with more than 1 million square feet.

If built, the B1 tower would loom over the arena plaza and bring the total Atlantic Yards square footage to about 8 million square feet. That tower would house most of the permanent full-time jobs associated with the project. However, office towers don't get built without an anchor tenant.

The railyard acknowledgement

The document also states:

Substantial additional costs for railyard and infrastructure improvements will be required to proceed with Phase II. During October 2013, the December 31, 2013 deadline to commence construction on the Permanent Railyard and to post the completion guaranty for such work was extended to June 30, 2014. If we choose to commence construction on the Permanent Railyard by June 30, 2014, it must be substantially complete by September 1, 2016. We have previously provided an $86,000,000 letter of credit to the Metropolitan Transit Authority (“MTA”) as collateral for such future work related to the construction of the Permanent Railyard. In order to construct the aforementioned seven buildings in Phase II, we will be required to construct a platform over the new Permanent Railyard. Alternatively, if we choose not to commence construction on the Permanent Railyard by June 30, 2014, the MTA may assert that we are in default of various MTA project agreements and pursue a draw down of our $86,000,000 letter of credit. A default under the MTA agreements would also result in our loss of approximately 3.3 million square feet of development rights for Phase II resulting in a significant charge related to abandonment of this development opportunity.

(All emphases added)

The value of delay

As I reported 10/15/13 for City Limits' Brooklyn Bureau:

The Metropolitan Transportation Authority (MTA) again asserts the deal “enhances the position of the MTA and LIRR,” because Forest City must post a $10 million guarantee to perform continuing work for six months, “with no change to the scheduled completion date [September 2016] or diminution of our underlying security.”

Then again, by delaying the official start date to June 2014 from December 31 of this year, Forest City gets six more months to post a full completion guarantee, which would put additional capital at risk. (The MTA would not specify the value of that guarantee, deferring to Forest City.) 

The agreement also gives Forest City time to share the risk with the new investors it's seeking for the overall Atlantic Yards project,

The previous hint

For reference, see the Form 10-Q document Forest City Enterprises filed 9/5/13 with the SEC:

We are in the process of developing Brooklyn Atlantic Yards, which is comprised of two phases. Phase I is comprised of the Arena and eight buildings totaling approximately 3.4 million square feet. Phase II consists of seven buildings totaling approximately 3.3 million square feet.
Substantial additional costs for railyard and infrastructure improvements will be required to proceed with Phase II. There is an upcoming December 31, 2013 deadline to commence construction on the Permanent Railyard and to post the completion guaranty for such work. If we choose to begin construction on the Permanent Railyard by December 31, 2013, it must be substantially complete by September 30, 2016. We have previously provided an $86,000,000 letter of credit to the Metropolitan Transit Authority ("MTA") as collateral for such future work related to the construction of the Permanent Railyard. In order to construct the aforementioned seven buildings in Phase II, we will be required to construct a platform over the new Permanent Railyard. Alternatively, if we choose not to commence construction on the Permanent Railyard by December 31, 2013, and we do not reach an alternative agreement with the MTA, the MTA may assert that we are in default of various MTA project agreements and pursue a draw down of our $86,000,000 letter of credit. A default under the MTA agreements would also result in our loss of approximately 3.3 million square feet of development rights for Phase II resulting in a significant charge related to abandonment of this development opportunity.