Forest City: despite B2 delay "disappointment," still bullish on Brooklyn apartment market, de Blasio policies; aim to sell Nets' share by end of year
Otherwise, the commentary in the first-quarter conference call held with investment analysts pretty much matched that in the press release and other documents released the day before. And those analysts, as is typical, missed the chance to ask some tough questions.
Atlantic Yards apartments
CEO David LaRue expressed disappointment that the modular building, Atlantic Yards B2, would be a year late, but said the Brooklyn market is projected to stay strong. He said there was a fixed-priced contract but wasn't asked about the contractor, which is a Forest City joint venture.
Nor did any of the analysts note that the Greenland Group, Forest City's new joint venture partner/overseer, has decided to build the next towers using conventional means. Could it be that one reason Forest City sought new buyers--or that it sold at a discount--was because modular was struggling?
Is Forest City concerned "that too much product might be hitting the market in Brooklyn at the same time"?
LaRue said no, that "we think that the market strength is still there... The unique nature of this project, it’s location with regard to to public transportation, where it sits in the market, even with the new construction going on, will be beneficial to us."
He added that Atlantic Yards "is uniquely positioned" produce affordable housing de Blasio wants, "not only for the city but for ourselves and our partners. again, we are still very bullish on the market dynamics."
One analyst asked if Atlantic Yards towers would compete with each other.
LaRue said no. B2 would open at the end of 2015. "We're looking at two more buildings on the site… both a rental, and potentially even a condo, because of the flexibility in the zoning." Actually, there's no zoning. The state overrode zoning for Forest City. And Forest City told the Times it would start three towers, not two.
Even if the new buildings are rentals, they wouldn't compete with B2. He said that "because B2 is a 50/30/20 building [market/middle- and moderate-income/low-income], we think the absorption of that building, once it does open, will happen quickly, and we actually can get a nice flow into the market."
Does Forest City see a better environment for developers under de Blasio?
LaRue reiterated that Atlantic Yards "can be a major component" of the mayor's affordable housing goals. "We are pleased with the ongoing support from the city," he said. "The city has committed to making this work for all developers."
Unmentioned is that Forest City is apparently seeking new subsidies.
Given the boost in Barclays Center revenues, an analyst asked "if results are tracking to your expectations."
Yes, said LaRue, adding that they were focused both on event revenues and expenses, given that they no longer need to be "were welcoming new guests." Revenues are "in line with our expectations."
"We’re overall pleased with the acceptance of the arena in the New York market," he said, "not only the people who come to the events, but also the performers and other users of the facility."
He didn't mention--and nobody asked about--the green roof planned to both enhance views from apartments and tamp down the escaping bass.
Forest City, given its " focus is on accelerating vertical development," has recently retained advisors to help market its minority share in the Brooklyn Nets. Forest City is the managing member of Nets Sports and Entertainment, which owns 20% of the team, otherwise owned by affiliates of Mikhail Prokhorov's Onexim Group.
What's the balance they're carrying the Nets on, the executives were asked.
"We’re carrying the Nets at zero, we’ve written it down," responded Chief Financial Officer Bob O'Brien.
I've estimated the sale might be worth as much as $150 million.
How long will it take? "The efforts really just started, it’s pretty early," said O'Brien. But if they identify a buyer, he said, they'd expect to reach agreement on price by the end of the year.
Next come are approvals by the NBA, he said, which are "a little harder to predict."