Skip to main content

In video interview, Gilmartin talks Chinese partnership, office tower, & "knowing your barista" (the new condo slogan?)


So again I'll interpolate comments (in italics) in the discussion between Kenneth Weissenberg, partner at EisnerAmper, and MaryAnne Gilmartin, president & CEO at Forest City Ratner.

Dealing with Greenland Group

KW: Do you find it particularly challenging dealing with foreign investors? (Not just investors but venture lead partners/overseers)

MAG: That's a very good question. (Chummy!) I like to say that, with 25 Chinese nationals that are our offices in Brooklyn, we are having, in many ways, a cultural odyssey, to connect the differences in the way that we do businesses... compared to the Chinese culture. (and if things go wrong with Greenland Forest City Partners , as some other partnerships--like Skanska--these words will be prophetic) It's not always easy, but as evidenced by all of the construction, it has been extraordinarily successful (not necessarily; three buildings--B12, B13, B15 are delayed) and in some ways, it's what makes New York great. Think about it, our partner on the arena was a Russian oligarch (she uses the term non-pejoratively), and the owner of the team and the arena today is Onexim... We have a Chinese developer, a $50 billion Chinese company partnering with us on the rest of the project and, y'know, we're Brooklyn through and through. So I think it's what makes New York a great place, that people come together from across the globe and do great things together. (Or use the local partner to wrangle subsidies and tax breaks before coming in.)

About EB-5

KW: That's terrific. (Chummy!) You haven't used EB-5 financing in any of your projects have you? (Not a good softball question, he surely knew the answer.)

MAG: We have. In fact, we put together the largest EB-5 financing ever, at its time, when we were building the project in Brooklyn, in part because we built through in the recession, a lot of the infrastructure, and as you well know, there's no longer infrastructure financing available in our business, and EB-5 became a very very smart and affordable way to continue with all of the readying of the land. (and the buying of the land) For many years, people said the project wasn't moving forward. Even in the face of all the controversy and the lawsuits, we continued to ready the land by doing all of the infrastructure work. (Actually, they stopped for a while.) So it was really like the iceberg, it wasn't the 20% you saw above the surface, it was the 80% that was going on beneath the dirt. So we have had two major EB-5 fundraises (and the third one counts as less-than-major, at $100 million?) associated with the project, and both have been successful. One has returned each of the investors with their investment and a green card. (That's news, actually. But it also reminds us they earned no interest.)

Becoming a REIT

KW: That's terrific. (Staying chummy) Recently, financing has become tougher.. you've gone REIT, the parent company has gone REIT. Is that in part to help with the financing situation?

MAG: Another great question. (Ditto) We were a public non-REIT company for many many years. For lots of reasons, it became clear that we needed to become a REIT. We needed to be judged along a REIT peer set and we needed to basically change in many ways the approach we had to development by not using as much leverage. When the last downturn occurred, we were highly levered. We had a lot of development on our books, and we didn't have enough liquidity. So as we've come out of the recession, we've changed our model, which is now a model of collaborating and partnering with other equity investors because we know how to develop, and that's a high barriers-to-entry profession. (But aren't they sacrificing some things too?) But we also think people like to invest with developers who really know how to develop in a city like New York. So we've been able to bring in partners, which has helped, because now we're getting much less financing in each of our buildings. In the old days, we would would finance up to 70, 75% of a project's total cost, today we're calibrating closer to 50% or 60%. That's just a new way of doing business as a REIT, and a smarter way to do business if your balance sheet is healthy, because you can borrow money cheaper. So, we've been all about less leverage. So was the world has changed, and leverage has become more challenging, in many ways, it lines up nicely with our strategy generally.

KW: The cost of capital becomes something that makes REITs a very attractive alternative.

MAG: Exactly. We have our eye on reducing our cost of capital, particularly our cost of equity. The lending markets are still flowing, and when you borrow $9 billion on your balance sheet a year, you have created tremendous relationships and huge confidence with lenders. We provide completion guarantees. So lenders like to do business with Forest City, because they've had a great run with us but today, we're borrowing less, we're still building and I think in that way the lenders also like it, because they have much more equity and skin in the game on the part of the developer. (So lenders like to do business the old way, until they don't, and now they like the new way?)

Building the office tower

KW: You're developing here. What's next on the horizon?
MAG: So I love our city. I like to say, follow the artist and restaurants. Brooklyn is an amazing place, and we're continuing to focus on Brooklyn, because it's the place to be. (Because they have approved development sites in the Pacific Park project.) Because of that, we're ready to put together an iconic headquarters office building, brand new, which really hasn't happened in many years in New York. There are folks like Jared Kushner that are buying existing buildings (aka "DUMBO Heights") and putting together space for technology companies.

Our vision is, right on Flatbush Ave, where today Modell's and P.C. Richard sit, which is just across the way from our beautiful arena, is to build a beautiful tower, an office tower, that can really be home to a headquarters company that wants to call Brooklyn its own headquarters. (In 2008, they were seeking an anchor tenant for "Miss Brooklyn," over the arena.)

KW: That sounds like a great concept. (uber-chummy)

MAG: That's what we're doing in Brooklyn. I'm an office developer, first and foremost... I would say we are going to keep trying to put a building online within the next few years, because the entitlements are under way (but not yet close to approved, given the need for Empire State Development approval, which will come only after the P.C. Richard eminent domain case is resolved), and you find an anchor tenant (not so easy) and you construct the project.

Condos vs. everything else

MAG: Elsewhere, we're looking at places like Queens, and South Bronx, even New Jersey. The opportunities exist there, because the land prices are still manageable enough where you don't need to build condos to come out. I call condominium development the great allocator of land costs. So my concern about rising land costs in Manhattan and Brooklyn is that, when a developer buys land for the pricing you see today, it forces the developer to look at certain product types in order to deliver the returns. And the most obvious product type is condominium. And it would be awfully sad if everything built in the next few years were condominium, both in Brooklyn and Manhattan.

The contextual 550 Vanderbilt
KW: Some of the prices they're asking for condominiums you have to be a billionaire to afford.

MAG: That's an interesting statement, (segue to sales pitch!) because what $1500 a foot gets you in Brooklyn, compared to $1500 a foot in Manhattan, is an extraordinary difference. The luxury definition in Brooklyn is not high-rise glass and steel towers, it's contextual (!?!), it's beautiful, it's more organic and it's knowing your barista down in the lobby of the building, the person that makes your coffee. ("Know your barista" was not the selling point of the Atlantic Yards Community Benefits Agreement.) We're creating a new kind of luxury in Brooklyn, with our condominium project, 550 Vanderbilt, we're about 50% sold (and were 30% sold upon official sales launch nine months ago) and the pricing is really sold, and y'know, in slow and steady fashion, we think the Brooklyn market will continue to outperform the other boroughs.

Where next?

KW: You mentioned the South Bronx or Queens... Do you see the Bronx as potentially the next Brooklyn?

MAG: I think Queens first... The competitor with Queens today is Jersey City, in my view. I think those will basically be driven forward at the same general pace... Some people will prefer the gold cost of New Jersey, others will prefer Queens. I was born in Queens, I prefer Queens... You know the advantages of Queens. The views of the midtown skyline from Queens are exceptional. (By Queens she means Long Island City, and maybe Astoria, surely not the rest of the sprawling borough.) The ferry service we're putting here in Roosevelt Island is going to make access from Roosevelt Island to Long Island City to the Navy Yard to the East Side of Manhattan extraordinarily easy. So I think Queens is going to move forward in a very, very positive way, but the land pricing will probably edge up. And that'll force developers to look in other places. I think the Bronx scores very high.... It is well served by mass transit, it's proximate to all the activity in the urban core... and it's a great place; the food and the culture is now at an inflection point (which means there are new coffee shops?), which I think is the beginning of its moment.


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 (post-dated pinned post)

This graphic, posted in November 2017, 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 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.

The previous graphic, from August 2017 (without the ghost B1)

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…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

Not quite the pattern: Greenland selling development sites, not completed condos

Real Estate Weekly, reporting on trends in Chinese investment in New York City, on 11/18/15 quoted Jim Costello, a senior vice president at research firm Real Capital Analytics:
“They’re typically building high-end condos, build it and sell it. Capital return is in a few years. That’s something that is ingrained in the companies that have been coming here because that’s how they’ve grown in the last 35 years. It’s always been a development game for them. So they’re just repeating their business model here,” he said. When I read that last November, I didn't think it necessarily applied to Atlantic Yards/Pacific Park, now 70% owned (outside of the Barclays Center and B2 modular apartment tower), by the Greenland Group, owned significantly by the Shanghai government.
A majority of the buildings will be rentals, some 100% market, some 100% affordable, and several--the last several built--are supposed to be 50% market/50% subsidized. (See tentative timetable below.)

Selling development …