Skip to main content

Forest City executives: mixed-use projects like Pacific Park still attractive; noncommittal about selling three sites

During a conference call yesterday with investment anlaysts (following 2016 second-quarter results), executives from Forest City Realty Trust, parent of Forest City Ratner, sounded bullish on Pacific Park housing despite increasing apartment supply but were vague and non-committal regarding progress on efforts to sell three unbuilt sites in the project.

Office space positive, but...

They didn't say anything specific about planned office space at Pacific Park (including the Site 5 and B4 sites), but sounded positive about office space in general. "In New York and in Brooklyn in particular there continues to be demand and strong pricing with new leases being signed at rates above the average of our in-place rents, said CEO David LaRue, calling it a signal that they could "achieve rent growth as our leases renew."

"In Brooklyn, in particular we also feel are benefiting from higher asking rates from new ground-up projects," he said, though there are relatively few such projects. This would have been a time to mention Site 5, but likely that's too far in the future to count on it.

The housing market

LaRule foresaw "moderating growth in residential as a significant amount of new product begins to come online" in markets such as Brooklyn. Even given favorable demographics and steady demand, such new units "will take time to absorb," he said.

Still, he said, mixed-used projects such as Pacific Park Brooklyn offer assets: "densification, access to mass transit, a variety of uses, and an active 18- to 24-hour ground plane that are attractive to today's urban rental demographics and help create a unique sense of place and community."

Asked more about the issue of increased supply, LaRue noted that "the basic laws of economics" mean"you are going to have less pricing capacity." Still, he said, the peak of delivery will be this year, so additional supply will be absorbed, and the balance will "return to the norm."

Asked about pushing rents and the expected returns. LaRue said that new product was all at or above "projected NOI," or net operating income. At Pacific Park, the majority of units being delivered in four buildings are affordable and the demand "is not an issue, so we see that being absorbed very quickly and our projected returns holding on those as well."

That was an interesting comment, because, first of all, a good chunk of that affordable produce is aimed at middle-income households, so the developer may have to try harder to market to them. Second, it's not at all clear that the condo building, 550 Vanderbilt, is leasing up quickly, given that the "50% sold" announcement last month seemed oversold--and even with the hype that actress Lupita Nyong'o was looking at apartments there.

What about selling Pacific Park buildings?

Asked for an update on the projected plans to sell three Pacific Park sites--majority owned by Greenland Holdings, of course, the lead partner in the joint venture Greenland Forest City Partners--LaRue was noncommittal, sounding a bit less enthused than during a similar conference call in May.

"We have been having discussions on the opportunity to recapitalize," he said, adding, "We have not come to a conclusion on any of those discussions, though they are ongoing."

He said it was "a prudent look at the market and the demand that does continue to exist in Brooklyn. So we continue to evaluate that. and if so, when we come to a conclusion, either getting a deal done, or not being able to proceed, we obviously will inform our investors."


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…

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 …

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

"There is no alternative": DM Glen on de Blasio's affordable housing strategy

As I've written, Mayor Bill de Blasio sure knows how to steer and spin coverage of his affordable housing initiatives.

Indeed, his latest announcement, claiming significant progress, came with a pre-press release op-ed in the New York Daily News and then a friendly photo-op press conference with an understandably grateful--and very lucky--winner of an affordable housing lottery.

To me, though, the most significant quote came from Deputy Mayor Alicia Glen, who, as the Wall Street Journal reported:
said public housing had been “starved” of federal support for years now, leaving the city with fewer ways of creating affordable housing. “Are we relying too heavily on the private sector?” she said. “There is no alternative.” Though Glen was using what she surely sees as a common-sense phrase, it recalls the slogan of a politician with whom I doubt de Blasio identifies: former British Prime Minister Margaret Thatcher, a Conservative who believed in free markets.

It suggests the limits to …