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

Forest City selling most of remaining project stake to Shanghai-based Greenland; Gilmartin firm to consult; huge tower starts 2019?

So MaryAnne Gilmartin's new firm L&L MAG (web site live today), indicating the loss of key Forest City New York personnel (notably those working on Atlantic Yards/Pacific Park), is apparently a secondary part of the story: the project will soon be controlled by a company owned by the government of Shanghai.

As the New York Post's Steve Cuozzo reported yesterday, without a named source, Forest City to sell all but 5% of Pacific Park to Greenland USA, meaning Forest City, already the minority  owner of Greenland Forest City Partners, will go from a 30% share to a 5% one. No sale price has been announced, but when it surfaces, it may indicate another loss for parent Forest City Realty Trust(which may need losses for tax purposes to counter gains from other dispositions).

An official announcement should be soon; a meeting of the Atlantic Yards Community Development Corporation Wednesday surely will address it.

Gilmartin's firm is will consult on the project, according to the Real Deal, including government relations. That was part of Forest City New York's role. Forest City also was the project manager; it's unclear if the new firm will play that role. (Updated) The name Greenland Forest City Partners will survive.

Forest City pull-back

The sale indicates a continued pulling back from new development (and risk-taking) by Forest City New York/Forest City Realty Trust, after years of losses regarding Atlantic Yards/Pacific Park and a new focus on operations. And it suggests an end to a partnership that Gilmartin in 2016 had said was "not always easy, but as evidenced by all of the construction, it has been extraordinarily successful,"

Though four towers are open, that statement was hype, given that additional towers have been delayed. In November 2016, Forest City announced an unspecified pause in the project, but last June, Greenland USA’s head suggested the joint venture would start two buildings by the end of the year. As no buildings launched, the partners were not in sync.

The sale may point to a decline in transparency regarding the project, given that Forest City, a company traded on the New York Stock Exchange, must make quarterly disclosures, including about such things as the percentages of units leased.

Greenland Holdings, parent of Greenland USA, by contrast is traded on the Shanghai Stock Exchange. It is owned, if not formally controlled, by the government of Shanghai. L&L MAG is privately owned.

Though Forest City New York (formerly Forest City Ratner Companies) has a notably aggressive reputation, Forest City's Susi Yu hinted to the Commercial Observer in 2016 that Greenland pushed harder: "China definitely has a different way of working, so I think there’s definitely a little bit of an educational process in learning that in New York you can’t just do everything because you say so.
Project image at full buildout via L&L MAG; B4 would be large wide building at left ; Site 5 taller thinner tower at left
A new building coming?

So Greenland USA will own 95%. Reports Cuozzo:
Greenland intends to move forward swiftly with plans for a new apartment building at Atlantic and Sixth avenues, next door to Barclays Center, with a groundbreaking in 2019, sources said.
That's interesting. B4, at the northeast corner of the arena block, would be a giant building, 511 feet and 824,629 square feet, bigger in bulk than the two other arena block buildings combined (461 Dean and 38 Sixth) and the second largest building planned.

The largest was B1, aka Miss Brooklyn, but now likely would be the two-tower complex planned but not yet approved for Site 5, catercorner to the arena and currently home to Modell's and P.C. Richard.

B4 was long expected to be an apartment building, but in 2016 a project representative announced plans--which haven't moved forward--to turn it into an office tower.

Partnership changes

Cuozzo suggested that, "With Greenland USA firmly in control, the long-delayed complex is likely to get a badly needed infusion of energy."

Well, maybe. According to the agreement between Greenland and Forest City, as stated in a 2014 memo by Empire State Development (ESD), the state authority overseeing/shepherding the project, Forest City had to agree on new building starts, but it provides for a possible buy-out in the event of a deadlock among the members of the Board of Managers and also provides for a dilution of a member's interest if it fails to meet certain obligations.

"Accordingly, it cannot be assumed that the 30%-70% divisions of interests described above is a permanent arrangement," wrote ESD official Rachel Shatz at the time.

In March 2014, Forest City told the SEC:
If and when the joint venture becomes effective, the Brooklyn Atlantic Yards project will be managed by a board composed of three representatives from Greenland and two representatives from the Company. While decisions would require a majority vote, many decisions labeled “Special Major Decisions” would require a vote by us for approval. There is the risk that many of the decisions made by the joint venture would not be in our best interests and, further, that an inability to agree on certain of the Special Major Decisions would trigger buy-sell rights and obligations between us and Greenland. The exercise of the buy-sell rights could result in our having to fund the purchase of Greenland’s interest in the entire joint venture, or in one or more individual parcels. It could also result in having our interests be purchased and the loss of ownership of the Brooklyn Atlantic Yards project or of one or more parcels thereof.
Is approval needed?

In 2014, Forest City told ESD it believed it can do the transfer without the agency's consent, but ESD was reviewing that, according to Shatz's memo.

ESD staff did conclude that the transaction didn't require ESD consent, but, to avoid doubt or ambiguity, it recommended that the ESD board--controlled by the governor--approve the transaction, which it did.

Perhaps that scenario will recur, or simply the board will be advised that no approval is necessary.

Affordability questions

That 2014 approval came with a new 2025 deadline to complete all 2,250 affordable housing units, with seemingly onerous fines. Only 782 have been built.

One thing to look for: will the levels of affordability continue to float upward, with a focus on middle-income units, as with two "100% affordable" towers? Will government regulators continue to relax previously stated affordability goals to serve the economic interests of the new owner?

Update: Gilmartin on private vs. public capital

Bisnow reported:
Gilmartin cited capital constraints with Forest City as a reason for her decision. Forest City New York, a division of Cleveland-based REIT Forest City Realty Trust, is looking for a way to reduce its debt, including perhaps a liquidation of assets 
"I would say that it is antithetical that a public company undertake large-scale developments in prime cities with high barriers to entry,” Gilmartin said. “My first love has always been ground-up development, and now I can do that with the L&L guys in a private company with access to capital.”

Comments

  1. Is it known weather B4 will be an office or apartment building?

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    1. Good question. I've updated my post to point out that it was long planned to be apartments, then proposed as office, but that didn't move forward. The Post said apartments. But we'll see.

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  2. Clearly all the promises of close relationships to the Brooklyn community made by Ratner et al are "no longer operative". Not only has Greenland not made any similar commitment, but they are traded on the Shanghai stock exchange, plus Gilmartin's new firm, if involved, is private. Less pressure on both to be held accountable. Will the ESD and the AYCDC step up their roles to lead and protect the interests of the community and the state?

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    Replies
    1. The Development Agreement still applies, which requires 2,250 affordable units, with some wiggle room re affordability. Other promises more in question, but the Community Benefits Agreement was never ironclad.

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