The Real Deal on "The Dismantling of Forest City Ratner": corporate infighting and an unforeseen opposition
The analysis in some ways goes beyond my lengthier 3/20/18 coverage for The Bridge, Forest City in Brooklyn: a Real Estate Pioneer on the Way Out?, notably new reporting on corporate tangles at Forest City Enterprises, now Forest City Realty Trust.
The company, sources say, was hindered by two key problems: major missteps at Pacific Park and a corporate restructuring that marginalized its development business.
The corporate structure
The fact that Ratner’s firm never moved on from Pacific Park to its next big development has to do with the company’s unique structure, sources say.
In 2016, when Forest City Enterprises became Forest City Realty Trust, it had to divest business lines and devote a smaller fraction of its efforts (and capital/loans) to risky ground-up development.
The Pacific Park miscalculations and the media ecosystem
Former employees, to the Real Deal, not only blame corporate change but "also point to miscalculations by Ratner," notably underestimating the Atlantic Yards opposition.
From the article:
Anyone who was following New York real estate at the time no doubt remembers Daniel Goldstein, the founder of the opposition group Develop Don’t Destroy Brooklyn and a local condo owner. The group sued to block the project, claiming that the use of eminent domain was unconstitutional, and staged near-constant protests, which dominated the press coverage.Near-constant protests? There were periodic protests, often lightly covered, but DDDB's more significant achievement was influencing the media ecosystem, as Goldstein was always at the ready with a press release or comment.
Notably, one key local element of that ecosystem, at least through 2009, was aligned with (and amplified) DDDB: the relentlessly critical (when independently-owned) Brooklyn Paper.
“You can’t overstate the impact that the opposition to the project had,” [former city official Seth] Pinsky said. “The delay meant Forest City was spending enormous sums of money while fighting the opposition until finally, when they were able to put shovels into the ground and go vertical, the market was no longer there.”Yes, the delay put Forest City in an unfortunate position, but that also has to do with other factors, including the unforeseen impact of the Downtown Brooklyn rezoning and the company's pattern of underestimating infrastructure costs, as well as the unusually harsh recession.
(Update: The more people I talk to, the more they emphasize the impact of the halt in lending, which would have hurt Atlantic Yards sooner or later, whether or not opponents had delayed it.)
In April 2007, then-CEO of Forest City Enterprises Chuck Ratner (and Bruce Ratner's cousin) said, “We’re very good at estimating markets, we’re very good at estimating rents, at estimating lease-ups, and estimating costs. We are terrible, and we’ve been a developer for 50 years, on these big multi-use, public private urban developments, to be able to predict when it will go from idea to reality. All we know is that if we pick the right place and we’re in with the right people, that over time we’re going to create tremendous value.” This time that posture didn't work.
“Community opposition is one thing. I don’t know that anyone can plan for someone like Daniel Goldstein,” said the source. “This was at the dawn of blogs and social media. Daniel Goldstein was masterful in using social media to amplify what was a very small, very localized opposition to the project.”Wait a sec. The opposition was localized, sure, and it was amplified by blogs, but it was not merely "very small, very localized." It gained pockets of support in various Brownstone Brooklyn neighborhoods, served by the Brooklyn Paper, and allowed Develop Don't Destroy Brooklyn to recruit some big local names, including celebrities, for an advisory board.
Bruce Ratner's hubris brought down Forest City Ratner, and he took a good chunk of Forest City Enterprises down with him. And while Daniel Goldstein's tenacity was key to Atlantic Yards' opponents' ability to fight to the end, the characterization by a "former Forest CIty Ratner employee" that the opposition was "very small, very localized," is just not true. Many people in the surrounding neighborhoods opposed the project, and that helped sustain Goldstein and Develop Don't Destroy Brooklyn.
Even if mostly unsuccessful, such lawsuits raised serious and substantial questions about the legitimacy of the project and the process behind it.
Putzier notes that, while Forest City New York has some significant operating assets (my article from The Bridge cites those assets, notably MetroTech, as among the parent company's biggest contributors) in New York, it's not moving ahead with new development. He got a quote from corporate:
“New York is an important core market with a substantial base of very high-quality assets,” Forest City’s [Jeff] Linton said in a statement, adding that the city accounts for a third of the company’s net operating income. “We expect to continue to have a presence focused on leasing, asset management, operations and a core development capability.”So "core development capability" means what, exactly? My article quoted LaRue as sounding distinctly lukewarm about new development.
Someone, suggests interviewee Pinsky to the Real Deal, will make Atlantic Yards/Pacific Park a "huge win," given the concept, location, and demand.
From Peter Krashes:
In his autobiography Daniel Doctoroff says he saw Atlantic Yards / Pacific Park as a "crazy risk," and as the project has very slowly moved forward, that has proven to be the case. But the risk wasn't just born by FCR; it was born by the community nearby and the public generally. The question for me is why Doctroff and later Pinsky and others in the Bloomberg administration let an approval process unfold, (not just once!), which assessed the value of the project based on the assumption it would be completed in ten years. Those same approvals were linked to environmental reviews with the same ten year assumption. The project, always of questionable feasibility, is a twenty to thirty year project -- if it ever is completed. It is a trope that the opposition is responsible for the project's delay. I think the problem is that government was overly optimistic, and in some ways still is. Why?From Daniel Goldstein:
Yup, apparently the need by Ratner folks to diminish the opposition and spread the lie that the opposition was “very small, very localized” remains still today. But it’s just fake news. Sad.