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

Did Greenland pay Forest City $547 million for its first round of investment? No. How much should it pay for the next round?

On Thursday, Aug. 2, Forest City Realty Trust will release its second-quarter financial results, and perhaps reveal the details of the transaction, already closed but without numbers attached, in which Greenland USA nearly all of Forest City's remaining 30% share in the Atlantic Yards/Pacific Park project going forward, leaving the original developer with just 5%.

That translates to 83.33% of Forest City's remaining share--taking 25% of the project from the remaining 30% share--and means that Greenland will own 95% of the project going forward. That means Greenland has acquired the investment Forest City has already made in the project, with exceptions, and will be responsible for almost all payments going forward.

Why didn't Greenland buy out Forest City completely?  The Real Deal reported last August that there may be a clause in Atlantic Yards government contracts that require the original developer to keep a stake. That's plausible, but not yet confirmed.

And if so, they couldn't call the joint venture Greenland Forest City Partners. Or, perhaps more precisely: Greenland Forest City Partners.

Let's take a look at how much Greenland paid in the first round, and how much they might pay this time.

Previous stake: $200 million

Forest City announced 12/20/13, "Under the terms of the definitive agreement, Greenland Group will make a capital contribution at closing of approximately $200 million to acquire a 70 percent equity interest in the project, excluding Barclays Center [operating company] and B2, the first residential building [aka 461 Dean]."

That meant Greenland acquired the majority of Forest City's previous investment in land, as well as the benefit of previous spending on such things as legal and environmental approvals. That also meant Greenland would pay 70% of the costs going forward.

Forest City CEO David LaRue said at a 12/9/13 conference call, "To date, we and our minority partners have invested equity of approximately $545 million." That, I assume, is rounding off from $547,453,415 later shown in documents.

Forest City didn't get back its investment. A 70% payment would have represented $383,217,390.50.

So, based on Greenland's payment, what was the overall investment now worth? $200 million is 70% of $285.71 million. That suggests Forest City's remaining investment was then worth $85.71 million.

Did Greenland pay $547 million? 

Some news outlets got this wrong. A March 2015 article from The Real Deal stated, "Greenland Holdings paying $547 million in October 2013 for a 70 percent stake in Forest City Ratner’s Atlantic Yards development in Brooklyn, which was promptly renamed Pacific Park."

That's likely relying on these tweets:
But ACRIS--the city's property database--didn't quite say that. It delineated the transfer between the Forest City owned Atlantic Yards Development Company and the jointly (with Greenland) owned Atlantic Yards Venture, as shown in the screenshot below.

Within the latter joint venture, aka Greenland Forest City Partners, in a transaction perhaps not recognized on ACRIS, Greenland paid $200 million. (No principal has ever said the deal was $547 million.)

Note that both entities involved are at the same address: Forest City headquarters at Metrotech.

How much is the deal now worth?

We should know on Thursday how much Greenland paid. But perhaps there's a way to ballpark the numbers.

The project involves 6,430 apartments, and this deal excluded the 363 units in B2.

That left 6,067 units to be built by the joint venture. They built three towers (535 Carlton, 550 Vanderbilt, 38 Sixth), with a total of 879 units. That leaves 5,188 apartments to be built.

The 879 units represent 14.49% of the total expected from the joint venture. So, if we diminish Forest City's $85.71 million stake by that percentage, it declines $12.42 million, to $73.29 million.

So if Greenland is buying 83.33% of that, that suggests it could pay $61.07 million.

Needed adjustments

However, there must be multiple caveats and adjustments.

First, the initial tranche of work by the joint venture also involved spending on the permanent railyard, apparently $100 million going forward as of this year and surely more in past years.

Future infrastructure work, notably the platform needed for vertical development, must be finished, but partial work on the platform supports has begin. So it's possible, but unclear, that the most expensive infrastructure work will have been completed under the previous joint venture terms.

Second, condo buildings like 550 Vanderbilt are far more costly to build than rental buildings with affordable units. Previously, several other all-condo buildings were planned, but that now seems unlikely.

It's unclear how many condos will be built, despite official plans for 4,500 rentals and 1,930 condos. But that changes the cost equation.

Finally, any deal depends on the motivations of the parties. Forest City, presumably, was very eager, if not desperate, to further lower its risk on this project. It didn't exactly have another buyer waiting. So Greenland had leverage.

That suggests that Greenland would get a discount on a $61.07 million cost.

Also, the deal might also be structured to advantage one party: it may not be a cash payment, or a cash payment in full. There could be a promise to pay over time, with a relatively low interest rate.

Or, perhaps, the deal could involve a restructuring of the ownership percentages in the three buildings already constructed by the joint venture. Stay tuned.