So, did the new developers working on Atlantic Yards/Pacific Park get a good deal or not from Greenland Forest City Partners, at that point 95% by Greenland USA?
I reported last month on the lease amounts paid by TF Cornerstone and the Brodsky Organization for three sites: B12 and B13, and B15. The Commercial Observer (which broke the TF Cornerstone news) and others reported on the lease amounts for B12 and B13.
But no one offered context, which I will try to do, with the acknowledgment of limited expertise and major caveats.
First, these are development leases, not sales of land, so they come with somewhat less long-term certainty and thus value.
More importantly, these are leases for sites on terra firma, while most other Atlantic Yards/Pacific Park development parcels, to be built over the Vanderbilt Yard, require an expensive deck. That means the lease for those parcels should cost less per square foot.
But it looks like the lease buyers got relatively good deals--even if Greenland USA itself didn't do badly, given the low cost of its purchase of 70% of the project site from Forest City Enterprises.
As I noted, the nearly $199 million received by Greenland, records suggest, was nearly the same as the $200 million Greenland USA's parent Greenland Group paid in 2014 to enter the project and acquire a 70% share of the project going forward, excluding the Barclays Center operating company and B2, the first residential building, aka 461 Dean.
Doing the math
The B15 lease was for $55.83 million, according to ACRIS records. The allowable square footage at B15 is 341,910 square feet, as detailed in the document at bottom.That works out to $163.29/sf.
I reported last month on the lease amounts paid by TF Cornerstone and the Brodsky Organization for three sites: B12 and B13, and B15. The Commercial Observer (which broke the TF Cornerstone news) and others reported on the lease amounts for B12 and B13.
But no one offered context, which I will try to do, with the acknowledgment of limited expertise and major caveats.
First, these are development leases, not sales of land, so they come with somewhat less long-term certainty and thus value.
More importantly, these are leases for sites on terra firma, while most other Atlantic Yards/Pacific Park development parcels, to be built over the Vanderbilt Yard, require an expensive deck. That means the lease for those parcels should cost less per square foot.
But it looks like the lease buyers got relatively good deals--even if Greenland USA itself didn't do badly, given the low cost of its purchase of 70% of the project site from Forest City Enterprises.
As I noted, the nearly $199 million received by Greenland, records suggest, was nearly the same as the $200 million Greenland USA's parent Greenland Group paid in 2014 to enter the project and acquire a 70% share of the project going forward, excluding the Barclays Center operating company and B2, the first residential building, aka 461 Dean.
Doing the math
The B15 lease was for $55.83 million, according to ACRIS records. The allowable square footage at B15 is 341,910 square feet, as detailed in the document at bottom.
Updated: However, 10,000 feet was subtracted in 2019 and transferred to B12, leaving a maximum of 331,910 square feet. That works out to $168.21/sf.
In a 7/16/18 sponsored post in the Commercial Observer, Ariel Property Advisors’ Sean R. Kelly wrote, "Pricing for development sites in Downtown Brooklyn has increased to between $300 and $400 per buildable square foot, making it very difficult to build a rental building and hit opportunistic level returns."
The B12/B13 lease was for $143,084,313. The allowable square footage for B12 is 317,185 square feet 327,185 sf and for B13 327,215 sf, for a total of 644,400 654,400 square feet. That works out to $218.65/sf.
Those figures are either lower than, or not much more than within the range expressed by Forest City Enterprises in December 2013 when announcing the deal with Greenland."Based on the 6.4 million square feet of remaining entitlements in both phases," according to the press release, "the total anticipated costs yield an expected average cost per square foot of approximately $180-$220 per square foot, prior to vertical development."
I'm not entirely sure how to parse that, given that it presumably included Forest City's previous land costs, but if that's the range, presumably the seller would get less per square foot for the railyard sites, given the infrastructure burden. That suggests that value of the land on terra firma should exceed the average. But it wasn't, in this case.
In other words, maybe Greenland Forest City didn't get a great return. After all, it wasn't operating from strength: I've written multiple times about the cash crunch and pressures facing Chinese developers.
Did one buyer get a better deal?
Those prices suggest that the developer of B15, The Brodsky Organization, might have gotten a better deal.
It's unclear why--perhaps because the site is somewhat less attractive, given that it's not attached to dedicated open space (as the other two sites are), is across the street from the Barclays Center, and will include a school at its base. Maybe the need to deliver that school, after delays, was also a factor.
(Updated) Keep in mind that TF Cornerstone also got 96,000 square feet of below-ground space to lease to Chelsea Piers as a fitness center and fieldhouse. That adds significant value.
That adds significant value. While commercial space is not as valuable as residential space, the total, 750,400 square feet, then works out to $190.68/sf.
Unlike with B15, though, the builder of B12/B13 had to complete surrounding open space.
Compared to Downtown Brooklyn
Those prices are low compared to current pricing in Downtown Brooklyn, albeit with a couple of asterisks.
In a 7/16/18 sponsored post in the Commercial Observer, Ariel Property Advisors’ Sean R. Kelly wrote, "Pricing for development sites in Downtown Brooklyn has increased to between $300 and $400 per buildable square foot, making it very difficult to build a rental building and hit opportunistic level returns."
However, the Atlantic Yards/Pacific Park buildings will not only be rental buildings, they'll have at least 25% affordable housing. So that lowers potential returns both from market-rate and subsidized units, and thus tamps down the price.
Building heights and square footages, via Empire State Development
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