Atlantic Yards/Pacific Park Report

For Atlantic Yards watchers, there's something quite synergistic about this photo of golfer Phil Mickelson , who "represents KPMG on Tour in the U.S. and across the globe." Here's the consulting company's blurb: Just knowing how won’t get the job done in a complex environment. You also need the passion to excel—to harness what you know against every challenge. Every time. That’s the kind of drive that puts Phil Mickelson atop the leaderboard. And leads KPMG to provide clear, actionable advice to our clients around the world. It’s that simple. Such clear, actionable advice--er, fuzzy math --helped the Empire State Development Corporation tell the public and courts that it was realistic to get the entire Atlantic Yards project, including the market-rate housing, built in a decade. And, of course, Barclays, which now sponsors numerous sporting events, bought naming rights to the Atlantic Yards arena.

A New York Times Real Estate section article yesterday, Boldface Buildings in the Cold Light of Now describes sales at what they call Richard Meier's "1 Grand Army Plaza" but was once marketed as "On Prospect Park" and is marketed now as "Richard Meier on Prospect Park." : Brown Harris has lowered prices on many units, and the glass tower is now nearly 80 percent sold, with an average sale price of about $900 per square foot, respectable for Prospect Heights. “It’s not as successful as originally planned,” Mr. [Stephen] Kliegerman [of Terra Development Marketing] said. “But that might have been overzealous.” (The website, btw, says "over 80% sold.") The KPMG report Why is this all important? Because the KPMG Atlantic Yards Market study done for Empire State Development, some 2.5 years old, claimed that the building was already 75% sold. Actually, as I reported , the figure was somewhere between 25% and 50%. The report, suggestin...

I was looking up some background on the accounting/consulting firm KPMG, notorious for its dubious (and secondhand ) work predicting the Brooklyn housing market on behalf of the Empire State Development Corporation. Was this part of any pattern? Well, the web site Cheating Culture , founded by David Callahan, author of The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead , has posted KPMG: A History of Abetting Fraud : While KPMG has avoided the fate of fellow auditing giant Arthur Anderson, it has primarily done so through quick settlements that prevent its numerous cases of fraud from ever reaching court. Though most of the focus of the financial crisis of 2008 has been placed upon the nation's big financial institutions such as Goldman Sachs, J.P. Morgan and Citibank, more evidence is arising over the role of auditing firms throughout the subprime loan disaster. KPMG was the first "big-four" firm to be hit with a lawsuit, accused in 2009 of "g...

Mark W. Everson's New York Times op-ed today, Lawyers and Accountants Once Put Integrity First , suggests: It will take decades to fully untangle the causes of the 2008 financial crisis, but as our economy fitfully heals, it would be prudent to ask whether lawyers and accountants offer the same protection against corporate misconduct that they once did. Three or four decades ago, investors and regulators could rely on these professionals to provide a check on corporate risk-taking. But over time, attorneys and auditors came to see their practices not as independent firms that strengthen the integrity of capitalism, but as businesses measured chiefly by the earnings of their partners. ...Lawyers and accountants who were once the proud pillars of our financial system have become the happy architects of its circumvention. Nowhere is this more the case than in the world of tax law. Companies (and wealthy individuals) pay handsomely for tax professionals not ...

In October 2009, as I wrote , the Empire State Development Corporation (ESDC) released the Atlantic Yards market study by KPMG, which stated, in the words of an ESDC lawyer, that it was "not unreasonable" for the 14 residential buildings (sans Site 5 and Building 1) to be absorbed in the officially announced decade. The upshot: Forest City Ratner was counting on sales prices of $1217/sf in 2015 up to $1369/sf in 2019. Well, we're four years away, and the luxury housing market isn't getting too close. At One Hanson A 5/17/11 New York Times article headlined A Perch Above Brooklyn, Going Once, Going Twice... described the bidding for penthouse condos in One Hanson Place, the former Williamsburgh Savings Bank building. A two bedroom duplex with 2,120 square feet inside and 1,948 square feet of terraces sold for $1.325 million. That's $625/sf, without counting the terraces. Three 3,243-square-foot four-bedroom, three-and-a-half-bath apartments without terraces w...

You wouldn't expect the Empire State Development Corporation (ESDC) to roll over, and the agency has responded to a request for a stay of Atlantic Yards construction with a flurry of arguments, notably that the arena is already well in progress, and that the 25-year outside date for project construction was long ago disclosed. Supreme Court Justice Marcy Friedman, in her November 9 ruling on the Atlantic Yards timetable in favor of two community coalitions, did not resolve the issue. (The ruling came after an unusual reargument of a case that was decided March 10.) Rather, she remanded the proceedings "to ESDC for findings on the impact of the Development Agreement and of the renegotiated MTA agreement on its continued use of a 10 year build-out for the Project, and on whether a Supplemental Environmental Impact Statement [SEIS] is required or warranted." ESDC says no SEIS is necessary, and that the Development Agreement's not so meaningful. ESDC staffers...

I've written a lot about KPMG's curious market study for the Empire State Development Corporation. Now I've threaded some of those observations and analyses into an op-ed for the Observer online, headlined KPMG's Fuzzy Math on Atlantic Yards , and tweaked to incorporate this week's news: On Tuesday, Atlantic Yards developer Bruce Ratner surprised reporters with his candor, acknowledging that the timetable for the project, despite the officially announced 10-year time span, was "market-dependent." After all, if the arena and all 16 towers take 25 years, as he acknowledged was possible, then the much-ballyhooed benefits (affordable housing, open space, tax revenues) would not arrive as promised. And the Empire State Development Corporation (ESDC), the state's economic development agency, might find itself with some egg on its face. Damningly, the ESDC's then-CEO said in April 2009 that the project would take "decades." However, in an Augus...

Well, maybe real estate agent Delroy Bodley could use a little help with fonts and proofreading (click on graphic to enlarge), but he gets credit for being the first to presume that the arrival of the Atlantic Yards arena will boost downtown real estate values: GET THE OLD BROOKLYN PRICES BEFORE THE NEW DOWNTOWN BROOKLYNS ARRIVES, THIS IS A AMAZING DEAL THAT JUST WILL GET BETTER & INCREASE IN VALUE AFTER THE NEW ARENA OPENS IN 2012. If so, then shouldn't those luxury condos on the Atlantic Yards site go up lickety-split? Well, maybe not. The apartment at issue is about $700 a square foot. Forest City Ratner, according to a KPMG report , is counting on sales prices of $1217/sf in 2015 up to $1369/sf in 2019.

It looks like not one but two judges will have to grapple with a fundamental charge regarding Atlantic Yards: that the project has changed so much since its approval in 2006 that the findings at that time--regarding both the environmental impact of the project and its expected benefits--are no longer valid. That doesn't mean the judges will rule in favor of those challenging the Empire State Development Corporation (ESDC). That, we've learned, is not exactly how courts in New York State work. But it does mean they have to think about it. And tomorrow, in state Supreme Court in Brooklyn, Justice Abraham Gerges--however distracted and uninterested he was during the first part of the case on August 6 --should not think the issues were resolved in similar case he dismissed in March. (The hearing will be at 10 am at Kings County State Supreme Court, IAS Part 74, 320 Jay Street, Room 17.21, Brooklyn. Here's the map .) Does change in pace change benefits? Let's rec...

Funny, the Empire State Development Corporation (ESDC) calls a lie by consultant KPMG about Brooklyn condo sales an "alleged inaccuracy" that is "trivial" as a legal matter. It's just one of several lies in a report KPMG prepared to give the ESDC cover in its dubious judgment that the Atlantic Yards project could be built in a decade. And so far, KPMG gets a pass. Trump gets sued Not everyone sits idly by when bogus sales figures get promoted. By contrast, in an article yesterday headlined Fifteen Buyers File Lawsuit Against Trump SoHo Project , the Times reported: A group of 15 buyers at the Trump SoHo Hotel Condominium New York is suing groups and individuals behind the project, contending that they inflated sales figures in the first year and a half of marketing the project. According to the complaint, which was filed in Federal District Court in Manhattan on Monday, representatives of Trump SoHo said the project was “30, 40, 50, 60 percent or m...

In court June 29, Empire State Development Corporation (ESDC) attorney Philip Karmel said that "probably the most important factor" in the ESDC’s decision to assume a ten-year buildout for Atlantic Yards was not the Development Agreement that provides 25 years without sanction but a KPMG report that backs the timetable. The KPMG report got very little discussion, but it contains lies-- blatant, checkable lies --about condo sales. And, as I discovered when I took another look, it contains more than two pages of shameless borrowing--plagiarism that is not diminished by a vague footnote. Borrowing from Corcoran The entire section on New York City Market Dynamics is cribbed from The Corcoran Report(s) for Manhattan and Brooklyn for the second quarter of 2009. Yes, there's a footnote to the section headline that cites "The Corcoran Report--2nd Quarter 2009" as a source (click to enlarge), but there's no indication that nearly all the text--with the slightest o...

Alex Gibney’s 2005 documentary, Enron: The Smartest Guys in the Room , contains several memorable quotes , but the most apt one, at least for Atlantic Yards watchers, is not listed on the IMDB quotes page. It comes from whistleblower Sherron Watkins , with only about five minutes left to go in the film: “Enron should not be viewed as an aberration, something that can’t happen anywhere else. Because it’s all about the rationalization that you’re not doing anything wrong. We’ve involved [accountants] Arthur Andersen, we’ve involved the lawyers, the bankers know what we’re doing. There’s a sense--the diffusion of responsibility. Everyone was on the bandwagon. And it can happen again.” So the message of the film is a reminder to take seriously Enron’s (ironic, in retrospect) slogan, "Ask Why." And what about AY? Atlantic Yards isn't Enron--right?--but who's responsible for taking responsibility and telling the truth? Government agencies and courts have punted on numerous...

KPMG's Atlantic Yards market study , conducted on request of the Empire State Development Corporation (ESDC) and dated August 31, is supposed to back up the assertion that Atlantic Yards might be completed in the announced ten years, rather than, as then-ESDC CEO Marisa Lago said in April, "decades." But it doesn't. I've written before about KPMG's lies about sales figures at Richard Meier's On Prospect Park and the Oro condos . (The Empire State Development Corporation calls the latter lie "trivial" as a legal matter.) Now let's take a look at the figures regarding the Toren condos. KPMG reported (see graphic above) that it had been 98% pre-leased/sold. However, the New York Times reports today, in a "Square Feet" interview with developer Donald A. Capoccia, that the 240-unit building is 55% sold: We launched this project in May 2008 and probably sold about a third of the building up to September. Then we had a hiatus. ...

New information gives even more reason to question the KPMG report for the Empire State Development Corporation (ESDC) on the housing market in Brooklyn, a report that asserted that there was sufficient demand for the planned Atlantic Yards luxury condos for the entire project to be completed in the announced decade. So far, judges have deferred to the ESDC's "experts," but the expert is not very reliable. Remember, KPMG last August 31 claimed that Richard Meier's On Prospect Park was 75% sold; however, the New York Times quoted the developers as saying half the units have been sold and that StreetEasy.com documented only 25% the units as sales. Now, the developer counts 54 units sold, with--after the consolidation of some units to make larger apartments--42 yet unsold, according to a New York Times Real Estate section article headlined Larger Units for a Richard Meier Condo . That's still way under 75%. (StreetEasy counts 38 recorded sales.) Prices goin...