Friday, October 31, 2014

Atlantic Yards, Pacific Park, and the Culture of Cheating (links)

I offer a framework to analyze and evaluate Atlantic Yards (in August 2014 rebranded as Pacific Park) and the Barclays Center: Atlantic Yards, Pacific Park, and the Culture of Cheating.

Note: this post is post-dated to remain at the top of the page. Please send tips to the email address above, rather than posting a comment here.





A model shown to potential immigrant investors in China in 2014,
though not shown publicly in Brooklyn.

From a deceptive 2006 Forest City Ratner brochure,
suggesting 6 acres of railyard would become a 22-acre project.



Saturday, October 25, 2014

Firm finally hired by Greenland Forest City as On-Site Environmental Monitor, will start six weeks late

Yesterday, Greenland Forest City Partners announced it has finally retained an outside engineering firm, Remedial Engineering, to serve as On-site Environmental Monitor (OEM), starting the first week of November, or six weeks after it was due.

The OEM, which will report to the developer, is supposed to monitor of construction activities to ensure that environmental requirements contained in the Memorandum of Environmental Commitments (MEC) for Atlantic Yards/Pacific Park Brooklyn are met.

Note that a 2012 report by an outside consultant concluded that the OEM was understaffed.  Empire State Development (ESD), the state agency overseeing/shepherding Atlantic Yards, in June disclosed that Forest City Ratner has agreed to hire an outside firm--rather than use an employee--to serve as OEM.

That's definitely progress, though the OEM does not report to the public. And we know that construction violations--heck, falsifications--can be covered up.

Remedial hired

According to the notice:
After a Request for Proposals was put out for the position, Remedial Engineering, whose core business is environmental engineering and compliance management, responded and was chosen as the OEM for the project. The firm has a proven track record of providing OEM-related services at high profile projects that require multiple agency coordination and interaction with surrounding communities.
Remedial Engineering, which was created in 1990 to provide engineering services to Roux Associates, shares office space and personnel with Roux but is a separate corporation with separate ownership. While you may know that Roux has been involved in this project from the beginning, as FCRC's owners representative, and specializes in the development of environmental plans to address contamination issues on development sites, Roux does not provide construction monitoring services.
Remedial's initial staffing at the site will include the OEM who will be assisted by two Mitigation Engineers. This number will grow as necessary to accommodate increases in construction activity.
It is anticipated that the OEM will be on-site beginning the first week of November. Until that time, the project will continue to be monitored as it has been since its inception.
Remedial and Roux are located in Islandia, NY. Roux has a web site; Remedial does not. As noted in the notice, Roux has long worked on the project.

September 15 goal

As I wrote 9/30/14, Forest City was required by the Second Amended Memorandum of Environmental Commitments for Atlantic Yards to "use commercially reasonable efforts to retain the engineering firm to serve as the OEM on or before September 15, 2014."

At the 9/4/14 Quality of Life meeting, Forest City acknowledged that timetable would not be met, but executive Ashley Cotton said that the delay would be "very short."

At the end of September, ESD told me the firm would be retained by mid-October. I'm not sure an Oct. 24 announcement precisely counts as mid-October.

ESD also that the "current OEM staffing is appropriate for the level of activity currently on the site and the new OEM will be in place in time for the anticipated increased activities."

As I wrote, Dean Street resident Peter Krashes, who at the earlier meeting had asked about the timetable, suggested the OEM be made available to the community for questions on a regular basis.

"At the end of the day, what the community impacted by construction deserves is transparency in real-time, meaningful recourse like penalties when things go wrong, and oversight during work that is impartial and motivated," he stated.

Crain's: as Nets increase All Access prices, ticket holders get resale insurance, free beer/wine for half-hour before game

Crain's New York Business reports, Nets to cover losses for ticket holders: The team, in a first, will offer All Access ticket holders 'loyalty insurance' to cover losses on tickets resold through Ticketmaster.

That means the 4,400 holders of premium tickets are getting some benefits, even as they pay more renewals in the team's third year:
The prices will range from $135 per seat up to $1,450, and will be on average 14% higher than they were when fans were first offered the deluxe, three-season package before the arena opened. But as the Barclays Center looks to boost profits, and as sports arenas in general face competition from bigger and better HD TV sets, the team is sweetening the package: This time the All Access tickets will come with "loyalty insurance."
Starting with the 2015-2016 season, the Nets will cover up to 15% of the total season-ticket purchase price for those tickets that the holder resells. A fan who spends $5,940 for the $135-per-seat package of 44 home games will be covered for losses on resold tickets up to $891 at the end of the season.
The only caveat is that the tickets must be resold via an authorized Ticketmaster site—not on StubHub, for instance.
So maybe the insurance can be seen as a sweetener for those increased prices.

Free beer and wine

Another sweetener:
In addition, All Access ticket holders will be entitled to free beer and wine for the half-hour before the game begins. That's on top of the all-the-concession-food-you-can-eat feature that has been included in the All Access ticket price from the beginning.
The Nets also recently gave All Access ticket holders a dedicated entrance on Atlantic Avenue.
OK, a half-hour isn't a long time, but that should get everyone a bit more boozed up.

Friday, October 24, 2014

"Accountability and Atlantic Yards": first public meeting next Thursday on settlement that led to new housing deadline, monitoring body

Also note Quality of Life meeting on November 12.

The settlement reached in June by representatives and allies of the BrooklynSpeaks coalition set a 2025 date for construction of the affordable housing (with firm penalties), and set up a new Atlantic Yards Community Development Corporation (CDC) in exchange for promises not to sue over discriminatory impacts of delay (and thus jeopardize Forest City Ratner's pending deal with the Greenland Group).

That represented progress--the housing was originally promised in ten years, but then given a 2035 outside date after renegotiation, and affordability becomes even more elusive with time. But it came with some question marks.

Some of the project's closest neighbors, represented by the Dean Street Block Association, warned that the "oversight created is just advisory and insufficiently defined," and that the settlement, negotiated behind closed doors, ran the risk of prioritizing "one category of interest over another."

Indeed, there's a potential tension between meeting deadlines and cutting corners on construction, as the Barclays Center buildout showed. And, as soon became clear, there was significant wiggle room on the affordability issue.

First full public discussion

The first full public discussion of the settlement will be held next Thursday, Oct. 30, at 8 pm at the Soapbox Gallery at 636 Dean Street, across the street from the southeast block of the project, where construction on two towers will begin in December.

The meeting is sponsored by the Prospect Heights Neighborhood Development Council, whose most prominent member, Gib Veconi, was one of the two community signatories of the settlement in June.

Thus the "Accountability and Atlantic Yards" title might also apply to the negotiations themselves.

"Learn more about the settlement reached between the Empire State Development Corporation, Forest City Ratner Companies, and community advocates," the notice (above) states, citing:
  • Shorter construction duration
  • New affordable housing commitments
  • Public oversight with local representation
Potential complications

Those issues all involve potential complications. The shorter construction timetable, while in some ways superior to an elongated buildout, could lead to cutting corners, especially since Greenland Forest City Partners has put aside plans to use modular construction--supposed to reduce the amount of workers and trucks--on the next buildings.

Even now, as noted in incident reports on Atlantic Yards Watch, there are regular violations of protocols by trucks serving the arena.

The new housing commitments contain significant wiggle room regarding the contours of affordability. In the next year, two 100% affordable rental towers will start--which also implies subsequent 100% market-rate rental buildings, rather than all 50/50 buildings, as promised--but the configuration of affordability does not match that long promised.

Instead, half the subsidized units in those towers would go to households earning 165% of area median income, or about $140,000 for a family of four (and commensurately less for smaller households). That means a two-bedroom unit would push $3,000--below market but hardly "affordable" to many who put their hopes in the project.

BrooklynSpeaks has said continued advocacy is necessary regarding the housing, which is surely true. But the change in affordability was obscured when the settlement was announced.

Also, the contours of public oversight have not fully emerged. The governor and ESDC said the CDC would "provide input on development, housing, and community impact throughout the completion of the project." BrooklynSpeaks said the CDC was "charged with overseeing compliance with all project commitments."

The official letter from the state indicated that the CDC would be "monitoring the delivery of public commitments by making policy recommendations to the ESD Board of Directors."

To "monitor" may mean to "oversee," but oversight in other contexts--as BrooklynSpeaks had long advocated--meant the project would be governed by a new dedicated board.

The distinction between what was advocated and what may result remains under debate--in both cases, the governor holds the cards--so I'll write more about it.

Empire State Development Atlantic Yards Letter by AYReport

Next Quality of Life meeting set for November 12; two towers set to begin in December

Also note October 30 meeting on the recent settlement regarding Atlantic Yards.

550 Vanderbilt, kinda skewed
A message from Empire State Development:
Dear Community,
Forest City Ratner Companies, along with Empire State Development Corporation will host the next Quality of Life meeting on
Wednesday, November 12, 2014
@ 6:00 PM
Brooklyn Borough Hall, Community Room
209 Joralemon Street, Brooklyn NY 11201

We will present an overview of the upcoming construction activities surrounding the project. Please plan to arrive promptly in order to provide time for presentations and questions and answers from the community members. If you have any questions please contact Nicole Jordan at atlanticyards@esd.ny.gov. Thank you for your continued commitment to the overall success of this project.
Presumably the discussion will regard the two towers Greenland Forest City Partners plans to start in December, at the corner of Dean Street and Carlton Avenue (535 Carlton) and the corner of Dean Street and Vanderbilt Avenue (550 Vanderbilt).

The discussion likely also will cover plans for the green roof on the Barclays Center as well as the stalled B2 modular tower. It's unclear if, as in September, a presentation will be circulated before the meeting.

As I wrote in August, what was once a Quality of Life Committee, nominally involving community members as equal players, has become a meeting hosted by the developer.

It's not clear how the Quality of Life meetings will be incorporated in the new plans for an Atlantic Yards Community Development Corporation, set to launch in December, to monitor project commitments.

Thursday, October 23, 2014

On Saturday, piece of Sixth Avenue will close for a few hours so a crane for green roof can be installed on Atlantic

After closing Dean Street and Sixth Avenue around the Barclays Center two weekends ago to allow for the erection of a giant crane to assist in the installation of a green roof around the arena, a less intrusive closure is planned for Saturday, October 25, for a few hours between 6 am and 11 pm.

This time, a crane for the green roof will be installed on the Atlantic Avenue side of the arena, which requires the temporary closure of Sixth Avenue, between Atlantic Avenue and Pacific Street. (It was actually supposed to be installed in August.)
The closure is expected to be in effect for a few hours during the afternoon and/or evening. There will be a detour of vehicle, pedestrian, and bicycle traffic from the block, while flagmen and Traffic Enforcement Agents, as well as Variable Message Signs, will be used for assistance.


Greenland Forest City now promoting condos to buyers in China; 2005 video shows executive claiming Forest City had no preference for condos

Two Forest City executives join two Greenland execs;
(not sure about man at left) source: Fang.com
Updated and clarified. Note Forest City says there's no sales effort.

"Projects change, markets change," Forest City Ratner executive Jim Stuckey, then the developer's point man on Atlantic Yards, told the New York Times in November 2005, after the newspaper belatedly examined the developer's plan to trade office space for more lucrative condominiums.

That was a notable evasion, especially since Stuckey claimed that the switch to condos was driven by community partners desirous of more housing.

And it was a notable understatement, given the gyrations before and since regarding Atlantic Yards (including the name change to Pacific Park), not to mention Stuckey's own sudden departure in 2007.

Forest City this year sold 70% of the remaining project to the Chinese government-owned Greenland Group. Now the new joint venture, Greenland Forest City Partners, has apparently begun the process for the first sales effort for Atlantic Yards/Pacific Park condos, in Shanghai.

Update: Forest City says no sales effort

Forest City spokesman Joe DePlasco says: "'They have not established a sales center for the condos in China. And they will not at this time. Units aren’t even on sale yet." He adds: "They were talking about the joint venture, the project, Brooklyn, etc."

I know machine translation is inexact, but see below, from a local promotional/news account. which points to a sales effort. DePlasco responds, "Regardless of what the article says – or the translation of that section says – a sales office has not been opened in China and they are not actively selling units."
From machine translation of this promotional/news article.
Maybe some of this is semantic. I wouldn't expect them to be actively selling units before construction.

Greenland and Forest City executives at October 11 launch
event in Shanghai. Click to enlarge. Source: Fang.com
But it still looks to me that they have begun the process, and done so before office has been established in Brooklyn to rent the subsidized and market-rate apartments in other planned towers.

If so, the first people with a claim on apartments in a project with enormous public assistance from New York and U.S. taxpayers--direct subsidies, tax breaks, eminent domain, below-cost land, and an override of zoning--may be Chinese nationals. 

Promotional event (and seeming sales effort)

On 10/9/14, New York YIMBY reported:
Greenland Forest City Partners – the joint venture recently forged between the Chinese developer that bought into the project and the Brooklyn-based firm founded by Bruce Ratner that started it – will host an introductory event for Pacific Park and 550 Vanderbilt in Shanghai this week...
They weren't introducing the affordable building, 535 Carlton, but rather the condo building.

Indeed, according to the machine translation of a Chinese promotional/news report, Saturday 10/11/14, marked the "worldwide release" of Pacific Park, with a "lavish feast," "inspiring passion passionate jazz performances," and the establishment of a sales center. (See screenshot above.)

Those present included of Greenland Chairman Zhang Yuliang and VP Xu Jing, Greenland USA's I-Fei Chang, along with Forest City Ratner's Chris Clayton and Melissa Burch. Attendees could win prizes, including tickets to a Brooklyn Nets game in Shanghai, another sign of synergy. (A separate effort to raise cheap financing via the EB-5 program is also under way in China.)

"It is promoting effects and its extraordinary influence on the regional economy, the project won three consecutive New York governor's approval, and New York City, Brooklyn government support," according to the article.

Stuckey famously defended the scale of Atlantic Yards to radio host Brian Lehrer in July 2006 by claiming the project required $1 billion--a figure I'm certain is inaccurate-- in "public infrastructure" and land purchases "before the first shovel goes into the ground to build a single affordable housing apartment or the arena."

“I think that’s a very significant investment,” Stuckey declared confidently. “That does deserve to make a profit. It is, after all, America.”

Or, apparently, China.

Stuckey's explanation

Stuckey's explanation to the Times was not the first time he addressed the switch evasively, though it was the first time Forest City's explanation got wide notice.

At the 5/26/05 City Council committee hearing on Atlantic Yards, the second and last in two years, Stuckey presented two versions of Atlantic Yards: one had the original 1.9 million square feet of office space and 6,000 apartments (1,500 more than announced in 2003); the other had 428,8000 square feet of office space, less than one-quarter the amount, and 7,300 apartments.

"When you do environmental impact studies, you are asked to look at alternatives,” Stuckey said smoothly, “and in fact we are looking at another alternative, which in fact may have additional residential space, as shown on this drawing here, which could have as many as 7,300 residential units in this area, and a slight reduction in the office space.”

A slight reduction? The addition of condos--later strategically reduced to 1,930--upended the 50/50 housing agreement just announced. Moreover, Stuckey's slide presentation indicated a drop from 1.9 million square feet to 428,800 square feet, hardly "slight."

(Forest City had increased the size of the project since the announcement.)

As shown in the video below, never before seen, Stuckey held an impromptu press conference after the hearing. Which alternative did he prefer, asked reporter Matthew Schuerman, then of the New York Observer, the version with the more office space or less?


Video courtesy of Battle for Brooklyn producers

“I don’t really think that we have a preference,” Stuckey replied neutrally, showing the wiles of a Vegas poker player.

“I think that the reason why we’re showing both of those proposals, because we understand there’s a very strong need for both jobs and housing," he continued. "And as a result of all of the meetings that we’ve had with the community, with elected officials, with community groups, with community boards, people who live in the area, what we’ve been hearing... is there is such a dramatic need for housing right now, so we have modified the plan to basically include more housing. But I don’t think that we as a developer necessarily have a preference.”

Schuerman followed up: "Mr Stuckey, is it possible though, that, given the high price of housing now, that residential actually would be more profitable than office space?

“Again, I don’t again think it’s a matter of profit,” responded Stuckey, who quickly changed the subject. “I think that Forest City has done very well as a business by building office space in Brooklyn.”

Actually, as I've written, Forest City knew when the project was launched that the office market was dubious. In a 12/12/03 interview on WNYC’s Brian Lehrer Show, Ratner said that "we need office space, when the market comes back, for companies not to leave the city.”

In 2003, just before Atlantic Yards was announced, the city, as it pursued the rezoning of nearby Downtown Brooklyn, estimated that only 70% of potential office development would be accommodated in a decade.

In November 2009, asked by the not-unsympathetic Crain's New York Business about plans for the flagship Miss Brooklyn, Ratner snapped: “Can you tell me when we are going to need a new office tower?”

In the Times

On Sunday, 11/6/05, Times reporter Nicholas Confessore produced an in-depth but naively contortionist account, dominating the Metro section front. The headline was "Fewer Jobs and More Condos, Ratner's Opponents Complain," with the subtitle Routine Changes, or 'Bait and Switch'?

(The Times shouldn’t have had to rely on “opponents” to point out that project changes--which the newspaper had failed to track at the May Council hearing--had eliminated many of the promised jobs and jettisoned the 50/50 housing promise. Bizarrely, Stuckey professed that Forest City was practicing “tremendous transparency” and claimed that criticism of the developer was “Orwellian, almost.")

The article stated:
Officials of Forest City Ratner said they eventually realized that they would have to reduce the amount of commercial space, to accommodate condominium units that would help pay for the project, including the below-market rental housing.
...The agreement signed last May between Mr. Ratner and Ms. Lewis applied only to the 4,500 rental units envisioned in the original plan. But it included a provision that if the developer added more residential units, the firm would develop 600 to 1,000 moderately priced for-sale units on or near the project site, in effect offering something close to a 50-50 ratio for all the housing associated with the project.
At the time, officials of Forest City Ratner said they were already contemplating adding 1,500 condominium units, in part because community leaders had pushed Mr. Ratner to include more housing in the project. That would have given the project 6,000 units of housing. But during a City Council presentation in May, Mr. Stuckey said the developer was contemplating adding an extra 1,300 for-sale units, bringing the total to 7,300 units.
That does not compute. 

They weren't adding condos because community leaders asked for them. They added condos--as they had planned from the start--because it fit their bottom line.

Also, they didn't promise 600 to 1,000 moderately priced for-sale units, they agreed to "work toward" such a program. We haven't heard anything yet about that program, though Forest City in December 2006 said it would "seek to build" 200 of those condos on-site.

Wednesday, October 22, 2014

U.S. State Department protests use of official in marketing "Atlantic Yards III" EB-5 investment to Chinese, gets mention cut from promotion

Also see coverage of the misleading video used in Atlantic Yards III promotion.

From the Qiao Wai web site, last week
The promoters of the "Atlantic Yards III" investment, aimed at immigrant investors seeking green cards in exchange for cheap loans, have provoked a slap on the wrist from the U.S. State Department, which asked them to stop claiming that a top State Department official supported the project.

Now mention of Assistant Secretary of State Charles Rivkin has been removed from a Chinese migration consultancy's website promoting the investment, which still lists six upcoming seminars aimed to recruit investors.

Last week, in an article, on Twitter, and in queries to the State Department, I asked whether it was appropriate for Rivkin to be portrayed as supporting "Atlantic Yards III."

It is a $100 million slice of the overall Atlantic Yards/Pacific Park project, marketed under the EB-5 program, in which investors and their families get green cards by parking $500,000 in a low-interest loan for five years or so, as long as an economist's report suggests those funds create ten jobs. (The job-creation requirements are fuzzy, actually.)

Rivkin, as shown in the screenshot above right, got the most prominent placement in the promotion. It was, to my knowledge, the first time an active State Department official was portrayed as boosting an EB-5 program.

Now he's gone from the Qiao Wai web site, as shown in the screenshot at right, and Brooklyn Nets forward Mirza Teletovic, who has nothing to do with the EB-5 program but (duh) likes the Barclays Center, got a promotion on the page. Though the Barclays Center serves as the centerpiece of the promotion to immigrant investors, the arena has already been built and thus can't be the subject of the "Atlantic Yards III" investment.

From the Qiao Wai web site, this week
The fig leaf of official support 

Another misdirection involves the other three officials portrayed as supporting the project: former New York Gov. David Paterson, former New York Mayor Mike Bloomberg, and former Brooklyn Borough President Marty Markowitz.

They're all out of office. And they praised the overall Atlantic Yards project, not this specific slice nor the previous two slices packaged for EB-5 investors, all of which come with their own separate business risks.

But the endorsement and presence of elected officials enhance a project in the eyes of potential investors from China and business ethics--in EB-5, in China--are often not a priority.

So the EB-5 promoters blur the difference. The promotion is the work of the Qiao Wai migration consultancy in China, which works with the U.S. Immigration Fund, a Florida-based regional center, a federally-approved entity to package the investments.

And the U.S. Immigration Fund works with Greenland Forest City Partners, the joint venture building Atlantic Yards/Pacific Park, which is owned 70% by the Greenland Group, a Shanghai government-owned enterprise.

As I wrote: as with the second round of Atlantic Yards fundraising, a foreign government is profiting by marketing a scarce U.S. public resource--green card slots under the EB-5 program--to its own citizens. And that, as far as I know, is unprecedented.

Rivkin's claimed role

In the screenshot at top, Rivkin was quoted as offering vague support for the overall project:
"Held and invested in by Greenland Group, the New York Atlantic Yards project has promoted local economic development, improved local employment, enhanced local urban functions, and made remarkable contributions to local development."
It's unclear whether he said those relatively bland words, and if so in what context. (He did hold a meeting with Greenland and did speak at a conference concerning EB-5.) But even if he did, that wasn't an endorsement of the EB-5 investment.

"Assistant Secretary Charles Rivkin has not endorsed or advised on any specific visa application or process," Kerry Humphrey, Media Advisor, Economic and Business Affairs Bureau, Department of State, told me, in response to my query.

"Assistant Secretary Rivkin is a public figure and sometimes his photograph is used without permission," she added. "His picture on this website does not constitute endorsement. We have asked for it to be removed."

Humphrey explained that State Department officials in Guangzhou contacted both Qiao Wai, which works with the U.S. Immigration Fund, as well as the Association to Invest in the USA (IIIUSA), the trade association of regional centers, to remove mention of Rivkin.

Thus the IIUSA, at the State Department's request, removed Rivkin from its website, apparently this 6/26/14 post:
For those who have been waiting to join IIUSA’s trade mission to Xiamen, China – we have some excited new information to share. As part of IIUSA’s commitment to bringing exciting and cutting-edge programming to our conferences, we are proud to announce that Charles H. Rivkin, the Assistant Secretary of State for Economic and Business Affairs, will be a special guest to the U.S. delegation to CIFIT. Previously, Mr. Rivkin served as United States Ambassador to France and Monaco. 
The headline has since been changed from IIUSA Trade Mission to CIFIT: Special Guest Charles H. Rivkin to Speak to U.S. Delegation to IIUSA Trade Mission to CIFIT Fast Approaching!

More questions

In response to my questions, Humphrey stated, "President Barack Obama has made it clear that the United States is 'open for business' and the United States warmly welcomes foreign investors to operate in our transparent, stable and open market."

That sounds like an overall endorsement of the EB-5 program and others drawing foreign investment. (Then again, note some new skepticism from the Migration Policy Institute.)

"We value the feedback we receive from overseas investors and others looking to do business in the United States," she added. And, apparently, they listen to feedback from those who see how such business can be hyped.

In video for "Atlantic Yards III," the arena (soon to be sold) still gets prominence, while (stalled) B2 building portrayed as progress

Also see coverage of the use of a State Department official in Atlantic Yards III promotion.

So, what's the difference between Atlantic Yards II, the second effort to raise funds from immigrant investors under the EB-5 program (visas for low-interest loans that purportedly create jobs) and Atlantic Yards III, the third effort?

Well, Atlantic Yards II aimed to raise $249 million from 498 investors, mostly from China, while Atlantic Yards III, which is ongoing, aims at $100 million from 200 investors. But the projects are essentially similar.

Both promotions heavily on the Barclays Center, though the money (presumably) will go to construction of residential towers and/or infrastructure, and maybe even to pay off the first round of Atlantic Yards EB05 financing. And, as shown below, the upbeat videos promoting each project are very similar.

The projects are marketed by the U.S. Immigration Fund, a federally authorized "regional center" set up to package and promote such projects, along with the Qiao Wai migration consultancy in China, with the cooperation of Greenland Forest City Partners, the joint venture building the project.

The leader of the U.S. Immigration Fund, Nicholas Mastroianni II, Fortune recently reported, "has a long history of legal problems, failed ventures, and unpaid debts—which have continued even as his professional fortunes have turned sharply upward—leaving a legacy of conflicts, judgments, and entanglements." Perhaps he's found the lightly regulated EB-5 world more to his liking.

The Atlantic Yards III video

The video below uses the same interviews with Forest City Chairman Bruce Ratner and CEO MaryAnne Gilmartin that appear in the Atlantic Yards II video (bottom), with a focus on the Barclays Center, but with some new visuals.

Despite the official name change from Atlantic Yards to Pacific Park Brooklyn, they don't want to confuse the potential investors from China--where Atlantic Yards must be somewhat of a brand--so they're still calling it Atlantic Yards.

There are two new ironies. The video includes several dramatic shots (see above right) of the B2 modular tower, seemingly rising boldly in the sky. But B2 is stalled, and the subject of a bitter legal dispute.

That adds some irony to Ratner's claim about Forest City, in the video, "One of the most important thing about our company, if you were to ask people in New York is: they get it done. We finish things... We understand that it's very important for all the people in EB-5 that we do what we say we'll do."

Also, not only can the investors not put their money into the Barclays Center, Forest City soon may not own it. Its share of the arena is now up for sale, and may even be transferred early in the process by which the immigrant investors come to the United States.




Some new visuals

The new video contains some new visuals showing Forest City's partnership with Greenland and with EB-5 promoters. Some screenshots below. Note the Chinese subtitles, which (I presume) translate the statements by Ratner and Gilmartin.

The Greenland Forest City Partners logo. In Brooklyn?


Greenland and Forest City, working together

Ratner greets (I believe) Ding Ying of Qiao Wai and Nicholas Mastroianni III of the U.S. Immigration Fund
The Atlantic Yards II video

Tuesday, October 21, 2014

Current management seen as continuing at Barclays Center (operating company), though not clear how long; why is Ratner selling for seeming low price?

Forest City Enterprises and Bruce Ratner are selling their 55% share of the Barclays Center--actually, the arena operating company--and only a few details have emerged since Sports Business Journal broke the news yesterday.

Sports Business Journal noted that investment bank Evercore, which is packaging the arena deal, declined to comment, and "Forest City referred questions to Nets and arena spokesman Barry Baum, who declined to comment."

Yesterday, however, there was a statement, as ESPN reported:
"Our goal is to identify a strategic partner as we continue to capitalize on the great performance of Barclays Center and the promise of Nassau Coliseum," Barclays Center spokesman Barry Baum said in a statement. "The current management team [Ratner and Barclays Center CEO Brett Yormark] will continue in its existing role."
That doesn't mean much. The current management team could continue as long as those owning the arena operating company decide to keep it. And the mention of the Nassau Coliseum suggests that the expected buyer/strategic partner might also get a piece of the Long Island arena.

Capital New York added this detail:
Exactly what sort of ownership structure will be created for the Barclays Center remains to be seen, but any deal will keep the Nets in place as the controlling owners. The team has a 45 percent stake in the arena.
I'm not sure of that syntax, because the Nets are not currently "in place as the controlling owners." Prokhorov, who owns 80% of the team, is a minority owner of the arena holding company. That might simply be an awkward interpretation of the statement that the current management would remain.

The Daily News reported:
Still, insider sources said that the best way to drive the value for Barclays Center is to keep the key players in place, meaning Ratner and CEO Brett Yormark could maintain their roles as day-to-day operators of the arena.
I'd bet those "insider sources" were current management.

A tenant/occupant owner, or not?

The new Islanders ownership has been mentioned as a potential buyer, as well. Sports Business Journal observed:
Indeed, if one of those two teams’ owners does not buy the arena — the Nets’ controlling owners hold the other 45 percent stake of the building — the structure would join a select list of venues in sports: an arena hosting two professional sports teams, but all three entities having separate ownership.
That runs counter to the traditional model of a team wanting to control the arena it plays in, enabling that franchise to benefit from having non-sports revenue at the facility as well.
If and when Prokhorov takes a majority, that means that almost all of the Atlantic Yards project--the arena plus 15 planned towers--will be under the control of foreign owners.

Ownership of the Barclays Center and the Brooklyn Nets
I'd bet that the one remaining building, the stalled B2 modular tower, will eventually be owned by Greenland Forest City Partners, the joint venture 70% owned by the Shanghai government-owned Greenland Group.

Public ownership

Note that neither Porkhorov nor Ratner actually own the arena, which is technically publicly owned and leased for a dollar.

The arena is nominally owned by the Brooklyn Arena Local Development Corporation, a creation of the Job Development Authority, which is an alter ego of the Empire State Development Corporation. That enables a complicated process for the developer to save money via the issuance of tax-exempt arena bonds.

The arena is then leased (I believe) to Brooklyn Arena, LLC, which is currently owned 55% by a Forest City affiliate and 45% by a Prokhorov affiliate. (See graphic at right from the 2010 Official Statement for the arena bonds, and click to enlarge.)

The new owners will still have to pay PILOTS (payments in lieu of taxes) to pay off the $511 million in tax-exempt bonds.

Sale at a loss?

The Daily News picked up (without credit) my observation that the $750 million assumed valuation, based on revenue flow, appears to be a loss, based on $930 million or $845 million in project costs (which add infrastructure). Ratner's share would be some $400 million.

The Wall Street Journal reported:
The move stands as a test for the value of the arena. In its first full year of operations, the building generated just shy of $30 million of operating income, less than its debt expenses, Forest City reported, leading to a loss for the year.
Since then, the performance has improved—it reported $21 million in operating income in the first six months of this year.
But at a pace that is still well below initial projections, which envisioned more than $70 million in annual operating income.
Even so, that doesn't mean Ratner should be selling at a loss, especially since the Barclays Center appears poised to reap more consistent revenues when the Islanders move in September 2015.

Could the concert business be that variable? Were some of the big-name concerts achieved by giving the artists particularly sweet deals?

Or is there more to the price and the contours of the deal than meet the eye?

One thing to note is that Forest City will still remain in the arena business, with the project to revamp the Nassau Coliseum. One of the selling points for that detail was potential synergy with the Barclays Center.

A wild-card explanation

Here's a wild-card thought as to why they might be selling the arena: maybe Forest City recognizes that, even with the coming green roof on the arena, it won't muffle sound enough before it hits the adjacent apartment buildings that they are building (two of them with Greenland). And they don't want to be responsible.

Ratner's selling the Nets

Ratner has been unable to sell his 20% share of the Nets, though the paper valuation of the team has rocketed, to a potential $1 billion or more. There's apparently a gap between the paper value and the lack of annual profits.

 Sports Business Journal reported:
The problem, market insiders said, are the steep financial losses at the Nets, which incurred a U.S. sports record loss of $144 million last season, according to published reports. The team has committed to stop the red ink after this season, but with an owner, Prokhorov, seen as willing to tolerate losses to sign top players, finding a willing partner subject to capital calls is not easy.
...Forest City paid Prokhorov a fee to avoid capital calls through July 2015, according to Forest City’s annual report, so the purchaser of the stake would apparently enjoy one capital-call-free season — the coming, 2014-15 season.
Murkiness about Prokhorov

Prokhorov's future is up in the air, too, as the Daily News reported:
Meanwhile in Russia, a leader of a political party said Monday that Mikhail Prokhorov could again dive into Russian politics “at any moment” ahead of the 2016 elections. As part of Russian law enacted under the rule of President Vladimir Putin, the 49-year-old Prokhorov would either have to divest his majority shares of the Nets or place the basketball team under control of one of his Russian companies if he again wants to run for office.
ESPN reported that at least one interested party said Prokhorov would be willing to give up majority ownership for the right price.

Monday, October 20, 2014

Breaking: Ratner's selling share of Barclays Center (at a loss?)

See update that explains that current management should remain, at least in the near term.

NetsDaily, drawing on Sports Business Journal's paywalled report, tells us Bruce Ratner selling majority share in Barclays Center. And while the publication did not report the projected sales price, it suggested that the arena's worth $750 million based on revenue flow, with Ratner's 55% share (part of a consortium with about 100 other investors) valued at a little more than $400 million.

That's an interesting number, because the arena, the transit connection, and site work cost $934 million, Forest City has said. Another accounting put project costs at $845 million.

I don't doubt the calculations regarding the sale are complicated, but that $750 million figure on its face looks like a loss.

In the first year, arena revenues were well below the expected figure, though they improved in the second year. The advent of the Islanders in 2015 should deliver a steadier revenue flow, even if concerts diminish.

So it's curious that the arena's for sale; perhaps Forest City recognizes that the upside from the Islanders is most available now, or perhaps Cleveland has decreed it. But Ratner has called the arena "fortress real estate," meaning it's something that can't be easily duplicated.

SBJ writer Daniel Kaplan suggested that potential owners could be Nets owner Mikhail Prokhorov, who owns a 45% share of the arena, or the new owners of the Islanders, former Capitals owner Jonathan Ledecky and London-based investor Scott Malkin.

If Prokhorov controls the arena, that would mean that foreign owners control all of Atlantic Yards. (Update: Yes, as the commenter points out, except for B2. But I wouldn't be surprise to see the Greenland Group take a share.)

Photo & GIF show 550 Vanderbilt rendering skewed to diminish size; model released in China (but not U.S.) suggests full Atlantic Yards bulk

What's wrong with the rendering at right of 550 Vanderbilt, the planned condo tower at the northwest corner of Vanderbilt Avenue and Dean Street?

It's not just that, as I wrote, the rendering offers a selective perspective, which minimizes the scale transition between low-rise buildings on Vanderbilt and this 202-foot tall, 17-story, 275-unit tower.

It's that the perspective itself is a lie. It makes the three-story, mixed-use red brick building across the street look shorter and wider than the reality. That allows the tilted tower to fit in the rendering.

Let's try a GIF to compare a photo of that three-story building at 552 Vanderbilt, which has the restaurant Chuko Ramen on the ground floor, with a similarly cropped piece of the rendering.
Vanderbilt & Dean on Make A Gif
It's odd, isn't it. The top left corner of the photo and rendering pretty much start with the same sliver of the adjacent building, then extend to the cornice of 552 Vanderbilt. And the bottom right border is the southwest corner of Vanderbilt and Dean.

In the rendering, however, the three-story building at 552 Vanderbilt is stretched and tilted. The far side of the building points down, and both the windows and the brick between them seem widened.

The result? Minimizing the scale of 550 Vanderbilt, which is actually one of the smallest buildings planned for Atlantic Yards.

In China, a huge project

Ironically enough, in China, potential immigrant investors  in "Atlantic Yards II"--the second round of immigrant investor funding, now on its third round--were in January 2014 shown the model below, which emphasizes the full scale of the project and may exaggerate at least some of the towers.

(They were shown the model at an event sponsored by the Qiao Wai migration consultancy, which works with the U.S. Immigration Fund, the "regional center" packaging the low-interest loan under the EB-5 program. The U.S. Immigration fund was working with Forest City Ratner and, presumably, the Greenland Group, its pending partner. Surely the model was produced in cooperation with Forest City.)

This model has not been shown publicly in the United States. In China, the audience is different: the immigrant investors wouldn't care about community impact but rather would be impressed by the project's grandeur. And Greenland, now the 70% owner of Atlantic Yards (minus one tower and the arena), loves to build big.

Consider that the southern wall of 550 Vanderbilt, at the southeast corner of the site, is ten stories, while the current plan, as shown in the rendering above, is for seven stories. Also note how the open space--remember, Pacific Park?--seems minimized.


Also note that the model may indicate a change in the project plan--or simply was an expedient but incorrect interim representation. The tallest building on the eastern third of the site, Building 9, over the railyard between Carlton and Vanderbilt avenues, is supposed to rise 419 feet.

But it looks nearly as tall as the 511-foot B1 and the 510-foot B4, both on the arena block. Could some buildings will be taller or smaller than previously represented? Stay tuned. As I've said, Atlantic Yards is a "never say never" project.

The tight view of Vanderbilt and Dean: photo


The tight view of Vanderbilt and Dean: rendering



The full view of Vanderbilt and Dean: photo


The full view of Vanderbilt and Dean: rendering



552 Vanderbilt, from Google Street View

From Google Street View

OK, Pacific Street between Carlton and Vanderbilt will be restored to two-way traffic tomorrow

A message from the developers of Atlantic Yards/Pacific Park:
On Tuesday, October 21, 2014 at 11:30 AM Pacific Street between Carlton Avenue and Sixth Avenue will be restored to TWO-WAY TRAFFIC.
Last Tuesday, 10/14/14, I cited the latest project Construction Alert, which indicated that Pacific Street between Sixth and Carlton avenues were to be restored to two-way traffic a day later, weather permitting.