Tuesday, September 30, 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.

Tuesday, September 02, 2014

The main investor behind Atlantic Yards B2 is Arizona State Retirement System; did they evaluate the risk for new modular tower?

The dueling lawsuits filed today by the developer and building of the Atlantic Yards B2 modular tower name Skanska USA Building, Inc., and Atlantic Yards B2 Owner, LLC as reciprocal plaintiffs and defendants.

And while Atlantic Yards B2 Owner is represented and managed by Forest City Ratner, the building will be owned mostly by the Arizona State Retirement System (ASRS), which must be experiencing some consternation and perhaps some questions over whether the risk was fully evaluated.

The ASRS is investing approximately $300 million with Forest City Enterprises, representing 75% of a $400 million investment fund. As noted in a 12/21/12 Forest City press release:
Forest City Enterprises, Inc. (NYSE: FCEA and FCEB) and the Arizona State Retirement System (ASRS) today announced the creation of a strategic capital partnership and a $400 million equity fund that will invest in multifamily development projects primarily in five core markets: New York City, Washington, D.C., Boston,Los Angeles, and San Francisco.

Funding for the venture will be 75 percent from ASRS and 25 percent from Forest City. The company estimates that more than two-thirds of its equity contribution to the fund is already represented by entitled development opportunities on its balance sheet. Equity from the fund will be paired with conventional project financing for an estimated aggregate development investment of approximately $800 million to $1 billion. Forest City will serve as fund manager.
B2 is one of the first two buildings being built by the new investment fund. (The entity is known as the FC Cactus Residential Development Fund.)

High hopes for returns

The ASRS had high hopes for the project, according to the slide dated 11/18/13 from an Asset Class Review of Inflation Linked Assets, including real estate.
From this ASRS document
As noted in the document, there's high demand in the Brooklyn market, and this site is well located in relation to transportation, shopping, and entertainment.

ASRS also negotiated favorable terms, with the expectation of an "unlevered going in yield of 6%"--real estate finance jargon I hope to clarify--compared with the 4.7% yield "for the next investor." (Is that the deal for Greenland to build the rest of Atlantic Yards?)

Perhaps the yield was higher because of the risk. By the time of this slide, the ASRS should have known that milestones in the modular project were not being met. Modules were supposed to have be erected starting in August 2013, but that process had not yet begun.

Did they evaluate the risk? Or just not discuss it?

B2 had to have been a calculated risk for ASRS, because it was planned to be the tallest tower in the world built modularly, not merely the replication of a tower type that has been built hundreds of times in New York. That risk goes unmentioned in the slide.

Presumably they did evaluate it, but for now it's impossible to say how much. There's almost no discussion in publicly available materials on the ASRS web site about the tower, except for the above slide.

So it'll be interesting to learn when ASRS got any reports on the delays in construction, whether they're adjusting their return expectations, and how much they evaluated the risk in the first place.

Playing with perspective: how renderings suggest new 18-story tower (smallest of all) almost harmonizes with row houses

Follow arrow: from fourth floor (right) to the seventh
The history of Atlantic Yards/Pacific Park includes much deception and misdirection regarding the scale of the project.

Part of that has been a policy of not showing the scale at all--remember the brochures that depicted towers as smudges from the sky?

Another element has been distortion--remember how the Williamsburgh Savings Bank (now known as One Hanson) was depicted as looming over the proposed Miss Brooklyn office tower, though the latter would be three times its bulk?

Well, the developers of Atlantic Yards/Pacific Park--now, Greenland Forest City Partners--are still at it.

Consider the very strategic release of renderings by CookFox (first, on 8/4/14, to Curbed) of B14, the 18-story, 184-foot tower also known as 545 Carlton, at the corner of Carlton Avenue and Dean Street. The construction plan should be part of the discussion at the Atlantic Yards Quality of Life meeting on Thursday, Sept. 4.

It's quite possible that a certain lens setting might produce these images, which, using truncated pieces of the building and a wide-angle lens, suggest that the tower would almost harmonize with nearby row houses. But they do not represent what most people will experience.

This is par for the course in the world of big real estate. As then New York Times architecture  critic Nicolai Ouroussoff wrote in April 2008, misleading and incomplete renderings produce a "distorted picture of reality" that "stifles what is supposed to be an open, democratic process."

An 18-story tower

Click on image to enlarge
These renderings, which attempt to show a perspective from street level, are better than the hovercraft or helicopter renderings so often used for the arena block.

Note that B14 would be, by far, the smallest tower in terms of both height and bulk, at 18 stories and less than 300,000 square feet. (See list of maximum building heights and square footages at left.)

But somehow this rather large building is portrayed as fitting into the neighborhood. In the rendering above right, the fourth floor of the row house roofline lines up directly with the seventh floor of the tower. (Yes, there's a floor tucked behind that terraced green space.)

The rendering below is more dramatic.
Follow arrow: from the third floor to the sky.
Follow the straight purple line I appended. Somehow, just half a block away, the tower disappears, with the roof line of a three- story row house vanishing into the distance above the 18-story building.

(To reach 18 stories, I count five stories at the level fronting the corner, three more at the first terrace level, eight more above that, plus two more in the background.)

What might an 18-story building look like?

At right the mash-up--not produced by CookFox--is what an 18-story building might look like, straight on.

It's not an accurate representation of what the building would look like from Dean Street--the gateway to the open space portrayed further below.

But it may approximate what the building might look like to someone approaching it walking east along Pacific Street to Carlton Avenue, to the tallest sides of the building.

At left below is a rendering of an 186-foot building planned for New Orleans, the Tracage. Even that perspective is a bit of a hovercraft, but it does show a rather imposing building.

Accentuating the virtues

Consider a Twitter exchange I had with Brooklyn writer Andrew Blum, who counts architecture and design among his specialties. He wrote that he felt "cautiously optimistic" about the designs of B14. I asked what he thought of the perspective in the renderings.

In New Orleans, a building of similar height
"Renderings always lie," he responded. "But very smart to a) bring the street wall to the corners, b) step up the massing, c) keep retail small."

I agree those are prudent choices, though most if not all were already in the Design Guidelines, as indicated below. And I agree that this design is better than, say, importing the more garishly colored B2 tower, which hugs the arena, to this site bordering a historic district.

But that's hardly the full story. As I responded, "Renderings may always lie, but I hope people arent 2 jaded to notice." After all, only more people notice will the developer and the architects stop misleading people.

From the Design Guidelines

The drawing below, from the 2006 Design Guidelines, suggests that the maximum base height on Dean Street is 100 feet at west (Carlton Avenue) and 90 feet at east (open space entrance), and the maximum shoulder height 165 feet. The building steps up, appropriately, going back from Dean Street to Pacific Street. The row houses are likely 40-50 feet tall.

From the 2006 Design Guidelines, Part 3; at left is view from NE corner, at right view from SW (Carlton/Dean)
A more honest rendering, from 2006

In the Final Environmental Impact Statement issued by Empire State Development in November 2006, the below rendering, from Frank Gehry (borrowing but not crediting a photo by Jonathan Barkey), shows the 27-story B15 tower on Dean Street, flush against a set of four-story apartment buildings.

The maximum shoulder height--the next to last level--is 185 feet, just about the size of the B14 tower. That also relies on a wide-angle lens. But at least the tower--and the ones behind it--don't disappear.

The light brown tower at left, on Dean just east of Sixth Avenue and flush to the street and the four-story apartment buildings, must be B15. However, the B15 designation in the graphic seems to be pointing to the building behind it.

Looking at the open space

Another CookFox rendering of B14, at right, shows a slice of the new building on Dean Street, leading to open space and a vague outline of a tower in the back.

This too misleads, on several fronts. Note the extra-wide angle that captures the first three stories of the building flush against Dean Street, while at least seven stories are pictured in the back of the structure.

That building could go back 220 feet, according to the Design Guidelines, though it certainly doesn't look like that here.

The full height of this segment of the building is 90 feet. That's not shown. The tower in the back is several years away, requiring an expensive deck for construction. The tower to the right, visible through the trees, will not be built at the same time.

Only a portion of the open space, which continues in the vague background, will be built along with the tower, since Pacific Street--the largest source of open space--is needed for construction staging.

From the 2006 Design Guidelines, Part 4
Consider the drawing, at left of the open space planned for the eastern third of the project.

B15, which I outlined in blue at lower left, will surely have some green space inside the L-shape of the building.

But it's unlikely that the oval lawn, which requires construction over Pacific Street and likely part of the railyard, will be available for years.

So, the rendering above right might be a representation of what the open space might ultimately look like from a certain perspective, one in which people just a few feet from the lens wind up very small. But it's certainly not a representation of what the open space might look like when B14 opens.

What about that sky garden

Consider another rendering, at right, released last month.

The view of the fifth floor garden leaves the impression that this tower is in keeping with the arboreal nature of the neighborhood.

But, of course, this space is private, not public, so it's an amenity for the residents, less so for the neighborhood.

It's telling, of course, that Greenland Forest City Partners did not provide any perspectives from the north or the west, thus showing the largest part of the building. Par for the course.

Monday, September 01, 2014

Despite Vermont's model EB-5 program, investors outraged by behind-the-scenes changes

The nonprofit news site Vermont Digger has done a good job investigating the EB-5 program in that state, one that has gotten lots of publicity and support from elected officials.

Until recently, the Vermont EB-5 Regional Center--the investment pool authorized to process $500,000 each from immigrant investors seeking green cards--was the only one run by a government agency rather than a private business, presumably adding accountability.

Well, according to Vermont Digger, it hasn't added enough accountability, since some immigrant investors "are incensed that Bill Stenger, president and CEO of Jay Peak Resort, seized ownership of the Tram Haus Lodge and turned their half-million dollar equity stakes in the property into IOUs"--a process they didn't learn about until five months later.

The role of the government regional center at least has added some transparency to the process, though the investors do not think it has been responsive enough.

And what about AY?

It makes me wonder what's been going on behind the scenes with the $228 million investment, via the New York City Regional Center, into Atlantic Yards, as well as the recently announced $249 million investment via the U.S. Immigration Fund, both involving mostly (if not exclusively) investors from China and both involving deceptive marketing, at the least.

Sunday, August 31, 2014

As Barclays Center prepares for next show, errant trucks fill no-standing zones, cause traffic jam on Flatbush after wrong turn attempt

It's been a slow summer at the Barclays Center, but now that there's another major event--a one-off that apparently requires many specialized deliveries--(apparently) inexperienced and/or poorly managed truckers are violating the law and/or protocols while making deliveries.

As posted yesterday on Atlantic Yards Watch, several 18-wheel trucks making deliveries to the Barclays Center--apparently for the 9/9/14 Fashion Rocks show, a "television special celebrating the powerful relationship between fashion and music"--were parking and idling yesterday in no-standing zones on Dean Street and Sixth Avenue.

Missing the easy turn off Flatbush onto Dean

Below is one example: trucks should traveling south along Flatbush Avenue to make a left onto Dean Street to enter the arena loading dock, which is located on Dean Street between Flatbush and Sixth Avenues,

Dean Street is already relatively narrow, not built for trucks, and it's been further narrowed by scaffolding and barriers set up for the construction of the B2 modular tower. So it's a tight fit even to make the left turn, which offers a driver lots of latitude.

In the video below, the northbound truck is trying to make a right onto Dean, a very difficult challenge. The result is a brief traffic jam on Flatbush, a major avenue, at about 4 pm. The driver ultimately decided to abort the turn.

For the full post, see Atlantic Yards Watch.

Saturday, August 30, 2014

Looking at the very variable prices for Brooklyn Nets single-game tickets

Remember how the Brooklyn Nets this past March claimed that upcoming "Season ticket prices remain the same from the 2013-14 season and start at $45 per seat"?

That's not so. For the first season, they started at $15, part of a longstanding--if short-lived--plan to offer 2,000 seats at $15, and in the second, season tickets started at $25.

Now that single-game Brooklyn Nets tickets are on sale, it's interesting to see how dramatic the price differences are depending on the opponent. Some games cost well more than $45, starting at $110, while some cost far less, starting at $20.

This is not unusual, apparently. The Chicago Bulls, for example, say that "single game ticket prices, depending on the game date and the amount of ticket availability, are subject to change without notice." 

Below, some selected screen shots showing current ticket prices. In Brooklyn, prices likely will change as the season develops and the number of available seats fluctuates.

Note that not only do the cheap seats fluctuate in price, so too do the moderate-priced and more expensive seats.

For now, it's not surprising that games against the Cleveland Cavaliers and New York Knicks command the highest prices. It is surprising how cheap, relatively speaking, some seats are to see the defending champion San Antonio Spurs.

From more expensive to less expensive

The Cleveland Cavaliers have LeBron James, Kevin Love, and Kyrie Irving: $110.

The New York Knicks may not be very good, but they have a strong local fan base: $79.

The Chicago Bulls are a solid team: $75.

The Oklahoma City Thunder are one of the top teams in the league: $69.

The Indiana Pacers may be as good as last year, but likely not: $50.

The Miami Heat still have Dwayne Wade and Chris Bosh: $45.

The San Antonio Spurs won the NBA championship last year, but seats are only $35? A bargain.

The Milwaukee Bucks will be terrible, but they will have former Nets coach Jason Kidd: $35.

The Philadelphia 76ers will be lousy: $25.

The Minnesota Timberwolves are rebuilding: $20.

Friday, August 29, 2014

Barclays Center releases September 2014 event calendar: six concerts, two free events, one hockey game (plus construction constraints)

According to the recently released Barclays Center event calendar for September 2014, there will be six ticketed concerts, with a maximum expected attendance at 14,000, two free afternoon community events, and an Islanders-Devils exhibition hockey game.

The  Back to School Bash--an educational resource fair with live music, games, prizes, food trucks, and more--will be 0/13/14 on the arena plaza from 11am-3pm.

The Brooklyn Beat Festival, from 4-5 pm 9/15/14 on the plaza features Dancewave with contemporary choreography, then Bed Stuy Veterans demonstrating NYC Bruk-Up, a style of movement based on a dance form that originated in Jamaica.

September 2013

The September 2013 calendar had eight concerts scheduled, plus boxing, pro wrestling, and a hockey game.

Impact on arena access

According to an arena construction update:
Starting in July 2014, you will notice construction on Atlantic Ave. for a brand new Long Island Rail Road tunnel. Please be aware of the following temporary traffic pattern changes:
  • Minimal space for pick up/drop offs near the Calvin Klein VIP
  • Atlantic Ave. median is now a travel lane for eastbound traffic
  • Pacific St. between Carlton and 6th Aves. is one-way going westbound
  • Pedestrian walkways are not expected to be effected until September
  • Other areas for pick up/drop off (adjacent to Barclays Center) are on Flatbush Ave. northbound between 5th Ave and Atlantic Ave.
Our operations team is working closely with city agencies to mitigate traffic. However, we advise Barclays Center guests to allow for additional travel time when driving to the arena. As always, we encourage our guests to use mass transit to Barclays Center, which is located adjacent to one of the largest transportation hubs in New York City.
The Long Island Rail Road tunnel, to be located under Atlantic Ave. by the arena, is a key component of the new rail yards for the Pacific Park development, and will greatly improve efficiency and provide necessary progress for the LIRR system.
We will continue to provide you with extensive communication during the construction period and are committed to ensuring the best possible experience for all of our guests.
(Emphasis added)

Those traffic pattern changes are indeed "temporary," but some--including parking prohibition on Atlantic Avenue--will last 24 months.

Thursday, August 28, 2014

Bitter dispute between Forest City and Skanska over cost overruns stalls work at B2 modular tower; raises questions about pre-fab future

Updated with a few details from New York Times coverage and the Wall Street Journal update.

Forest City Ratner has had very high hopes for its modular construction plan, at one point calling it their "iPhone moment" and claiming to have "Cracked the Code" for high-rise modular, expecting to build towers faster than conventional construction, steadily supplied by modules fabricated at a new factory in the Brooklyn Navy Yard.

But the first tower, the 32-story, 363-unit (half market, half subsidized) B2, which broke ground in December 2012, faced steady delays. It was originally said to take 20 months (though Forest City in one earlier interview hoped for 14 months!), but the delivery date then became December 2014. As of April 2014, it was slated to open in the fourth quarter of 2015.

Even that may be too optimistic, now that Forest City and its general contractor, Skanska USA, are in a bitter dispute regarding cost overruns (worth tens of millions of dollars, according to a source quoted by the Wall Street Journal), which has caused the jointly owned factory at the Brooklyn Navy Yard to furlough workers.

That dispute is such that Forest City's spokesman blamed Skanska for "failures and missteps as the construction manager" and claimed the firm is trying "to to weasel out" of its obligations.

It's a reminder of the prescient warning, as I wrote in a 10/31/11 analysis of the secret history of Forest City's prefab plans, from Brooklyn architect Jim Garrison: "The American modular industry typically builds up to four stories. It has not yet built a 30-plus-story modular tower or anything nearly that tall. The challenges are those of engineering, assembly, and production. "

“Having designed several modular buildings I can say that they are intricate and if they are to be cost effective require development totally outside of normal building practice," he stated. "They are more like product or automobile design where assembly and detail may be considered together.

And it's a reminder of the verb in the headline in a 7/26/12 Engineering News-Record article, Developer Gambles on Modular High-Rise for Atlantic Yards Sports Village.

What next?

Forest City's charges sounds like bridge-burning, a prelude not to mediation but rather to a lawsuit. That would be a significant snag, since the tower, located at Flatbush Avenue and Dean Street, is only ten stories complete, less than one-third of the total.

And even if by chance they wanted to open a truncated building, they can't: the tax-exempt bonds and subsidies are premised on a completed building, of course, and a full rent roll would be necessary to recoup costs.

“This is not a referendum on modular,” Forest City CEO MaryAnne Gilmartin told the Times, “it’s a monetary dispute. We’re confident we’ll get the building built. But we’re doing what we have to do to protect the company, the project and the business.”

Then again, as the Journal observed:
However the dispute is resolved, the struggles with costs undermine the tower's role as a pioneering project. The "code," said Mr. Kennedy of Skanska, "hasn't quite been cracked."
Note that, unlike the rest of the towers, which will be owned 70% by Forest City's new partner/overseer, the Greenland Group, and developed by Greenland Forest City Partners, B2 is co-owned by the Arizona State Retirement System, which likely is not happy its expected investment return has been jeopardized.

(The ASRS is actually the majority owner, since funding for the venture "will be 75 percent from ASRS and 25 percent from Forest City," the developer said in a 12/21/12 press release, which noted that "Forest City will serve as fund manager" for the $400 million fund, which invests in multiple buildings.)

Greenland has announced that the next set of towers will be built conventionally, but Forest City's Ashley Cotton said 6/27/14 that "as soon we can, we'll move forward with more modular buildings." It's an understandable wish to want to recoup their investment in both the factory and in research and development, and to perfect a process they hoped to sell to other developers. That plan is in question.

As noted in the latest Atlantic Yards/Pacific Park Construction Alert, issued 8/18/14, no more modules were delivered to the B2 tower in the previous two weeks, leaving a total of 297 (of 930), with the tenth floor complete. Erection of 11th floor modules was begin in September 2014.

The dispute emerges

According to an Aug. 26 letter (obtained by Capital New York), an attorney representing FCRC Modular told Skanska that its threat to unilaterally furlough workers at the factory violated the joint agreement since such "such decisions may not be made by any officer of FC+Skanska without approval of the Board of Directors," but the board did not approve it.

(Note that Forest City and Greenland also have an agreement which requires mutual assent on major decisions.)

Thus, wrote attorney Harold Weinberger, Skanska was was breaching the agreement, which would make it "responsible for the significant damage these actions will cause."

Richard Kennedy, chief operating officer of Skanska USA, told Capital New York, Work stops at Atlantic Yards as partners fight over cost, “It finally got to the point where we said, ‘OK, this project is requiring from us an investment that is much more significant than anything we ever anticipated or agreed to."

In the Wall Street Journal, Eliot Brown, who had the scoop, wrote that Kennedy blamed "'technological issues' that made it difficult to fabricate the modules, which he said were the fault of the design." The Times noted that the contract to provide the modules is $117 million.

Forest City responded with a blistering statement blaming Skanska's "own failures and missteps” and violation of a fixed-price agreement. “Now faced with over-runs, they are employing a typical strategy to try to weasel out of that obligation,” said Jonathan Rosen.

“We are extremely disappointed that Skanska has unilaterally and wrongfully stopped work at our factory—unnecessarily putting the livelihoods of hundreds of employees at risk and causing unneeded delays in a critical project for New York City’s future,” he said. “Forest City remains deeply committed to completing B2 and meeting our commitments to the people of Brooklyn … We intend to pursue all of our rights and remedies under the law to enforce our agreement and resume work at the factory.”

The furlough notice

According to the notice below, obtained by Crain's New York Business, FCS Modular told workers that "a significant commercial dispute exists between the Atlantic Yards B2 Owner, the project Owner, and Skanska USA Building, the project Contractor, in connection with the B2 project. FCS is not a party to that dispute, but our factory operation here at the Brooklyn Navy Yard depends directly on the continuation of production of the B2 modules...at this time we do not know if, or when, the dispute will be resolved."

Previous optimism

From Skanska blog, 12/23/13, Construction history in the making: Skanska raises the first modules at B2 Atlantic Yards, the world’s tallest modular building
Construction history was changed December 12 in New York City when the Skanska team raised the first modules into place at B2, the 32-story residential tower that will be the world’s tallest modular building.
Nine hundred thirty modules – weighing between 10,000 lbs. and 40,000 lbs. – will go into this tower, with the units being assembled by the Forest City Ratner /Skanska team at the Brooklyn Navy Yard. But the focus that chilly Thursday morning was on that first module. It was just after 2 am when a tractor-trailer pulled that oversize load away from the Navy Yard for a one-and-a-half mile trip to the Atlantic Yards project site. At 9:30 a.m., the crane hoisted the module into place. Union ironworkers took 15 minutes to make the structural connections.
“There was a certain sense of excitement and a little bit of nervousness, just like on any jobsite when you’re moving and lifting something new,” said Susan Jenkins, Skanska vice president and operations head of the modular assembly plant. “And definitely a sense of pride for Skanska, and for myself being part of Skanska.”
Jenkins added: “It was a tremendous moment. A lot of people – from both Skanska and our partner and client Forest City Ratner – have worked very hard to develop and make modular construction possible on this project.”
When the modules leave the 100,000-square-foot Navy Yard assembly plant – operated by a joint venture of Forest City and Skanska – they are fully assembled, including kitchens, bathrooms and appliances. This isn’t how a building normally goes up, not even for Skanska, which has done much with off-site construction of mechanical, electrical and plumbing (MEP) systems on many projects (especially in the healthcare sector). Fully modular construction was needed on this project to ensure efficient, safe and sustainable construction.
Now that lifting modules into place has begun, it won’t be a daily activity, Jenkins said. Some days will be dedicated to setting into place the steel brace framing that rises the height of the 348,000-square-foot tower, and also surveying. However, the assembly plant will continue to send module units to the site. Our team plans to have at least two floors of modules – of which there are six types – ready and waiting at the Navy Yard to be sent to the site for the duration of the project, designed by SHoP architects and Arup engineers,