Saturday, October 31, 2015

Atlantic Yards, Pacific Park, and the Culture of Cheating

I offer a framework to analyze and evaluate Atlantic Yards (in August 2014 rebranded as Pacific Park Brooklyn) 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 in Brooklyn in September 2015, via Curbed

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

Saturday, October 03, 2015

The rhetoric continues: from Curbed, "For Sale Inside the Barclays Center: 'Brooklyn's Newest Neighborhood'"

From Curbed yesterday, For Sale Inside the Barclays Center: 'Brooklyn's Newest Neighborhood':
Construction on Pacific Park is well underway: at least our of the buildings in "Brooklyn's Newest Neighborhood"—yes, that's the tagline that emblazons promotional tote bags—are now rising, and sales soft-launched at 550 Vanderbilt, the first of the project's dozen-or-so residential buildings, in June. The sales gallery for the COOKFOX-designed building only opened last week, and it seems more a formality than a necessity: 80 of the building's 278 studio to four-bedroom condos have sold in the past three months. Naturally the sales office is in the Barclays Center, the crown jewel and only completed undertaking associated with the 22-acre overhaul. Not only will it be the gallery for 550 Vanderbilt, but will also be the place where the rest of the micro-hood's condos are pedaled [sic], so of course we had to check it out.
No, it's not a "neighborhood." (On Twitter, at least, Curbed added a skeptical "Huh?")

Nor is it a "park". Nor does 550 Vanderbilt, as the copy says, site "at the site's southwestern most corner." (Rather, it's southeast.) And, why would they bother to create a sales office if it was "more a formality than a necessity"?

Go to Curbed for a full set of photos of/from the sales office, but note the photo below, which usefully shows Pacific Park Brooklyn dwarfing its neighbors, a view developers have been reluctant to show.

By the way, even the Dean Street elevations are far higher than the alleged 60-foot street wall on the south side of Dean Street they're supposed to match up with.

Friday, October 02, 2015

Decoding the graphic at the 550 Vanderbilt launch: "Evokes the heritage of Brooklyn & classic New York living"

It's worth following up on the launch last week of the sales office for the 550 Vanderbilt tower. Consider the graphic below, created by artist Heather Klar, who specializes in creating real-time records of gatherings. And see celebratory photos here.

The graphic was a smart idea, and a deft execution. But a hipster artist, no matter how talented, is limited by the meeting she has to record. So let's consider the rhetoric, and then a more skeptical approach.

We had a long beginning... That means lots of controversy, and a name change from Atlantic Yards.

This is our home too... It depends on the meaning of "this." Yes, (some) executives and more employees live in Brooklyn. That doesn't mean they live on the blocks that take the brunt of construction and arena operational impacts.

Health. Warmth. Comfort. Modern... That's what's planned, not what neighbors are experiencing.

Evokes the heritage of Brooklyn & classic New York living... That's a reference to the use of brick and masonry in the condo building, apparently. No mention that the project is majority owned by a Chinese company (controlled by the government of Shanghai) and financed in significant part by selling visas to Chinese millionaires under the sketchy EB-5 program.

Heather Klar, via Twitter
Connecting you and nature... Well, there will be eight acres of open space. That doesn't mean a particularly placid connection, if 14,000 people are using it, thus lowering the ratio of open space per person.

The New Heart & Soul of Brooklyn.. A commercial development?

Interactive... Not sure what that means.

Brooklyn's newest neighborhood!... Or, perhaps, part of Prospect Heights.

Crafted around nature.... Another buzzword like "interactive." What's the alternative: through nature?

Now an Energy Center.... Ditto on the buzzwords.

Infused with Choices... If you have $600,000+ to spend.

Thursday, October 01, 2015

Forest City exec hopes for 8-year buildout, likens open space to Chicago park 3X larger; WPIX claims affordable housing "gives back to community"

8 acres of open space around
towers in Brooklyn
A softball Bisnow interview with a Forest City Ratner Executive VP, SUSI YU ON AFFORDABLE HOUSING: INNOVATION IS IN OUR DNA, has a couple of interesting moments, including comments on an aggressive timeline, a comparison to a real park, and something left unsaid.

When the Bisnow interviewer asks about a 2025 deadline for the affordable housing, Yu responds, "We’re hoping that it’s really an eight-year timeline, but we’ll see. If we have another financial crisis, you just don’t know."

An eight-year timeline would mean 2023, so stay tuned.

What about the "park"?

Asked about "the importance and the impact of Pacific Park on the community around it," Yu responded the project will not only knit neighborhoods:
I think the eight acres of open space are going to be an incredible public amenity. Brooklyn is all about trees and openness, parks and playgrounds. We really think that eight acres of open space that we’re designing with Thomas Balsley is more like Millennium Park in Chicago, where we’re going to have a lot of activation that’s part of the park that sort of recognizes the fact that urban dwellers use open space and parks in a different way than it was designed in the 18th century.
Millenium Park in Chicago, with green space and
 some public gathering areas. No residential towers.
Yes, as Yu suggests, park design has evolved, and thus the open space for the Brooklyn project can draw on the lessons of places like Millennium Park.

But her comparison is a tad aggressive, because even landscape architect Balsley himself, when asked, could not suggest an analogue.

After all, Millennium Park is is three times the size of the open space in the Brooklyn project--more than 24 acres--and does not have ten residential buildings inside its perimeter--or creating its perimeter.

It doesn't have any such towers. It's also a public park, not privately managed, publicly accessible open space.

Fitting the Brooklyn esthetic?

Asked about the challenges in planning the project, Yu states:
461 Dean 
It was a project that was in its incubation stage for a long time. I do think all of that is behind us and what we face is trying to build as quickly as possible, and also build the type of development that embraces the aesthetic of Brooklyn because I think building in Brooklyn is very different than building in Manhattan. So we can’t land a glass tower in Brooklyn in such a strong brownstone neighborhood. We’re very cognizant of building buildings that fit the aesthetic that really does exist in Brooklyn. 
Yes, they have chosen masonry and brick for the buildings on the southeast block, which are still far larger than their neighbors. But does the design for 461 Dean Street (above), aka B2, in any way reflect the "Brooklyn" aesthetic?

Affordable housing

Asked "What is the most important thing about affordable housing that you think people should know?" Yu responds:
I think that workforce housing has not really been created in the last 20 years in the city and I think the administration’s shift to create a more diverse income band in the mandatory and inclusionary 421a is the right step. Having a mixed-income with market rate is really important for the socioeconomic diversity of New York City. It’ll make the city a much more vibrant and richer place to live. 
Note that "workforce housing" is not "low-income housing" and "more diverse income band" means higher incomes for subsidized units. Elsewhere she states:

Pacific Park has 35% affordability blended across 40% to 160% AMI. I would say the city sort of caught up to it because we’re the first ones who did 30% affordability. And that’s where the new wave of entitlements that you see that’s occurring, that’s even in the mandatory inclusionary zoning and in the 421a legislation, where they’re upping the affordability to 25, 27, 30%.
Of course they also proposed 50% affordable housing, and got a huge increase in development rights, as well as other government help in response.

Note that Yu avoided talking about the viability and plans for modular housing, which some three years ago was Forest City's proud innovation.

Gilmartin on affordable housing

I missed this PIX11 6/23/15 coverage, an anodyne interview with Forest City Ratner CEO Maryanne Gilmartin with a very promotional headline: New program gives back to community with affordable housing development.

No journalistic effort is expended to explain that the program does not "give back" but was part of a deal in which the developer got an override of zoning to build far bigger than previously allowed, and that the below-market units rely on subsidies, tax breaks, and below-market financing.

Gilmartin describes "a whole wide range of housing stock" aimed at low-, moderate-, and middle-income households, as well as luxury units.

Actually, of the 6,430 apartments, there would be 1,930 condos and 4,500 rentals, of which 2,250 would be "affordable," below-market, but many of them would be not so affordable.

 Gilmartin cites "four vertical buildings" under construction, with 900 units, 600 of them affordable. Actually, her number encompasses three buildings, two front-loaded "100% affordable" buildings (B14, 535 Carlton Avenue, and B3, 38 Sixth Avenue) and a condo tower (B11, 550 Vanderbilt Avenue), not acknowledging a fourth building under construction at the time, a 50% affordable, 50% market building with 363 units (B2, 461 Dean Street).

Beyond that, two additional 100% market buildings are in process today, one with condos (B12, aka 615 Dean Street), the other rentals (B15, aka 37 Sixth Avenue).

"We're delivering a large number of affordable units over a very wide spectrum of incomes," she says, not so precisely.

"Neighborhood from scratch"

"How is this going to be affordable?" the anchor asks.

"So I think if you were building a neighborhood from scratch, this is what you would want to do, which is mix a highly diverse group of individuals and create a real place," responds Gilmartin, again with that unironic use of Frank Gehry's notorious "neighborhood from scratch" quote. "So, because of that, we have families of four, that are making well below the Area Median Income, which is how housing prices are defined when you talk about affordable."

No numbers are supplied, of course.

"So families can live here," she continues. "Families that are low-wage earners. Families that are working class, families could live here as well. And then we have luxury housing. So I think within one particular building, you can have a wide range of incomes.  And I think it's not just low income, I think for all of us in New York, to get close to the urban core, to live where all the action is, it's very, very expensive, and this this project's goal is to create more options for people."

That's another part of the mantra, pointing out that, well, even if the housing's not so affordable, at least it's close to the "urban core."

Yu on Forest City: beyond "white Jewish men"

Asked about working at Forest City, Yu responds:
I have to tell you, it’s amazing being in an industry that’s dominated by white Jewish men, and I go to work every day at Forest City Ratner Co, where my CEO is a woman who hired me, and who is not a relative of the chairman of the board. A lot of the key executives all across the different departments, they’re all women at high level and I think it speaks to Bruce’s ethos and MaryAnne’s ethos on giving opportunity to the best, those who strive the hardest no matter what the race, creed or ethnicity is—just the fact that I am a Korean-American immigrant with an architectural background who has been given the opportunity. 

Wednesday, September 30, 2015

From the latest Atlantic Yards/Pacific Park Construction Update: Atlantic Avenue crane to be removed; Saturday work at three sites

The latest Atlantic Yards/Pacific Park Brooklyn Construction Update was sent at 5:11 pm yesterday, after the second business day of ten concluded, by Empire State Development after preparation by Greenland Forest City partners, covers the two weeks beginning Sept. 28 and Oct. 5, though the document (see bottom), oddly enough, says October 11.

Among the notable changes are the disassembly of the Atlantic Avenue crane for the arena green roof on Saturday, Oct. 10 (though that will not reopen traffic lanes); foundation work for the B3 site (Dean Street and Sixth Avenue), and the transfer of a mobile crane to the B3 site from the B14 site, at Carlton Avenue and Dean.

Here's the previous alert: note no previous mention of demolition on Block 1120--buildings that jut into railyard from Atlantic Avenue--and no mention of current demolition on Block 1128, site of B15, though there it appears to be ongoing. no mention of continuation of work cleaning out the contents of 666 Pacific Street, which was described in the previous alert "As part of mobilizing for the demolition."

Also note ongoing Saturday work at the B2 site, at Flatbush Avenue and Dean Street, the B15 site, at Sixth Avenue and Pacific Street; and the B14 site.

The sections below are verbatim, with the new information highlighted in bold.

B2 - 461 Dean Street, Modular Residential
During this reporting period:
 Interior work will continue on modules that have already been installed.
 *Exterior façade adjustments and paint repairs ongoing. All work will be performed within the construction fenced perimeter. Work will commence on the ground floor storefront. Enclosure work of the Arena Dean Street entrance area will be substantially completed.
 Saturday work to address field conditions within the site will occur during this reporting period. This work includes all work listed above.
B3 - 38 Sixth Avenue
During this reporting period:
 Foundation activities, including the drilling of piles and material delivery, shall occur during this reporting period. Mass excavation is complete. Minor excavation will continue as required for pile caps and footings. Soil that has been classified as clean or contaminated will continue to be removed from the site and brought to appropriate disposal locations.
 Saturday work to address field conditions within the site will occur during this reporting period. This work includes all work listed above.
*A small mobile crane will move to the B3 site from where it is currently staged at B14.
 *Pile installation will continue through this reporting period. Foundation work is expected to begin during the week of September 27th. 
 *Concrete pours will for foundation work will commence
Arena Green Roof
During this reporting period:
 Delivery of material continues during this reporting period and will be lifted to the roof utilizing the Atlantic Avenue crane when needed. Deliveries will come through the Atlantic Avenue gate utilizing flagmen to direct traffic.
* Pursuant to permits the Atlantic Avenue crane will be disassembled on Saturday, October 10; a community notice will be distributed. 
 Protocols for the trucks entering and exiting the site have been put in place to provide clarification and instruction for on roadway routing to and from the project site, queuing of trucks while on site and vehicle idling restrictions.
LIRR Yard Activities - Block 1120 & 1121
During this reporting period:
 During this reporting period, the Contractor will continue excavation and hauling of soil from Blocks 1120 and 1121. Soil that has been classified as clean, contaminated or hazardous will be removed from the site as part of the excavation activities and brought to appropriate disposal locations. Protocols for the trucks entering and exiting the site have been put in place. These protocols provide instruction on roadway routing to and from the project site, queuing of trucks while on site and vehicle idling restrictions.
 Support of Excavation (SOE) work including the installation of lagging and tiebacks will continue within this area during this reporting period.
 Manhole and duct bank installations will be ongoing in Blocks 1120 and 1121 during this reporting period.
 Foundation footing and pier rebar, formwork, and concrete installations will be ongoing in Blocks 1120 and 1121 throughout this reporting period.
 Pacific Street Retaining wall rebar, formwork, concrete installations and back-filling behind wall will be ongoing in Block 1120 and 1121 throughout this reporting period.
 Excavation, formwork and underpinning for future removal of LIRR Atlantic Avenue Tunnel wall will continue throughout this reporting period.
 *Building and platform foundation pile installation and testing will be ongoing during this reporting period.
LIRR Yard Activities – Atlantic Avenue
LIRR Yard Activities – Night/Weekend Work
Tunnel Work
 Weekend Electrical Utility work (conduit and support installation) is being performed inside the LIRR Tunnel and will continue during this reporting period and is currently scheduled to continue through 2015.
Block 1129
B11 – 550 Vanderbilt Avenue:
During this reporting period:
 Superstructure phase of construction continues. A crawler crane has been installed. All related equipment and materials will be delivered to the site for ongoing superstructure work including concrete pours. Carpenters are performing formwork for 6th floor columns, shear walls and slabs. Concrete pours will continue on a daily base.
*Temporary standpipe will be installed during this period.
 *Delivery for masonry will start.
B14- 535 Carlton Avenue:
During this reporting period:
 Saturday work as well as work up until 9 pm during weekdays to address field conditions within the site will occur during this reporting period. This work includes all work listed below.
o The sidewalk on the west side of the 6th Avenue Bridge (between Pacific and Atlantic) will remain closed to pedestrians;
o The MPT will remain in place on the far west lane of the 6th Avenue Bridge from Pacific Street to Atlantic Avenue.
 *Superstructure work is continuing with the framing and pouring of the ground floor. The framing of the 1st floor will occur in this reporting period as well.
 *Foundation backfill and waterproofing will continue throughout this reporting period. Conveyor belt may be used to assist in backfill efforts.
 *Foundation backfill and waterproofing will continue throughout this reporting period. Conveyor belt may be used to assist in backfill efforts.
B-15 (6th Ave and Pacific Street)
During this reporting period:
 Geotechnical borings and test pits will continue this period. Soil and well borings will be drilled with the use of a limited access drill rig, when required. Test pits within the sidewalks and basements of existing properties will be hand excavated, with use of a jackhammer.
 Some of the geotechnical borings and test pits will be performed on the sidewalks along Pacific Street, Dean Street and Sixth Avenue. In all cases the sidewalks will be partially closed, however a five foot pedestrian lane will be maintained in accordance with obtained DOT permits.
 Broadcast lot will be shared/ utilized by both the arena and the B2 site for temporary storage of equipment.
 Saturday work to address field conditions within the site will occur during this reporting period. This work includes all work listed above.

*Block 1120 & 1128 Demolition
During this reporting period:
 *Contractor will commence clean out of buildings on Block 1120 during this reporting period.

How to Reach Pacific Park Brooklyn Community Liaison Office (CLO)
The Community Liaison Office is located at Atlantic Center Mall, 625 Atlantic Avenue on the 3rd floor. Visitors seeking the office should enter through the mall entrance located at the corner of Atlantic Avenue and So. Portland Avenue. The CLO’s hours are M-F from 9am – 4pm and can be reached by phone at 866-923-5315 and by email at
Noise Receptor Control Program
You may be eligible to receive and have installed double paned or storm windows and an in-window air conditioning unit for certain residential units where such air conditioning and/or double paned windows/storm windows do not exist today. The cost of any windows and any air conditioning units, and the cost of their installation, would be borne by the Developer.
The locations that may be eligible at this time are the residential sites in proximity to site construction and identified in the 2006 Final Environmental Impact Statement (FEIS) or the 2014 Final Supplemental Environmental Impact Statement (FSEIS) as having the potential to experience significant adverse noise impacts during the construction of the Pacific Park Brooklyn project.
In order to schedule an on-site inspection by the Developer to determine which windows may be eligible for replacement and/or AC units provided please contact:
Roberta Fearon
Forest City Ratner Companies Tel: (718) 923-5314 Email:
Irma Barrera
Forest City Ratner Companies Tel: (718) 923-5306

NY Post on 550 Vanderbilt: "How New York City is building new neighborhoods from nothing" (!)

Remember how original Atlantic Yards architect Frank Gehry got flak for saying--according to the New York Times's erroneous transcription--that the project was "building a neighborhood from scratch"? (He'd said "practically from scratch," which was already a stretch.)

Well, Forest City Ratner CEO MaryAnne Gilmartin likes to say "neighborhood from scratch" today, and she's getting lapdog treatment in some media outlets. Consider the New York Post Real Estate page article today, How New York City is building new neighborhoods from nothing. (Actually, it appears in the luxury supplement, Alexa--see bottom.)

From the lead:
Density ought to be embraced, and vertical living ought to be celebrated,” pronounces MaryAnne Gilmartin, president of NYC real estate giant Forest City Ratner Companies. It’s a bold statement, but she’s talking about a bold project: Pacific Park, the 22-acre, 15-building complex rising over Brooklyn’s Atlantic Rail Yards, near Barclays Center.
The massive undertaking will create an entirely new neighborhood of 6,000 apartments, multiple retail spaces and eight acres of parkland. Megaprojects like Pacific Park — which offer residents every convenience in a compact, preplanned area — are front and center in New York’s new-building barrage.
Luxury developers are pairing residential towers with amenities like schools, playgrounds, food courts, office spaces and even subway stops — and bringing in starchitects and A-list designers to craft spaces that blend home, work and play.
Note the effrontery of the headline, then note that complex is not rising "over Brooklyn's Atlantic Rail Yards." The 22-acre project will rise, in part, over the Vanderbilt Yard, though, other than the small segment of the former yard occupied by the arena, all the buildings under construction are on terra firm.

It won't be a park, but rather privately managed, publicly accessible open space. And while it surely will be a new complex, it hardly will be a new neighborhood. There were people and businesses. Moreover, the new infrastructure, including one school, will hardly be enough to handle the entire population. 

And, by the way, "New York City" is not building anything. Atlantic Yards/Pacific Park is a state project, built by Greenland Forest City Partners, which is 70% owned by Greenland Holdings, itself controlled by the government of Shanghai. Greenland gets no mention in the article.

Sales figures

The Post reports:
When 550 Vanderbilt, a Pacific Park condo designed by COOKFOX, launched sales this summer, 30 percent of its 278 units entered contract “within weeks,” according to Gilmartin. Prices for the building, which opens for move-ins in 2016, range from $625,000 for a studio to $6.86 million for a penthouse....
Summing up

The article closes with Gilmartin, as well:
And Gilmartin says the open space at Pacific Park will be available to all comers.
“It was critically important for us to include the community,” she emphasizes. “Our goal is to knit together the surrounding neighborhoods with this development.” She says the project is an exercise not just in real estate development, but in master planning meant to blend into the fabric of NYC.
Still, she concedes that such unique projects are no small task: “It’s a big responsibility to build up a neighborhood from scratch.”
Um, their goal is to make a profit. As for including the community, the amount of open space per person will actually go down, given the huge new population.

Tuesday, September 29, 2015

After extensions from lender (expire?), Forest City will prematurely pay off $45M loan for troubled modular tower (+$11.6M subordinate loan)

See update below that confirms that Forest City is paying off an additional $11.6 million to NYC HDC.

Redemption planned for Oct. 6
In an unusual occurrence surely prompted in part by delays and construction problems, developer Forest City Ratner next week will pay off $45 million in tax-exempt financing for the B2 modular tower rather than enjoying the fruits of the low-interest loan until 2046.

Nor does the New York City Housing Development Corporation (NYC HDC) plan to issue the additional $45 million in tax-exempt financing once planned for the tower, also known as 461 Dean Street.

That $90 million total would have gone halfway to paying for a tower initially slated to cost $183 million (including $117 million for construction).

Delays and costs overruns have added perhaps $80 million to the cost of the tower. It should open late next year, after some 3.75 years of construction, nearly twice as long as initially expected, leaving a cloud over Forest City's once-heralded plans to revolutionize construction in New York.

A loan on shaky ground

The 2012 loan is not in default, but has been on shaky ground.

Sept. 28 construction photo via Tectonic
 Last October, Forest City disclosed that the Bank of New York Mellon had suspended disbursement financing because construction had stopped for 21 days. 

It's unclear whether such disbursements resumed when construction re-started this year, after Forest City began operating the modular factory without former partner Skanska and engaged Tishman to build the tower. Construction has proceeded steadily in the past months.

But evidence points to an extended freeze, given that the forbearance agreement was steadily extended. 

In August, parent Forest City Enterprises (FCE) in its Form 10-Q warned:
we can provide no assurance that our lender will agree to extend the forbearance agreement. Depending on the outcome of our lender discussions, we may be required to repay the current outstanding balance of $45,000,000 currently secured by, amongst other things, $37,500,000 of restricted bond proceeds included in restricted cash, $10,000,000 of cash in escrow and an equity letter of credit of $9,300,000. In the meantime, we continue to fund construction costs with equity.
So, while evidence suggests the lender may have decided not to extend that agreement, forcing the bond redemption, Forest City would not confirm that. 

Forest City's statement

Forest City Ratner responded briefly to my queries:
With a relatively short period of time remaining to complete our work in the factory and field, we made the decision to use equity to continue construction and will evaluate procuring new financing at a later date.

Forgoing the unissued bonds gives the NYC HDC an opportunity to use the unused allocation for other projects to create additional affordable housing in the City. The affordable program at 461 Dean Street will remain the same.
That may indeed assist affordable housing, but surely no developer chooses to use their own equity when they can use other people's money. 

As David A. Smith, an affordable housing analyst in Boston whom I consulted, observed, "In general, never use equity when affordably-priced non-recourse debt is available." (Non-recourse means an lender seeking to be paid can only go after the collateral, not the developer's other assets.)

Forest City did not respond to follow-up questions regarding whether disbursements ever resumed or whether the lender had forced their hand.

Should 461 Dean open successfully, it could be a candidate for new financing. CEO MaryAnne Gilmartin has said, "The building, when it stands at the corner of Dean and Flatbush, will tell us whether high-rise modular has an application in the city."

Disclosure of default avoided

Even if disbursements had resumed, the future would have been grim. "The likeliest conclusion," observed Smith, when asked about the scenario in which Forest City was redeeming a bond that was being disbursed, "is simply that FCE concluded it would never be able to meet the bond takeout criteria in any practical timeframe, and it decided to eliminate the complications of having a public debt issue outstanding." 

To resolve such a debt issue in standard fashion, Smith observed, the property typically has to be finished, with its trade creditors paid, leased up to a stipulated threshold, and with a stipulated net operating income.

"Failure to achieve conversion within a certain time frame is normally also a default, even if the interim interest is being paid," he added. "When this happens, you don’t want to be paying standby fees, or having a property in default (something you may have to disclose on other regulatory filings or your financial statements), and if external capital is cheap (e.g. from China), then you are by far the best served by wiping out the proposed financing and hence eliminating the reporting and disclosure requirements."

Note that new investor Greenland Holdings owns 70% of Atlantic Yards/Pacific Park going forward, excluding B2 and the Barclays Center. The clearance of the loan removes one obstacle to new investment, though the legal issues likely need to be settled first.

NYC HDC 2014 audit
NYC HDC statement

NYC HDC spokeswoman Christina Sanchez told me that the loan was not in default, as Forest City Ratner was able to extend the forbearance agreement with the Bank of New York Mellon.

"However, the borrower has decided to pay off the HDC mortgage loan and HDC will redeem the bonds on October 6th," she wrote. "The HDC Regulatory Agreement that is recorded against the property enforcing the affordability of the units will remain."

"It is not common for HDC loans to be paid off during construction," she added, in response to my query, "and we are unaware of any plans for additional HDC financing."

One scenario in which loans are paid off early might be when interest rates plunge, so a borrower could refinance at a lower interest rate.

Fees for the loan, via NYC HDC
That is not the case here. Indeed, the interest rate was .02% to .12%, according to a 2014 NYC HDC audit (see screenshot above), though there were much larger annual fees associated with the issuance (see graphic at left).
Why now--harvesting losses?

Beyond potential pressure from the lender, it's possible that FCE wants to harvest as many losses as possible before the end of the calendar year, when its financial structure changes.

As I noted in January when the firm announced its plan to become an REIT, CEO David LaRue in August 2014 told investment analysts that, while the company was still a C Corporation, "We still have substantial NOLs [net operating losses] that allow us as a C Corp to continue to be very tax-efficient... As we go through repositioning, and go through non-core asset sales, it gives us some additional flexibility."

A tangled tale, and another loan to be paid off

The NYC HDC financing of 461 Dean Street contemplated two bond issuances to fund the entire mortgage loan. The first tranche was issued with the closing of the loan in December of 2012, while the second was supposed to come in 2013. It did not, perhaps because the modular factory was behind schedule.

Even earlier this year, that loan seemed to be contemplated. According to minutes from the 4/20/15 board meeting, NYC HDC executive Catherine Townsend said "that a second tranche of bonds for 461 Dean Street, which was authorized by the Members in December 2012, was not expected to be issued until construction resumes."

Construction did resume. However, Sanchez told me, "Since the borrower has decided to pay off the construction loan, HDC will not be issuing the second tranche of bonds and will redeem the bonds on the first tranche."

Also, according to a November 2012 memo (excerpt at right) from NYC HDC President Marc Jahr, this building was to receive an additional loan from the agency of $11.6 million, with a 1% interest rate. 

Update: "HDC provided a $11.6M subordinate loan at the loan closing for B2 in December of 2012," Sanchez confirmed. "Forest City Ratner is not in default on this subordinate loan. However, they will pay off the subordinate loan in conjunction with the first mortgage loan on October 6."

A rising price tag

The price tag for 461 Dean Street has skyrocketed. Last November, FCE said that, while it had designated $155 million for B2, related to land, building and capitalized interest, total project costs could reach $215 million to $265 million. 

That said, it does hope to recover some of those cost increases after litigation with former partner Skanska, which was hired to build the tower and lead the operation of the modular factory.

As noted last February, Forest City in 2014 recorded an impairment charge of $146,300,000--a loss of value--regarding the building in 2014. This past August, it stated:
As of June 30, 2015, we have $74,182,000 capitalized on the Consolidated Balance Sheet related to B2 BKLYN. Based on the most current information available, total project costs are estimated to be $162,100,000, after giving effect to an impairment charge recorded in 2014. 
Does that mean that building's overall cost to Forest City could exceed $300 million, with the impairment added to the the project costs? Unclear.

Impairment charges can be murky. "There’s a huge body of financial reporting requirements around when you take an impairment, when you reverse it, and so on," Smith commented. "They are a mixture of science, art, and necromancy."

The redemption notice

Monday, September 28, 2015

WPIX promotes Premiere Week at Barclays Center

WPIX, which has a studio in the Barclays Center, is still practicing synergy, offering a sweepstakes for Premiere Week, when the New York Islanders season begins.

Here's the PIX11 page for stories tagged Barclays Center. Below is the page in PDF form:

News flash: Nets player finally moves to Brooklyn

As the Brooklyn Nets begin their fourth season in Brooklyn, there's some news, as noted by the Brooklyn Game not so grammatically, The Nets finally have a player that lives in Brooklyn.

The post cites ESPN, which quotes forward Thaddeus Young, who said he and his wife wanted stability for their five year-old son:
"It's a good environment," Young said. "We like to come down and walk on the piers and walk on the bridges and stuff like that. Plus, the practice facility is gonna be in Industrial City [in February] so that's gonna be probably 10-15 minutes away from here, and like I said, Barclays Center is right up the street.
That suggests the location is in the Downtown Brooklyn area. Update, it's sort-of Brooklyn Heights, actually a large condo building in a former factory.

Because the Nets have practiced in New Jersey, it made logistical sense for many players to live in Manhattan or even New Jersey. Early next year a practice facility will open in Brooklyn.