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October 11, 2006

Financialized Corporate Era (FCE) part 2

Picketing Henry Ford

Stuart Schrader just posted Part Two of his thoughts on "financialization" and its effects on real estate markets, specifically on Forest City Ratner's prospective Atlantic Yards project:

Financialization is fundamentally based on the anticipation of future gains or losses, and all corporations are subject to this sort of divining. In FCE’s case, the marketing material makes clear that the corporation is deploying its resources to assure investors of its longevity, especially the flagship NYC market, which folk wisdom holds as currently impervious, more or less, to the burst of the housing bubble. Blackburn argues, “In drawing up their investment plans, [corporations] will have to show that these will achieve the benchmark or ‘hurdle’ rates of return established by the financial sector. . . Making a good profit is no longer enough; a triple A rating is also needed. Theoretically, the value of a share has nothing to do with present or past profits, but exclusively relates to the prospects of future profits” (43). In this way, it becomes clear why FCR is so intent on developing the AY in such an outsize, winner-take-all manner. The focus is on future profits, and residential real estate is now the highly profitable development field, even as, on the one hand, speculation has contributed to the current bubble effect, and on the other, a luxury development designed by a world-famous architect is aimed directly at speculators.

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Posted by lumi at October 11, 2006 11:54 AM