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February 28, 2007

Press Release: "Atlantic Yards" Financial Projections Fail to Shed Light on Forest City Ratner's Potential Profit

Figures Released By ESDC Under Threat of Legislators' Lawsuit Leave Many Questions Unanswered, Appear to Grossly Understate Profit

BROOKLYN, NY- Financial projections released today by the Empire State Development Corporation (ESDC) purporting to show Forest City Ratner's (FCRC) projected profit for the proposed "Atlantic Yards" project appear to raise more questions than they answer - and to severely understate the developer's profit.

The financial documents, which were released only after State Assemblyman Jim Brennan and State Senator Velmanette Montgomery sued the ESDC for the information, fail to provide sufficient details or underlying assumptions, including information on "sources and uses" typically provided for a project receiving significant amounts of public funding. In some cases, the documents omit information altogether, for example, assigning no projected value to the project's planned hotel. The true value of the assets, once built, would appear to be much higher than the values outlined; several elements of the plan appear to be estimated below market value, let alone future value.

At least one local real estate developer who has reviewed the documents had serious questions about the conclusions contained in the documents. Shahn Andersen, in comments posted to the web site Brownstoner.com, stated that he believed FCRC would earn approximately a billion dollars, and questioned how much money of its own the developer was actually putting up. He also questioned FCRC's purported rate of return as being severely understated.

The documents only project out eight years, to 2015, one year before the project's officially projected completion date. (In comparison, the MTA, in its Request for Proposals for the Vanderbilt rail yards, had required 20-year pro forma projections, although FCRC failed to provide the MTA with the requested information.) Some people with knowledge of the project, including "Atlantic Yards" landscape architect Laurie Olin, have said they expect construction to last 20 years.

The financial projections do reveal some interesting information about the arena, including the fact that the New Jersey Nets are currently losing some $40 million dollars a year. "It appears that the taxpayers are being asked to bail out a professional sports franchise that's currently a complete money loser," said Candace Carponter, spokesperson for Develop Don't Destroy Brooklyn. "While the city and state are bending over backwards to subsidize Bruce Ratner, it seems that it should be the other way around."

According to the documents, the act of relocating the Nets from New Jersey into an arena in Brooklyn will allow Ratner and the Nets' co-owners to essentially double their initial investment by 2013, providing the money-losing team's investors with a publicly subsidized golden parachute.

It's also unclear as to whether the ESDC has analyzed and verified the projections released today, or if they simply rubberstamped this submission, just as they have every other aspect of the "Atlantic Yards" project. Given the vast public subsidies that this project is slated to receive, the public has the right to expect some assurance from the government that the developer's numbers are comprehensive and based upon valid business assumptions," said DDDB's Carponter. "The footnote on these documents says 'For discussion purposes only - actual results may vary.'"

Posted by lumi at February 28, 2007 6:40 PM