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March 29, 2007

On Drug Crimes And Business Plans

Gumby Fresh has a pretty damn good explanation as to why the non-existent financial projections for Atlantic Yards are important, why Forest City Ratner doesn't want them to see the light of day, and why this only happens in the public sector (emphasis added):

I was pretty gobsmacked to learn that the developer had not submitted a business plan to the state when asking it for all kinds of juicy subsidies and the power of condemnation and so forth. This is pretty much project development 101, and gives you a pretty good idea of how much Bruce Ratner is winging it.
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A business plan would give the interested reader an idea of what revenues Ratner is devoting to repaying what sources of financing, and which parts of the project are included within the scope of the naming rights cash, tax-exempt debt, taxable debt, state subsidies, state money towards infrastructure improvements and so forth. It is, wearingly enough, often withheld as commercially sensitive, and I'd assumed that the state could stonewall in this fashion for ever.

But no, Forest City has not actually bothered to put a business plan together for its public partners, partly because it wants to be able to slosh its capital expenditure towards whichever use is most lucrative, and partly, I suspect, that it wants to dedicate as little of the project revenues towards servicing the taxable debt as possible. This would indeed have a substantial effect on the project's internal rate of return (a number, expressed as a percentage, that is not the same as "profit", or many other accounting concepts, but both do correlate with a large number of the same inputs, per a discussion here).

But anyway, I need to put a business plan together before spending more than a couple of grand of my employer's money. It is abject lunacy that Ratner cannot assemble one of these for a sprawling mixed-use development that threatens to gut the prettiest county in the United States. [Actually I can't get sign-off on a few hundred in expenses from my employer right now as a result of some tedious interdepartmental feuding. Wonderful]

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NoLandGrab: Upon hearing the news, we were pretty "gobsmacked" too... or was it "gabberflasted?"

Posted by lumi at March 29, 2007 8:13 AM