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March 30, 2007
Once again, KPMG report on IRR doesn't mean profit
Atlantic Yards Report
If you're as confused as we are about the difference between "profit" and "internal rate of return," join the press corps:
Two published articles this week have inaccurately suggested that the KPMG audit the Empire State Development Corporation (ESDC) commissioned actually estimated Forest City Ratner's profit on the Atlantic Yards project.
First, the New York Sun reported, in an article noting that the state never saw a full business plan for the project:
Cash flow projections and interviews with executives were the basis for the report's conclusion that the developer would stand to make a total return on its investment of about 9.8% on the mixed-use portion of the project.
Then the Brooklyn Paper followed up:
The KPMG report projects that Ratner will walk away with a $400-million profit from his state-backed $4-billion Prospect Heights Xanadu.
So how do we square this with New York magazine's estimate of $1 billion profit? We don't.
As I reported in December, quoting affordable housing expert David A. Smith, internal rate of return (IRR) doesn't mean profit....
Norman Oder explains (link).
Posted by lumi at March 30, 2007 8:39 AM