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July 31, 2007
Would FCR's development fee match its investment? A few clues
Atlantic Yards Report
Once again, Norman Oder goes where no other reporter has gone before. Today he connects the dots to address the question of how much of its own money Forest City plans on investing in its controversial Atlantic Yards megaproject. This is important because the development company stands to make a substantial return, whether or not they are investing skads of their own money.
How much money would developer Forest City Ratner put up to build Atlantic Yards? We don't know, but there are hints, not previously reported, that suggest that a good portion of the developer's investment might be covered by its developer fee alone.
NoLandGrab: Simply put, Forest City might have to put up very little, if any, of its own money, since the developer's fee itself might cover the company's "investment."
By compiling information from an Empire State Development Corporation memo made public in the lawsuit questioning the Atlantic Yards environmental review, a recently released page from Ratner's bid for the MTA railyard, and a cash-flow analysis prepared by Ratner and KPMG, Norman Oder notes that:
It's quite possible that Forest City will invest only a fraction of the now $926.2 million [private equity investment.] Add outside investors. Add cash flow from the Barclays sponsorship--say $20 million a year. Add profits from condos. Of course there are many question marks, but it could be a very sweet deal.
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Forest City Ratner's payday, which would include not just the development fee but a segment of other revenues, could be much, much larger. So it's not implausible that the development fee could, in itself, cover a significant portion of the FCR's investment.True, developers typically get rewarded for putting together a complicated deal. The question is how much. And Forest City sure hasn't come clean.
NLG: Why should it matter how much Ratner plans to invest and stands to make? If it does matter, given there is an exceptional amount of public investment and subsidy involved, Ratner and the State should make these figures public. If it doesn't, then why haven't they?
Posted by lumi at July 31, 2007 9:53 AM