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August 11, 2007
Real Estate Round-Up: August 10, 2007
Brooklyn Daily Eagle
Sarah Ryley
Atlantic Yards developer Forest City Ratner would only clear a 16 percent profit on its $4.2 billion arena and 16 high-rise development, which is less than the generally expected profit margin of 20 percent for residential developments, The Real Deal reports.The Real Deal attributes the smaller returns Ratner and other developers are now seeing to the high cost of land, materials and labor, particularly as projects drag on due to “structural problems, bad weather or community opposition.”
Demand for housing has also slowed, said Abraham Hidary of Hidrock Realty, which recently completed a condo project in Kensington.
“Some developers estimate an 18-month turnaround, but it ends up taking two or three years,” he said. Then, as costs increase, “their profit margin erodes.”
The Real Deal does not note that Forest City Ratner would not be putting up the full $4.2 billion for the construction of Atlantic Yards.
The city and state have agreed to give the developer $305 million, in addition to roughly $2 billion in tax-exemptions and financing, so the developer's return would likely be higher than 16 percent.
Posted by amy at August 11, 2007 10:06 AM