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December 17, 2008

Atlantic Yards Becomes a Question Mark

Based on "multiple people familiar with discussions," The NY Observer's Eliot Brown is reporting that Atlantic Yards developer Bruce Ratner has cash flow problems and the near future doesn't look any better.


Bruce Ratner, the Brooklyn-based cousin of Chuck Ratner who runs Atlantic Yards, seems to be rushing to patch a leaky dam. According to multiple people familiar with discussions, his subsidiary company, Forest City Ratner, is attempting to cobble together extra money; trying to speed up tens of millions of dollars it is owed by public entities; delay tens of millions in payments it owes to both the public and private sectors; and tack on new subsidy programs for the housing piece of the project. Earlier this month, Bruce Ratner abruptly shut down preliminary construction efforts related to the NBA arena in an apparent attempt to preserve cash.

For now, with Forest City still planning to build at some point, the question becomes how long the developer can keep doling money out without seeing any come back in. Forest City is awaiting what is likely the last major court challenge to the use of eminent domain, with a decision expected in the first half of 2009. But even if that concludes in its favor, as many legal experts expect it will, the developer may very well have an additional wait ahead of it. At this point it is unclear—many would say unlikely—that in six months to a year, investors would be willing to provide the nearly $1 billion in bonds needed for an arena or other financing for high-rise residential developments.

All the while, the company is signing checks. Bruce Ratner bought the Nets in 2004 for the purpose of moving them to a new arena at Atlantic Yards. For now, paying rent in someone else’s arena, Forest City reported losses of more than $30 million on the Nets in the first nine months of 2008.

Since Atlantic Yards was originally a highly leveraged project with small returns for the public, things don't look any rosier going forward.

Atlantic Yards Report, In AY as "question mark," Observer breaks news that Ratner's renegotiating subsidy deals

In light of the revelations reported by Eliot Brown, Norman Oder asks some key questions:

While no official would comment on the record, it's all worth much more scrutiny.

Why should FCR not have to pay the MTA in timely fashion if that was part of the original deal (and the payment less than half the appraised value)? Will FCR even build a permanent new railyard or just leave the MTA with the interim, temporary yard?

Why should the cash-strapped city give FCR a special deal when so many programs are hurting?

And shouldn't there be transparency regarding the Atlantic Yards affordable housing? How would the subsidies compare to those for other projects?

Posted by lumi at December 17, 2008 5:23 AM