The news about Atlantic Yards keeps coming and none of it--not a single, solitary shred of it--is good. Today's Wall Street Journal brings news that Frank Gehry has laid off more than two dozen architects working on the project per orders from developer Forest City Ratner. As if that wasn't enough to cause supporters of the project spit up their morning Cup 'o Joe, there's more. Today's Observer wonders "How Long Until the Project Collapses?" Now, why would someone wonder about that? Uh, money. There's the little issue of the even bigger public subsidies that will be required to keep the project from aspirating on its own financial vomit. Then, there's a loan that's coming due in February. That $153 million loan from Gramercy Capital has accrued to $177 million. It's due in early February and the developer is trying to extend the loan.
It's the Observer that really goes to town on the teetering finances of the project, if not the entire development firm. Let's go to the copy and past for the game highlights:
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...At a glance, Atlantic Yards would certainly seem a prime candidate for collapse. The project had an unusually low margin of return back in 2006—according to state and Forest City figures from the time, at the height of the real estate boom—as Mr. Ratner slathered on promises and concessions in an attempt to win political support. Since, several key assumptions changed in Mr. Ratner’s disfavor, surely challenging the project’s financials. For now...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.