Forest City Realty Trust acknowledged Wednesday that it’s in talks over a development rights transfer at its Pacific Park megadevelopment in Downtown Brooklyn that could potentially give rise to the largest office building in the borough.
Speaking on the company’s year-end earnings call, Forest City president and CEO David LaRue said the company is “really very early in the discussion” about development possibilities at 590 Atlantic Avenue, also known as Pacific Park’s Site 5.
But LaRue acknowledged that Forest City, through the Greenland Forest City joint venture partnership that is developing Pacific Park, has up to 650,000 square feet of development rights at a nearby plaza adjacent to the Barclays Center that could be transferred to Site 5.
“It’s really very early in the discussion about building [on the site], but it’s an opportunity to evaluate the right placement of that office square footage,” LaRue said.
Earlier this month, it was reported that Greenland Forest City was exploring the possibility of securing state approval for such a development rights transfer that would enable construction of a massive, 1.5 million-square-foot office tower at 590 Atlantic Avenue.
Forest City — which converted into a real estate investment trust at the start of this year — also discussed its outlook on the Brooklyn office and residential markets, in which it remains a sizable player.
On the residential side, the company said that despite “lots of supply” coming online in Brooklyn, it has seen “strength in demand” that has helped absorb new units. Executives pointed to strong leasing at Forest City’s 80 DeKalb Avenue residential tower in Downtown Brooklyn as an example, but also noted that, “at some point, supply may slow down rent growth.”
A strong Brooklyn residential market has also driven more attention than ever toward the Brooklyn office market, which has become an increasingly attractive proposition for developers as more of the borough’s populace has looked to work “closer to where they live.”
“The properties we own and have invested in and continue to lease into the marketplace have always done very well,” LaRue said of Forest City’s Brooklyn office holdings, like 1 MetroTech Center. “There’s more supply that will be coming [and] more interest in the market… We see continued increase in the overall pricing of the market, as well.”
Forest City also discussed how the disposition on non-core assets – like its sale of the Barclays Center and its minority interest in the NBA’s Brooklyn Nets – have helped the company identify $40 million in annualized savings, with hopes the REIT can increase that figure to $60 million annually.
And while LaRue said Forest City is pleased with its conversion into a REIT, “what hasn’t been so pleasing” has been the company’s stock performance since the beginning of the year, in wake of that REIT conversion on Jan. 1
While the company attributed such struggles to the transition into a new structure, Forest City shares opened at $17.44 on Wednesday morning – down from $21.93 at close on Dec. 31.