Greenland Forest City looking to “recapitalize” Pacific Park: LaRue

Newly-christened REIT’s CEO believes NYC job growth will absorb “sizable addition” to BK resi supply

TRD New York /
May.May 06, 2016 05:17 PM

Forest City Realty Trust used its first quarterly earnings call as a real estate investment trust to acknowledge reports that it’s marketing a stake in the sprawling Pacific Park development in Downtown Brooklyn and offer its outlook on a Brooklyn rental market that some observers think is slipping into oversupply.

The company — known as Forest City Enterprises before its conversion to a REIT in January — and its Pacific Park joint venture partner Greenland Group are currently shopping a “very significant” equity stake in several of the 15 buildings planned at the project, as The Real Deal reported last month.

Forest City CEO David LaRue acknowledged on the earnings call Friday that the company has tapped CBRE to help “recapitalize the project” and take advantage of investor demand for residential assets like the market-rate rental buildings at Pacific Park.

LaRue said two of the properties being marketing are entitled with the now-defunct 421a tax abatement, and added that Forest City was encouraged by the “superior value creation” gained from its $158 million sale of Downtown Brooklyn development site, at 625 Fulton Street, to the Rabsky Group.

“The partnership between Greenland and Forest City is committed to creating value and this recapitalization would allow us to do it,” LaRue said. “We’re just exploring how to maximize return for the partnership.”

The Forest City CEO was also asked for his thoughts on “supply risk” in the Brooklyn residential market, and acknowledged a “sizable addition to supply coming online” in the borough over the next year. LaRue said he anticipated “just over 12,000” market-rate units coming to market in Brooklyn in the next 12 months.

But he also cited strong demand for that product via “the growth in tech jobs” in New York City — noting that “350,000 tech jobs” were added to the city’s economy last year and that “Brooklyn has a large population of that workforce.”

LaRue acknowledged that the supply glut “will clearly impact rent growth” in the Brooklyn residential market over the next 12 to 18 months. But he said that after those units come online, Forest City anticipates “a drop off in supply in the Brooklyn market” – partially but “not exclusively related” to 421a’s expiry. That will shift market dynamics back “towards the existing assets in the market,” he said.

Forest City expects to complete its Pacific Park residential building at 461 Dean Street, formerly known as B2 BKLYN, in the third quarter of this year — by late September or early October, LaRue said. The 363-unit modular tower has received “thousands of registrations” for applications for the roughly 180 affordable housing units at the building, he added.

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