Mapping Out Forest City Ratner’s Monopolistic Strategy of Subsidy Collection

(Click on any image in this post to enlarge.)

(Above: Highlighted in yellow, the monopolistic Brooklyn real estate empire Forest City Ratner is pursuing. The large block in the lower right is FCR’s proposed Atlantic Yards adjacent to FCR’s two malls, Atlantic Terminal and Atlantic Center, one of which includes an office building. The large block in the in the upper left is FCR’s still-growing MetroTech. Almost right next to it is an office building in Brooklyn Heights and to the southwest is the Court Street Cinema/Barnes and Noble block. Equi-distant between MetroTech and the proposed Atlantic Yards chunk of ownership is Ratner’s “10 MetroTech” and the adjacent new 80 DeKalb residential building.)

Ratner’s Monopoly-Seeking

We have said many times before that Forest City Ratner’s strategy at Atlantic Yards is to pursue a monopoly. (See: Saturday, November 14, 2009, The Yankee’s Hoggish New Stadium Monopoly Taxes The Rest of Us.) And we pointed out that a strong motivating factor for Forest City Ratner to launch its Atlantic Yards quest was to wipe out competition for other developers in its back yard. (See: Tuesday, October 13, 2009, Forest City Ratner’s “Not In My Back Yard” Attitude.) We have also pointed out that, taking into account subway system linkages, the monopoly Ratner is pursuing at Atlantic Yards should be considered an extension of the control Ratner has over other key Brooklyn real estate (emphasis added below):

Atlantic Yards and its use of eminent domain is first and foremost about monopoly. It’s about precluding competition and the options of others. The Atlantic Yards site is adjacent to other property of Forest City Ratner, thereby giving the developer unchallenged control over 30 acres of some of Brooklyn’s most valuable real estate. (In fact, jumping over to the nearby subway stops just up the line you find that Forest City Ratner’s monopolistic ownership of Brooklyn real estate continues.)

Atlantic Yards was birthed through the preclusion of allowing other developers to bid against Forest City Ratner for the site. Without that first step it never could have proceeded. The abuse of eminent domain was just a next step that was similarly about removing competition to complete the FCR monopoly. And, . . . . . the public cannot walk away.

(See: Tuesday, October 6, 2009, First Monday in October: An Open Letter to Sonia Sotomayor about Noticing an Eminent Reality.)

Mapping It Out

To assist in showing what we mean we thought we would supply some maps as visuals to demonstrate more about the exclusive control Ratner is seeking to establish involving strategic consolidations of much of Brooklyn’s most important real estate. The first of these visuals appears at the beginning of this post with a caption that explains which properties are which.

Beginning With MetroTech, He Wants to Make It Bigger

MetroTech is where Forest City Ratner’s foothold on monopolistic control of key Brooklyn real estate began. Anyone who doubts what Forest City Ratner is all about in regard to this kind of control should take a look at a January 1999 article that appeared, contemporaneously with some of the public relations hoopla of MetroTech coming on line. It appeared in the now defunct “Brooklyn Bridge” magazine. Atlantic Yards Report has written about the article, “King of the Deal” twice: Stadtmauer Bailkin, Bruce Ratner, and the web of subsidies (Friday, August 17, 2007) and Flashback, 1999: Developers, said FCR, must be "more creative" in finding sites (Thursday, August 23, 2007). Unfortunately, going back to 1999 there is no weblink to the article. The image supplied here (of the first two pages- Click to enlarge) is from Atlantic Yards Report.
MetroTech began with a plan to redevelop the Polytechnic University campus, focusing on making it a “high-tech research center” to tap into some Silicon Valley 1980's style growth. The “King of the Hill” tells us that when Forest City Ratner, Bruce Ratner’s family real estate development firm, entered the picture their focus was to grow the plan into a larger one:

“When Forest City came in, they said the plan had to be substantially larger,” said [attorney Michael] Bailkin, who went on to work for Forest City for eight years, helping to negotiate the incentive packages from the city that would lure companies to Brooklyn.

That should sound familiar to those who have been paying attention to the Forest City Ratner exploits at Atlantic Yards. There has clearly been an operative strategy to make Atlantic Yards bigger than it needs to be both in terms of the site’s footprint and in terms of consolidating bulk onto that site through a zoning override. Among other things the Atlantic Yards plan involves the proposed condemnation and destruction of a block of buildings that there is no reason to destroy except that the site is being gerrymandered to please the developer’s desire to have more cheap land and a larger monopoly.

The Ratner Tradition of Avoiding Competition

The fact that developers tend to always be attracted to size may obscure something that makes size especially important to Forest City Ratner. It is a way to eliminate competition. Here is what the 1999 article says about competition and the traditions of Forest City Ratner development:

An institutional rather than a speculative developer, the firm specialized in projects where it would not face competition and where public subsidies were available. One indicator of its unusual niche is that Forest City was the largest single recipient of federal Urban Action Development Grants (UDAGs) in the entire country.

Elimination of Competition and Chasing Subsidies: “Rent Seeking”?

The firm specializes in collection of subsidies in environments where it does not have competition? This sounds essentially like what we have been saying when we describing Forest City Ratner as being not really a developer but a “subsidy collector.” It also sounds like the classic definition of “rent seeking.”

“Rent seeking” is a concept closely related to the concept of monopolies and originated out of discussions about them. Atlantic Yards Report summarizes “rent seeking” as “the pursuit of special advantage via public policy” and links to a definition in the Glossary of Political Terms. We find Wikipedia’s discussion of the subject more useful. That speaks of capturing special benefit or income “through manipulation or exploitation of the economic environment, rather than by earning profits through economic transactions and the production of added wealth,” for instance through “special monopoly privileges, such as government regulation of free enterprise competition.” It points out that the term is “derived from the far older and more established practice of appropriating a portion of production by gaining ownership or control of land.”

Engineering Losses to Society

The Wikipedia discussion goes on to point out that “Rent seeking generally implies the extraction of uncompensated value from others without making any contribution to productivity, such as by gaining control of land and other pre-existing natural resources” and that it “can impose substantial losses on society.” Reiterating how closely linked the concept is with monopoly, it elaborates that “Studies of rent seeking focus on efforts to capture special monopoly privileges such as government regulation of free enterprise competition” and “The term "monopoly privilege rent seeking" is an often-used label for the former type of rent seeking.”

Applying it to the way Forest City Ratner operates, monopoly and subsidy collection synergistically reinforce each other. Government-created monopolies are a starter form of subsidy that eliminates competition. The absence of competition, in turn, allows Ratner to capture subsidies more easily without comparison benchmarks easily being available to shine light on what it might be fair to actually give them. This makes it easier for politicians to dole out excessive amounts to the Ratner firm. The “King of the Deal” article specifically attributes the Forest City Ratner success in Brooklyn to these “generous subsidies” referring to Bruce Ratner’s “uncanny knack for identifying projects that dovetail with the city’s economic development plans and therefore benefit from generous public subsidies.”

There Ought to Be a Law or a Public Policy

There probably ought to be a law that no subsides should be handed out unless those subsidies can be competed for. There is no such law, but it is a desirable policy. Further, as the administration of Battery Park City demonstrates with its bidding out of individual development parcels to multiple developers, it is possible to have competition when large sites are developed. Also, the much higher proposed per dwelling unit amount of the housing subsidies proposed for Atlantic Yards demonstrates the inevitable result when there isn’t competition.

Saying Aloha to Destructive Monopolies?

It should be viewed as a significant irony that one of the most precedent-setting and conceptually challenging cases in which the U.S. Supreme Court dealt with eminent domain was Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984) which held that Hawaii could use eminent domain to break up and redistribute to a wider population land that was overwhelmingly concentrated in the hands of a few private landowners. Now, in situations like Atlantic Yards and the Columbia University takeover of West Harlem eminent domain is being used for exactly the opposite, to artificially concentrate monopoly ownership of property in the hands of giant land owners such as Forest City Ratner and Columbia University, respectively.

An Origin Story: A Stint With the City and a Subsidy-Seeking Law Firm

At the time MetroTech began, Bruce Ratner was a partner at the law firm of Stadtmauer Bailkin LLP. One of the two Atlantic Yards Report articles that wrote about the “King of the Deal” story focused specifically on how the law firm of Stadtmauer Bailkin LLP, specializes in the large-scale extraction of special subsidies from New York and using the firm’s website Atlantic Yards Report itemizes many of the subsidies the firm was involved in procuring for MetroTech.

While “King of the Deal” describes Bruce Ratner as having an “uncanny knack” for focusing in on and extracting “generous public subsidies” we would attribute this to a skill that was developed through careful preparation and study going way back. It can hardly be considered an accident that Ratner went to work for a law firm that specializes in the extraction of subsidy. Similarly, coming from a family development firm that specialized in the collection of uncompeted-for subsidies it should not be viewed as an accident that Bruce Ratner’s first significant career move was to serve as consumer affairs commissioner in Mayor Koch’s administration. “King of the Deal”explains how these two career steps got Ratner’s family firm involved with MetroTech as owner and developer of a major subsidy-collecting chunk of Brooklyn real estate:

“Bruce was at the firm [Stadtmauer Bailkin LLP.] to look for development deals when MetroTech came along,” says Bailkin. And it was Ratner’s [Koch administration] connections that got the ball rolling.

Converging Traffic, the Story on the Surface

The “King of the Deal” article begins with a description of how, when MetroTech was nearing completion, Ratner assigned one of his real estate development directors the job of flying over Brooklyn in a helicopter “videotaping traffic patterns and housing concentrations” searching for a location to build new shopping complexes that eventually became the Atlantic Center mall in 1996 followed by then the adjoining Atlantic Terminal mall. Atlantic Yards is envisioned as an another immediately adjoining extension to those properties.

The fact that Ratner was looking at street traffic patterns and likely located the malls at the significant convergence of traffic he found at the intersection of Atlantic Avenue and Fulton Street may be viewed as dismaying news to neighborhood residents who are looking at the fact that Ratner now wants to put a traffic-surge generating basketball arena at the very same site together with many blocks of traffic-attracting parking.

Converging Traffic, A Deeper Story

While Ratner, a boy from Cleveland, apparently had a real estate director looking at Brooklyn’s vehicular surface traffic way back then, in New York, what is much more important is where the subway lines are. We generated another map showing subway lines because the influence of subways is one several things that effectively make more pronounced the real estate monopolies that Ratner is pursuing.

To look at how effectively troubling a real estate monopoly is, one should not look at just at site acreage. One should also look at the density and size of the buildings in question, not only in terms of what exists and has been built but also in terms of what can be built. When looked at next to their neighboring structures the Ratner buildings dominate in size. Secondly, one should look at the relative value of that land and its practical proximity when traveling to other real estate. In those terms we find that the Ratner sites are dominating the subways lines too. See the map with city subway lines overlaid below. (Below that, as second reference on this is a DOT bicycle map that shows subway lines.) In other words the Ratner monopoly is more significant than might immediately be apparent.
(Above: Red lines show the 2 & 3. Dark Green the 4 & 5. Blue the A & C. Light Green the G. Yellow the R & M. Orange the B, D, Q & F.)

It’s Not As Simple as Just Tracking Ownership
To be fair, it is not easy to provide a map of Forest City Ratner’s dominance of Brooklyn real estate that provides all the information one might want to see to assess the situation. For instance. although Forest City Ratner’s website provides an image of MetroTech (above) that thrusts forward with relative prominence the two Chase Bank buildings (MetroTech addresses 3 and 4), those two buildings are not actually owned by Forest City Ratner. They are at least nominally owned by a city development agency, which ownership is probably tied in with the delivery of subsidies the two buildings receive. Accordingly, the Forest City Ratner website page (that allows visitors to zoom in and out on a map to view properties listed as owned by Forest City Ratner) omits these properties (see below). The website is not perfectly accurate: It puts One Pierrepont Plaza at the wrong end of Brooklyn Height’s Pierrepont Street rather than much closer to MetroTech on the side of Cadman Plaza (see below). With little overlapping pins, it also doesn’t give an idea of the expanse of the Forest City ownership.
(Above: One Pierrepont Plaza, with its pointed spire seen in the background behind 12 MetroTech also known as 330 Kay Street. Below: A picture of One Pierrepont Plaza on Cadman Plaza.)
Similarly, although our map highlights all of MetroTech, there are other buildings that Forest City Ratner does not own: for instance, it does not own a number of buildings that FCR developed for Polytechnic University. By the same token, though Forest City Rather is getting development control of all of the proposed Atlantic Yards site, to the extent that it develops luxury condominium buildings it will only have developed those buildings without ultimate ownership of them in later years. The many nuances of what constitutes control and influence could keep us busy writing an article of much greater length than this in which we would get into such subjects as ground leases and management contracts. For instance, we note that one way the FCR extends its influence in the MetroTech area is through the MetroTech BID (Business Improvement District) a form of local government over which it has substantial control (see map below- from the Downtown Brooklyn Partnership site). Comparably, Atlantic Yards proposes to have a Forest City Ratner-dominated “nonprofit” that will control “public space.”

Below is a list of addresses the Forest City website lists as owned (it doesn’t get into the Atlantic Yards properties). Below that is a map of MetroTech with MetroTech addresses. It doesn’t show 10 MetroTech Center. If you ask about it, the security guard will be confused. Keep reading.
Below is a version of our original map that highlights in MetroTech only those properties that the Forest City Ratner website lists as owned by the firm. If anything, showing the Ratner ownership at the MetroTech site as a reduced amount only emphasizes the proportionately greater ownership of Brooklyn real estate to which Forest City Ratner wishes to surge through exclusive ownership of Atlantic Yards.
A Befuddling Extension of MetroTech

The colors on our original map don’t show the MetroTech BID as Ratner territory, but the BID interestingly extends far enough south and east (and the current official "MetroTech"? see below) of the above Metrotech map to pick up and include a distant Ratner-owned property to which Ratner gave the improbable vanity address of 10 MetroTech Center (corner of Fulton and Hudson Avenue) thereby throughly confusing pedestrians who will find that it is .8 miles from 12 MetroTech Center (aka 330 Jay Street). Those pedestrians are likely to be lost and have a long way to walk because both these addresses, 10 and 12 MetroTech Center, befuddle both Map Quest and Google Maps which, as a result, will get you nowhere close to where you want to go. (We have written before about the problem with vanity addresses when we were commenting about the MTA’s inappropriate giveaway of naming rights to Ratner for two subway stations. See: Sunday, June 28, 2009, Naming a Problem: The MTA Gives Ratner the Right to Name Brooklyn Subway Stations “Barclays”)

(Below is a "MetroTech" map according to the Metrotech BID.)
It is possible that the vanity address (that is the way Ratner himself referred to it) of 10 MetroTech Center (see building above) is a long-ago clue to Ratner’s ambitions for much more city-assisted ownership in this area. Perhaps he is looking forward to one continuous end-to-end swath. Ratner has since gone on to build adjacent 36-story 80 DeKalb residential building (see blow). Looking at the building’s size in relation to its neighbors is a reminder that, as we already made the point, it is important to consider relative size in evaluating dominance. Financing for 80 DeKalb was provided when scarce subsidizing tax-exempt housing bonds were provided to it by the New York State Housing Finance Agency. One would hope that the developer did not, as it typically does, use political influence to obtain preferential access to that subsidy.
Looking at a Handsome Building
MetroTech was originally spoken of as a 16-17 acre campus. It has, however, grown larger. The aforementioned 12 MetroTech on the other side of Jay Street expands it. We should point out that 12 MetroTech, Brooklyn’s second-tallest building after the Williamsburg Savings Bank Building when it was built, is an absolutely beautifully designed building, at least so far as we can tell from the street. It is probably the very best in design of anything Ratner has built in Brooklyn. (You see we can say nice things about Ratner when a compliment is due.) The building of 12 MetroTech was resisted by other occupants of the MetroTech Center, Chase Manhattan Bank and Polyprep, on a “Not In My Back Yard” basis: The building houses the Brooklyn Family Court and Kings County Family Court, the New York State Supreme Court (criminal division) and related city agencies. (The building has building will have three separate lobbies, one each for the Family Court, the Supreme Court and the commercial tenants.)

However beautiful 12 MetroTech (aka 330 Jay Street) may be, the question must be asked whether it was another situation where Forest City Ratner benefitted disproportionately as developer because of special access and lack of competition. This would probably take some sorting out. The property for the building was city property that housed the New York City Transit Authority and the deal involved the location of the courts in the building and was linked to Chase Bank locating at MetroTech. All that was opportunity for Ratner’s aforementioned speciality: “rent seeking.” As recently as June 2008, Brownstoner reported with a raised eyebrow how the city bought from Ratner the condominium portion of the building that the city already controlled, putting $499,401,179 in Ratner’s pocket for 830,879 square feet of space. (As you see from this piece of news Ratner does not any longer technically “own” 28 out of the 33 stories in the building even if the FCR website says it does.) Though the price the city paid did not seem such a bad deal after apportioning construction cost to the floors sold, Brownstoner commented: “Our question: Is this the most valuable high-rise in Brooklyn? Gotta at least be in the running.” (See: June 27, 2008, How Much For a Downtown 'Scraper? At Least Half a Bil.)

Controlling a High Proportion of Upcoming Development

If anything, the proposed Ratner monopolistic total control over the development of the Atlantic Yards site is a more disproportionate addition to Ratner’s Brooklyn holdings than one might expect because Forest City Ratner would own more of it and because it is all upcoming development. It is also disproportionately greater because of the extraordinary extra density being piled onto the site, significantly more than at MetroTech. The terms of the ludicrous so-called economic benefits agreement that ACORN signed with Ratner called for ACORN to support Ratner’s monopoly control of “7.799 million square zoning feet for the project.” (See: Saturday, June 28, 2008, Selling out the Community for Beans (A Giant Wrong).) On a square footage of land site control basis alone, this is a substantial portion of all the development that shows up on the Downtown Brooklyn Partnership’s map of “Current Development Projects” (see below). Only a small portion of the “handle” of Atlantic Yards’ wrench-shaped site peeks in onto that map but that “tip of the iceberg” portion looks huge compared to the rest of the development on the map. The map manages to show the rest of the Atlantic Yards site by shrinking the mega-project down to a minuscule fraction of its actual size, perhaps a ninth, where one block normal city length equals then three of the comparatively diminutive AY block lengths.
Square footage, however, does not take density into account. Taking the density "negotiated" by ACORN into account, the 22-acre Atlantic Yards megadevelopment, calculated on a per square mile basis, would be twice as dense as the densest census tract currently existing in the country. Eminent domain is being used as a tool to shoehorn in more density than would be possible under normal circumstances. (Though the 22 contiguous acres of the megadevelopment should certainly be considered as a whole, the 22 acres actually don’t constitute a single census tract since the span of acreage exists in four different districts. See: Ratner Will Bring Us Closer Together, by Matthew Schuerman in the Observer, October 5, 2006. As noted, the project land area unto itself is substantial: Though the project design involves discredited superblocking, its footprint could readily constitute 10 city blocks if it were better laid out.)

BIG Question

We conclude simply with this. If monopolies have always been recognized to be bad, such that we have national laws against them, and if monopolies facilitate “rent seeking” behavior that enables developers like Forest City Ratner to manipulate gains for itself at society’s loss, why is the government fostering these real estate monopolies for one real estate company’s unprecedented takeover of so much of Brooklyn? It doesn’t make sense to us but it’s a really BIG question. We hope that our mapping it out helps to visualize just how big.

(Below: MetroTech as seen from the southwest. A much smaller and lower density megadevelopment than Forest City Rather proposes to own at the proposed Atlantic Yards site.)