From:                                         Hoyt, Winthrop <whoyt@
Sent:                                           Thursday, November 19, 2015 10:26 AM
To:                                               Jeffrey Nelson
Cc:                                               Yu, Susi; 'Scott Solish' (ScottSolish@
Subject:                                     Site 5 Development Rights
Attachments:                          12‐047NY‐0410 (Atlantic Yards Site 5).pdf; 30._City_Participation_Agreement.pdf
 
Follow Up Flag:                      Follow up
Flag Status:                              Completed
 
Jeff:
 
Wanted to follow up with you after our Pacific Park B1 / Site 5 meeting last week.  Thanks for taking the time to speak to us
about our proposal.  In the meeting we briefly discussed the City‐owned air rights on Site 5 and I wanted to give you some
background as to the agreement that we reached with EDC on this topic some time ago.  The City owns the development rights
above the current buildings on Site 5 – approximately 270,000 sf based on the underlying zoning.  The City agreed to contribute
these development rights, as well as certain other properties and benefits (e.g, certain streets, two parcels on the arena block,
PILOT benefits, etc.), to the project.  At the time of the Atlantic Yards / Pacific Park “Master Closing” in December of 2009,
Forest City negotiated with EDC (specifically, Chris Leng‐Smith and Charu Singh) a participation agreement by which the City
would be repaid the value of these contributions via waterfall‐based project cashflow sharing once the project achieves a 15%
IRR.   The valuation methodology for the development rights was agreed upon by both parties in the agreement and specifies
the following: (1) the development rights will be appraised by an appraiser mutually selected by EDC and the developer; (2)
they will be valued accounting for zoning and other conditions as of March 3, 2010 (the day before the title vesting date of the
project’s first condemnation), and (3) the valuation will not take into account the impact of the uses specified in the Atlantic
Yards Modified General Project Plan.
 
Chris and I agreed on CB Richard Ellis as the appraiser for the Site 5 air rights, and CBRE completed the appraisal on June 29,
2012.  The appraisal accounted for the appropriate value deductions that would be required to realize the value of the City’s air
rights, namely, the buyouts of the fee interests of both Site 5 parcels (occupied by Modell’s and PC Richard), the cost of buying
out Modell’s long‐term lease, and certain development cost premiums caused by the site’s environmental status and proximity
to multiple subway lines.  The site condition‐related items were agreed to by me, Chris and Lisa Kirsch, who had taken over for
Charu.  The resulting value of the development rights was $800,000.  I am attaching the appraisal for your reference; Chris, Lisa
and I had multiple calls in 2012 and 2013 with the appraiser to review the valuation. 
 
The agreement also contains a provision calling for payment to the City if the developer fails to start construction of the project
by May 12, 2020.  In that scenario, we would either pay the City the value of the development rights or forfeit them back to the
City.  The agreement calls for the City to receive a 6.25% annual return on the value of the development rights and its other
contributions.
 
I’m also attaching the governing agreement (the “Atlantic Yards – City Participation Agreement”) for your reference.  Realizing
the complicated nature of this information, I’m happy to discuss it further at your convenience.  Let me know your thoughts.
 
Best,
Win Hoyt
 
Winthrop Hoyt
Forest City Ratner Companies
One MetroTech Center
Brooklyn, NY 11201
(718) 923-8718 (f)
whoyt@

 

 NOTICE: This message is intended only for the personal and confidential use of the designated recipient(s) named above. If you
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message is strictly prohibited. This communication is for information purposes only and should not be regarded as an offer to sell or
as a solicitation of an offer to buy any financial product, an official confirmation of any transaction, or as an official statement of
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privileged, confidential, legally privileged, and/or exempt from disclosure under applicable law.

 ATLANTIC YARDS DEVELOPMENT SITE 5
15 Fourth Avenue & 617 Pacific Street
Brooklyn, Kings County, NY 11217
CBRE, Inc. File No. 12-047NY-0410

Self-Contained
Appraisal Report

Prepared For:
Winthrop Hoyt
ATLANTIC YARDS DEVELOPMENT
COMPANY, LLC
C/O FOREST CITY RATNER CO.'S, LLC "
One Metro Tech Center
Brooklyn, NY 11201

VALUATION & ADVISORY SERVICES

 VALUATION & ADVISORY SERVICES

One Penn Plaza, Suite 1835
New York, NY 10119
T (212) 715-5741
F (212) 207-6069
www.cbre.com

June 29, 2012
Winthrop Hoyt
ATLANTIC YARDS DEVELOPMENT COMPANY, LLC
C/O FOREST CITY RATNER COMPANIES, LLC
One Metro Tech Center
Brooklyn, NY 11201

RE:

Appraisal of Atlantic Yards Development Site 5
15 Fourth Avenue
617 Pacific Street"
Brooklyn, Kings County, NY
CBRE, Inc. File No 12-047NY-0410

Dear Mr. Hoyt:
At your request and authorization, CBRE, Inc. has prepared an appraisal of the market value of the
referenced property. Our analysis is presented in the following Self-Contained Appraisal Report.
The subject property, known as Atlantic Yards Development Site 5, is situated on a 53,933 SF parcel
located in Brooklyn, NY. The site is bounded by Atlantic, Fourth and Flatbush Avenues and contains 2
one-story retail buildings and a 33 space parking lot. Retail uses consists of a 16,980 SF Modell’s
Sporting Goods and a 30,300 SF P.C. Richards and Sons.
At the request of the client, we have provided a value for the additional development rights granted to
the site by estimating the overall fee simple value of the land and subtracting out the value of the
property as it existed on the determination date specified (March 3, 2010), including the costs of
infrastructure that was mutually agreed upon by the City of New York and Atlantic Yards Development
Company (AYDC) and our estimate of the lease buy-out costs for Modell’s. We were specifically
instructed to value the site under a “stand alone” assumption, meaning that our value is not impacted
by the overall re-development of Atlantic Yards, thus not adding value for the owner’s investment in
the surrounding community.
The requested value date per documentation provided is March 3, 2010, making this a retrospective
value conclusion. Based on the analysis contained in the following report, the retrospective market
value of the subject is concluded as follows:

 Winthrop Hoyt
June 29, 2012
Page 2

MARKET VALUE CONCLUSION
Appraisal Premise

Interest Appraised

Date of Value

Fee Simple Estate - Land

March 3, 2010

$35,600,000

Less: As Is - Retrospective

Fee Simple Estate - PC Richard

March 3, 2010

($13,700,000)

Less: As Is - Retrospective

Leased Fee Estate - Modell's

March 3, 2010

($6,700,000)

Less:

Modell's Lease Buyout Cost

March 3, 2010

($3,500,000)

Subway Cost

March 3, 2010

($10,900,000)

Value Conclusion

March 3, 2010

$800,000

As Is - Retrospective

Less:
As Is - Retrospective - Development Rights

Value Conclusion

Compiled by CBRE

Data, information, and calculations leading to the value conclusion are incorporated in the report
following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an
integral part of, and inseparable from, this letter.
The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the
reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed
based on, and this report has been prepared in conformance with, our interpretation of the guidelines
and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP),
the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice
of the Appraisal Institute. It also conforms to Title XI Regulations.
The intended use and user of our report is specifically named in our report as agreed upon in our
contract for services and/or reliance language found in the report. No other use or user of the report
is permitted by any other party for any other purpose. Dissemination of this report by any party to nonclient, non intended users does not extend reliance to any other party and CBRE will not be
responsible for unauthorized use of the report, it’s conclusions or contents used partially or in its
entirety.
It has been a pleasure to assist you in this assignment. If you have any questions concerning the
analysis, or if CBRE, Inc. can be of further service, please contact us.
Respectfully submitted,
CBRE, Inc. - VALUATION & ADVISORY SERVICES

Mark T. Godfrey
Vice-President
NY State Certification No. 46-41668
Phone: 212-715-5719
Fax:
212-207-6069
Email:
mark.godfrey@cbre.com

Helene Jacobson, MAI
Managing Director
NY State Certification No: 46-26005
Phone: 212-207-6106
Fax:
212-207-6069
Email:
helene.jacobson@cbre.com

 ATLANTIC YARDS DEVELOPMENT SITE 5   C ERTIFICATION OF THE A PPRAISAL

CERTIFICATION OF THE APPRAISAL
We certify to the best of our knowledge and belief:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting
conditions and are our personal, impartial and unbiased professional analyses, opinions, and conclusions.
3. We have no present or prospective interest in or bias with respect to the property that is the subject of this
report and have no personal interest in or bias with respect to the parties involved with this assignment.
4. Our engagement in this assignment was not contingent upon developing or reporting predetermined results.
5. Our compensation for completing this assignment is not contingent upon the development or reporting of a
predetermined value or direction in value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the
intended use of this appraisal.
6. This appraisal assignment was not based upon a requested minimum valuation, a specific valuation, or the
approval of a loan.
7. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity
with the Uniform Standards of Professional Appraisal Practice, as well as the requirements of the State of
NY.
8. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in
conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal
Practice of the Appraisal Institute.
9. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly
authorized representatives.
10. As of the date of this report, Helene Jacobson, MAI have completed the continuing education program of
the Appraisal Institute.
11. As of the date of this report, Mark Godfrey has completed the Standards and Ethics Education Requirement
of the Appraisal Institute for Associate Members.
12. Mark Godfrey and Joseph Stunja have and Helene Jacobson, MAI has not made a personal inspection of
the property that is the subject of this report.
13. Joe Stunja provided significant real property appraisal assistance to the persons signing this report.
14. Valuation & Advisory Services operates as an independent economic entity within CBRE, Inc. Although
employees of other CBRE, Inc. divisions may be contacted as a part of our routine market research
investigations, absolute client confidentiality and privacy were maintained at all times with regard to this
assignment without conflict of interest.
15. Mark Godfrey and Helene Jacobson, MAI have not provided any services, as an appraiser or in any other
capacity, regarding the property that is the subject of this report within the three-year period immediately
preceding acceptance of this assignment.

Mark T. Godfrey
NY State Certification No. 46-41668

Helene Jacobson, MAI
NY State Certification No: 46-26005

i

 ATLANTIC YARDS DEVELOPMENT SITE 5   S UBJECT P HOTOGRAPHS

SUBJECT PHOTOGRAPHS

TYPICAL VIEW OF THE SUBJECT

TYPICAL VIEW OF THE SUBJECT
ii

 ATLANTIC YARDS DEVELOPMENT SITE 5   S UBJECT P HOTOGRAPHS

TYPICAL VIEW OF THE SUBJECT

VIEW LOOKING NORTH (FLATBUSH AVE)

iii

 ATLANTIC YARDS DEVELOPMENT SITE 5   S UBJECT P HOTOGRAPHS

VIEW LOOKING EAST (ATLANTIC AVE)

VIEW LOOKING SOUTH (4TH AVE)

iv

 ATLANTIC YARDS DEVELOPMENT SITE 5   S UMMARY OF S ALIENT F ACTS

SUMMARY OF SALIENT FACTS
Property Name

Atlantic Yards Development Site 5

Location

15 4 Avenue
617 Pacific Street, Brooklyn, Kings County, NY 11217

Assessor’s Parcel Number

Block 927 Lot 1 & 16

Highest and Best Use
Land

As If Vacant
Property Rights Appraised

Fee Simple Estate

Land Area

1.24 AC

Total Developable Square Feet (FAR)

323,598 SF

Estimated Exposure Time

6 Months

53,933 SF

PC Richard

Modell's

Owner/Leased GLA (Square Feet)

30,300 SF

16,980 SF

Current Occupancy

100.0%

100.0%

Financial Indicators - As Improved Valuations

Stabilized Occupancy

96.0%

96.0%

Stabilized Credit Loss

1.0%

1.0%

Overall Capitalization Rate

7.25%

7.25%

VALUATION

Total

Land Value
As Is - Retrospective - Development Rights
Market Value As Is On
Fee Simple Estate - PC Richard & Son

Per SF

$35,600,000

$660.08

$800,000
March 3, 2010
$13,700,000

$452.15

Leased Fee Estate - Modell's

$6,700,000

$394.58

Modell's Lease Buyout Cost

$3,500,000

$206.12

CONCLUDED MARKET VALUE
Appraisal Premise

Interest Appraised

Date of Value

Value

Fee Simple Estate - Land

March 3, 2010

$35,600,000

Fee Simple Estate - PC Richard

March 3, 2010

($13,700,000)

Less: As Is - Retrospective

Leased Fee Estate - Modell's

March 3, 2010

Less:

Modell's Lease Buyout Cost

As Is - Retrospective
Less: As Is - Retrospective

Less:
As Is - Retrospective - Development Rights

Subway Cost
Value Conclusion

Compiled by CBRE

v

($6,700,000)
($3,500,000)
($10,900,000)

March 3, 2010

$800,000

 ATLANTIC YARDS DEVELOPMENT SITE 5   S UMMARY OF S ALIENT F ACTS

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT)
Strengths and weaknesses are internal to the subject; opportunities & threats are external to the
subject
Strengths
The subject is in a desirable location adjacent to the renovated Atlantic Terminal Mall
The subject contains approximately 323,598 as of development rights
Weaknesses
None Noted
Opportunities
As of our date of value the market was poised to move into the recovery phase of the economic
cycle following an extended period of market malaise.
Threats
Overall uncertainty in the economy and marketplace
EXTRAORDINARY ASSUMPTIONS AND HYPOTHETICAL CONDITIONS
We were specifically instructed to value the site under a “stand alone” assumption, meaning that our
value is not impacted by the overall re-development of Atlantic Yards, thus not adding value for the
owner’s investment in the surrounding community. This is an Extraordinary Assumption as we are
assuming a condition which is known to be contrary to what existed as of the determination date.
The costs associated with the Subway related infrastructure has been provided to us and totals
$10,900,000. We have not done any independent verification of this figure as it has reportedly been
agreed upon by both parties to this transaction. Should this number change, the value conclusion
contained herein would change accordingly.
At the request of the client we have estimated the costs to buy Modell’s out of their leasehold position.
The reader is cautioned that lease buy outs are complicated transactions, whereby the motivations of
the tenant and landlord can have a significant impact on the resulting buy out figure. These
transactions are often handled in arbitration forums and there is no true way to have a “market”
estimate of what these costs will be. We have applied a methodology that is reasonable based on
market participant interviews; however it is a specific assumption of this report that the negotiations
between landlord and tenant are handled in a expeditious manner and are not impacted by nonmarket oriented factors.
The use of any extraordinary assumptions of hypothetical conditions may have a material impact on
the value conclusions reported herein.

vi

 ATLANTIC YARDS DEVELOPMENT SITE 5   T ABLE OF C ONTENTS

TABLE OF CONTENTS
CERTIFICATION OF THE APPRAISAL .............................................................................................i 
SUBJECT PHOTOGRAPHS .......................................................................................................... ii 
SUMMARY OF SALIENT FACTS.................................................................................................... v 
TABLE OF CONTENTS .............................................................................................................. vii 
INTRODUCTION ...................................................................................................................... 1 
AREA ANALYSIS ......................................................................................................................... 6 
NEIGHBORHOOD ANALYSIS .................................................................................................. 13 
MARKET ANALYSIS .................................................................................................................. 18 
SITE ANALYSIS ........................................................................................................................ 37 
ZONING ................................................................................................................................ 40 
TAX AND ASSESSMENT DATA .................................................................................................. 42 
HIGHEST AND BEST USE ......................................................................................................... 47 
APPRAISAL METHODOLOGY ................................................................................................... 49 
LAND VALUE ........................................................................................................................... 51 
LEASED FEE ANALYSIS – MODELL’S .......................................................................................... 57 
FEE SIMPLE ANALYSIS (PC RICHARD) ........................................................................................ 60 
MODELL’S LEASE BUYOUT ...................................................................................................... 62 
RECONCILIATION OF VALUE .................................................................................................. 64 
ASSUMPTIONS AND LIMITING CONDITIONS .......................................................................... 65 
ADDENDA
A Glossary of Terms 
B Land Sale Data Sheets 
C Legal Description 
D Précis METRO Report - Economy.com, Inc. 
E Required Client Information 
F Qualifications 

vii

 ATLANTIC YARDS DEVELOPMENT SITE 5   I NTRODUCTION

INTRODUCTION
PROPERTY IDENTIFICATION
The subject property, known as Atlantic Yards Development Site 5, is situated on a 53,933 SF parcel
located in Brooklyn, NY. The site is bounded by Atlantic, Fourth and Flatbush Avenues and contains 2
one-story retail buildings and a 33 space parking lot. Retail uses consists of a 16,980 SF Modell’s
Sporting Goods and a 30,300 SF P.C. Richards and Sons.
At the request of the client, we have provided a value for the additional development rights granted to
the site by estimating the overall fee simple value of the land and subtracting out the value of the
property as it existed on the determination date specified (March 3, 2010), including the costs of
infrastructure that was mutually agreed upon by the City of New York and Atlantic Yards Development
Company (AYDC) and our estimate of the lease buy-out costs for Modell’s. We were specifically
instructed to value the site under a “stand alone” assumption, meaning that our value is not impacted
by the overall re-development of Atlantic Yards, thus not adding value for the owner’s investment in
the surrounding community.
The requested value date per documentation provided is March 3, 2010, making this a retrospective
value conclusion.
OWNERSHIP AND PROPERTY HISTORY
The land is held by two separate entities. Title to the Lot 16 is currently vested in the name of Forest
City Master Associates III, LLC who acquired title to the property in February 2007 by a real property
transfer from a related party who acquired the property in 1998. Lot 1 is vested in the name of A.J.
Richard & Sons, Inc. who acquired the property in 1998. To the best of our knowledge, there has
been no ownership transfer of the property during the previous three years.
PREMISE OF THE APPRAISAL
The following table illustrates the various dates associated with the valuation of the subject, the
valuation premise(s) and the rights appraised for each premise/date:
PREMISE OF THE APPRAISAL
Item

Date

Interest Appraised

Date of Report:

June 29, 2012

Date of Inspection:

May 4, 2012

Dates of Value
As Is - Retrospective:

March 3, 2010

Fee Simple Estate

As Is - Retrospective:

March 3, 2010

Leasehold Interest

Compiled by CBRE

1

 ATLANTIC YARDS DEVELOPMENT SITE 5   I NTRODUCTION

PURPOSE OF THE APPRAISAL
The purpose of this appraisal is to estimate the market value of the subject property as per Sections
3a, 3b and 3c of an Atlantic Yards – City Participation Agreement dated December 23, 2009,
between the Atlantic Yards Development Company, LLC (AYDC) and the City of New York. The
current economic definition of market value agreed upon by agencies that regulate federal financial
institutions in the U.S. (and used herein) is as follows:
The most probable price which a property should bring in a competitive and open market under all
conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and
assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of
a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised, and acting in what they consider their own best
interests;
3. a reasonable time is allowed for exposure in the open market;
4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements
comparable thereto; and
5. the price represents the normal consideration for the property sold unaffected by special or
1
creative financing or sales concessions granted by anyone associated with the sale.
TERMS AND DEFINITIONS
The Glossary of Terms in the Addenda provides definitions for additional terms that are, and may be
used in this appraisal.
INTENDED USE OF REPORT
This appraisal is to be used to establish development rights value for sale to Atlantic Yards
Development Company, LLC (AYDC).
INTENDED USER OF REPORT
This appraisal is to be used by AYDC and The City of New York
Intended Users - the intended user is the person (or entity) who the appraiser intends will
use the results of the appraisal. The client may provide the appraiser with information
about other potential users of the appraisal, but the appraiser ultimately determines who
the appropriate users are given the appraisal problem to be solved. Identifying the
intended users is necessary so that the appraiser can report the opinions and conclusions
developed in the appraisal in a manner that is clear and understandable to the intended

1

Office of Comptroller of the Currency (OCC), 12 CFR Part 34, Subpart C – Appraisals, 34.42 (g); Office of Thrift
Supervision (OTS), 12 CFR 564.2 (g); Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago:
Appraisal Institute, 2010), 122-123. This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value
as well as the updated Interagency Appraisal and Evaluation Guidelines promulgated in 2010.

2

 ATLANTIC YARDS DEVELOPMENT SITE 5   I NTRODUCTION

users. Parties who receive or might receive a copy of the appraisal are not necessarily
intended users. The appraiser’s responsibility is to the intended users identified in the
2
report, not to all readers of the appraisal report.
SCOPE OF WORK
The scope of the assignment relates to the extent and manner in which research is conducted, data is
gathered and analysis is applied, all based upon the following problem-identifying factors stated
elsewhere in this report:
Client
Intended use
Intended user
Type of opinion
Effective date of opinion
Relevant characteristics about the subject
Assignment conditions
This appraisal of the subject has been presented in the form of a Self-Contained Appraisal Report,
which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(a) of
USPAP. That is, this report incorporates, to the fullest extent possible, practical explanation of the
data, reasoning and analysis that were used to develop the opinion of value. This report also includes
thorough descriptions of the subject and the market for the property type. CBRE, Inc. completed the
following steps for this assignment:
Data Resources Utilized in the Analysis
RESOURCE VERIFICATION
Source/Verification:
Public Record - City of New York
Public Record - City of New York
Source/Verification:
Improved Data
Gross Size/Units
Public Record - City of New York
Area Breakdown/Use
Inspection
No. Bldgs.
Public Record / Inspection
Parking Spaces
Inspection
YOC
Public Record - City of New York
Source/Verification:
Economic Data
Deferred Maintenance:
N/A
Infrastructure Costs:
City of New York / Forest City
Income Data:
N/A
Expense Data:
N/A
Site Data
Size
Excess/Surplus

Compiled by CBRE

The costs associated with the Subway related infrastructure has been provided to us and totals
$10,900,000. We have not done any independent verification of this figure as it has reportedly been
2

Appraisal Institute, The Appraisal of Real Estate Appraisal, 13th ed. (Chicago: Appraisal Institute, 2008), 132.

3

 ATLANTIC YARDS DEVELOPMENT SITE 5   I NTRODUCTION

agreed upon by both parties to this transaction. Should this number change, the value conclusion
contained herein would change accordingly.
Extent to Which the Property is Identified
CBRE, Inc. collected the relevant information about the subject from the owner (or representatives),
public records and through an inspection of the subject property. The property was legally identified
through the following sources:
postal address
assessor’s records
Economic characteristics of the subject were identified via:
Lease abstract of leasehold
Extent to Which the Property is Inspected
CBRE, Inc. inspected the subject and its surrounding environs on May 4, 2012 the effective date of
appraisal.
Type and Extent of the Data Researched
CBRE, Inc. reviewed the micro and/or macro market environments with respect to physical and
economic factors relevant to the valuation process. This process included interviews with regional
and/or local market participants, available published data, and other various resources. CBRE, Inc.
also conducted regional and/or local research with respect to the following:
applicable tax data
zoning requirements
flood zone status
demographics
comparable data
Type and Extent of Analysis Applied
CBRE, Inc. analyzed the data gathered through the use of appropriate and accepted appraisal
methodology to arrive at a probable value indication via each applicable approach to value. The
steps required to complete each approach are discussed in the methodology section. CBRE, Inc. then
correlated and reconciled the results into a reasonable and defensible value conclusion, as defined
herein. A reasonable exposure time associated with the value estimate presented has also been
considered.
EXPOSURE/MARKETING TIME
Current appraisal guidelines require an estimate of a reasonable time period in which the subject
could be brought to market and sold. This reasonable time frame can either be examined historically
or prospectively. In a historical analysis, this is referred to as exposure time. Exposure time always
4

 ATLANTIC YARDS DEVELOPMENT SITE 5   I NTRODUCTION

precedes the date of value, with the underlying premise being the time a property would have been on
the market prior to the date of value, such that it would sell at its appraised value as of the date of
value. On a prospective basis, the term marketing time is most often used. The exposure/marketing
time is a function of price, time, and use. It is not an isolated estimate of time alone. In consideration
of these factors, we have analyzed the following:
exposure periods for comparable sales used in this appraisal;
exposure/marketing time information from the CBRE, Inc. National Investor Survey and the
PWC Real Estate Investor Survey; and
the opinions of market participants.
The following table presents the information derived from these sources.
EXPOSURE/MARKETING TIME INFORMATION
Investment Type

Exposure/Mktg. (Months)
Range
Average

Comparable Sales Data

3.0

-

9.0

6.0

CBRE Apartments
Class A

1.8

- 42.5

5.8

Class B

1.8

- 42.5

5.8

Class C

1.8

- 42.5

5.8

0.0

- 18.0

5.3

3.0

-

6.0

PwC Apartment
National Data
Local Market Professionals
CBRE Exposure Time Estimate

6.0
6 Months

Source: CBRE National Investor Survey & PwC Re al Estate Investor Survey

CBRE, Inc. has concluded an exposure/marketing time of 6 months to be reasonable for the subject.
This exposure/marketing time reflects current economic conditions, current real estate investment
market conditions, the terms and availability of financing for real estate acquisitions, and property and
market-specific factors. It assumes that the subject is (or has been) actively and professionally
marketed. The marketing/exposure time would apply to all valuation premises included in this report.

5

 ATLANTIC YARDS DEVELOPMENT SITE 5   A REA A NALYSIS

AREA ANALYSIS
The dynamic natures of economic relationships within a market area have a direct bearing on real
estate values and the long-term quality of a real estate investment. In the market, the value of a
property is not based on the price paid for it in the past or the cost of its creation, but on what buyers
and sellers perceive it will provide in the future. Consequently, the attitude of the market toward a
property within a specific neighborhood or market area reflects the probable future trend of that area.
Since real estate is an immobile asset, economic trends affecting its locational quality in relation to
other competing properties within its market area will also have a direct effect on its value as an
investment. To accurately reflect such influences, it is necessary to examine the past and probable
future trends, which may affect the economic structure of the market and evaluate their impact on the
market potential of the subject. This section of the report is designed to isolate and examine the
discernible economic trends in the region and neighborhood, which influence and create value for the
subject property.
REGIONAL AREA
The subject property is located in Brooklyn, one of the five boroughs comprising New York City.

6

 ATLANTIC YARDS DEVELOPMENT SITE 5   A REA A NALYSIS

The examination of social forces is primarily based upon demographic characteristics of an area
including, but not limited to, population trends, age of population and household formation. A review
of these demographic trends is imperative in order to determine the basic demand for real property in
the area.
Population
The population in New York City as determined by the 2000 census increased 9.4% over the 1990
count after increasing by only 3.5% from the 1980 count. Changes among the different Boroughs
between 1990 and 2000 varied considerably with Manhattan reflecting the lowest population
increase of 3.3%, while Staten Island’s population increased 17.1%.

The low growth within

Manhattan is most likely due to the out-migration to the outer boroughs for affordable housing and
the limited room for expansion. More recent data from Claritas, Inc. is summarized as follows. It
should be noted that the 2009 population figures represent an estimate utilizing 2000 census
information.
NEW YORK CITY POPULATION DATA
1990

2000

1990-2000

2009

2000-2009

2014

2009-2014

% Change

Estimate

% Change

Projection

% Change

Census

Census

Bronx

1,203,745

1,332,650

10.7%

1,376,775

3.3%

1,398,890

1.6%

Brooklyn

2,300,664

2,465,326

7.2%

2,539,821

3.0%

2,584,531

1.8%

Manhattan

1,487,530

1,537,195

3.3%

1,634,248

6.3%

1,686,919

3.2%

Queens

1,951,636

2,229,379

14.2%

2,278,911

2.2%

2,310,732

1.4%

378,977

443,728

17.1%

487,026

9.8%

509,469

4.6%

7,322,552

8,008,278

9.4%

8,316,781

3.9%

8,490,541

2.1%

Staten Island
New York City
Source: Claritas

Overall, the population is expected to increase slightly over the next several years reflecting the slower
economic growth of the entire region.
Over the next five years Staten Island and Manhattan are anticipated to have the highest increase in
population with respective increases of 4.6% and 3.2%. The Bronx and Brooklyn are anticipated to
have more modest growth during the period while Queens is expected to have a small increase.
Overall, the population in New York City is projected to increase by 2.1% during the next five-year
period.
Households
Household statistics, including the number of households and average household size from Claritas,
Inc. are summarized as follows.

7

 ATLANTIC YARDS DEVELOPMENT SITE 5   A REA A NALYSIS

Bronx
Brooklyn
Manhatt an
Q ueens
Staten Island
New York C ity Total

1990 Censu s
424,096
828,199
716,421
720,166
130,519
2 ,819,401

NEW YORK CITY H OUSEHOLD DA TA
2000
1990-2 000
200 9
200 0-2009
C ensus
%Ch ange
E stim ate
% Chan ge
463,212
9.2%
473,120
2.1%
880,727
6.3%
898,487
2.0%
738,644
3.1%
768,292
4.0%
782,664
8.7%
778,174
-0.6%
156,341
19.8%
173,321
10.9%
3,021,588
9.4%
3,091,394
2.3%

2014
Projection
478,835
911,262
787,371
781,831
181,963
3,141,262

20 09-2014
% C hange
1.2%
1.4%
2.5%
0.5%
5.0%
1.6%

Source: Claritas

As illustrated in the previous table, the number of households is expected to increase by 1.6% between
2009 and 2014. This is due in part to the moderate increase projected in the number of households
in all the boroughs, with the exception of Queens, which display a projected decrease. Manhattan
has the smallest average household size in the city since it has the highest percentage of one-person
households. It is estimated that close to half the households in Manhattan are single persons, a rate
twice the state average. This extraordinarily high percentage is due in part to the job opportunities
available in the city, as well as a function of Manhattan lifestyles.

Bronx
Brooklyn
Manhattan
Queens
Staten Island

NEW YORK CITY HOUSEHOLD MEDIAN INCOME DATA
2000
1990-2000
2009
2000-2009
1990 Census
Census
%Change
Estimate
% Change
$21,968
$27,927
27.1%
$34,063
22.0%
$25,756
$32,509
26.2%
$41,003
26.1%
$32,792
$47,471
44.8%
$63,472
33.7%
$34,320
$43,183
25.8%
$52,756
22.2%
$43,953
$55,641
26.6%
$66,862
20.2%

2014
Proj ection
$37,209
$45,187
$71,543
$57,927
$73,049

2009-2014
% Change
9. 2%
10.2%
11.3%
9. 8%
9. 3%

Source: Claritas

Of the five boroughs of New York City, Staten Island has the highest median household income,
followed by Manhattan and Queens. Over the next five-year period, the median household income
within the boroughs display increases that range from 9.2% in the Bronx to 11.3% in Manhattan.
Employment
The following chart outlines total employment and the composition of the different employment
industries in New York City between 1999 and 2008.

8

 ATLANTIC YARDS DEVELOPMENT SITE 5   A REA A NALYSIS

ANNUAL EMPLOYMENY BY INDUSTRY
NEW YORK CITY 1999-2008 (000's)
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Avg. Ann.
Growth

Total %
Change

299.3
112.5
186.8

297.3
120.5
176.8

277.7
122.1
155.6

255.2
115.8
139.4

239.2
112.7
126.5

232.6
111.8
120.8

227.2
113.3
113.9

224.6
118.5
106.1

228.1
127.1
101.0

226.6
131.5
95.1

0.33%
0.89%
0.54%

-24.29%
16.89%
-49.09%

Service Producing
Trade, Transportation & Utilities
Information
Financial Activities
Professional & Business Services
Educational and Health Services
Leisure & Hospitality
Other Services
Government

3,319.6 3,420.4 3,411.6 3,326.1 3,291.8 3,316.8 3,375.0 3,441.6 3,517.1 3,563.6
556.3
569.6
557.4
536.5
533.5
539.3
547.5
558.3
570.6
573.2
172.8
187.3
200.4
176.9
163.9
160.2
162.8
164.6
165.9
167.7
481.0
488.8
473.6
445.1
433.6
435.5
445.1
458.3
467.9
465.1
552.9
586.5
581.9
550.4
536.6
541.5
555.3
571.3
591.4
605.0
604.4
615.2
627.1
646.0
658.2
665.3
678.8
694.7
707.0
719.3
243.7
256.7
260.1
255.3
260.3
270.1
276.7
284.9
297.0
308.3
141.5
147.4
148.7
149.7
149.1
150.5
153.2
154.3
158.1
161.4
567.0
568.9
562.4
566.2
556.6
554.4
555.6
555.2
559.2
563.6

0.03%
0.18%
0.58%
0.21%
0.18%
0.17%
0.41%
0.71%
0.18%

7.35%
3.04%
-2.95%
-3.31%
9.42%
19.01%
26.51%
14.06%
-0.60%

Total Employment

3,618.9

0.04%

6.19%

Industry
Goods Producing
Construction
Manufacturing

Employment Change
Goods Producing
Service Producing
Total Employment

3,717.7

3,689.3

3,581.3

3,531.0

3,549.4

3,602.2

3,666.2

3,745.2

3,790.2

-0.7%
3.0%
2.7%

-6.6%
-0.3%
-0.8%

-8.1%
-2.5%
-2.9%

-6.3%
-1.0%
-1.4%

-2.8%
0.8%
0.5%

-2.3%
1.8%
1.5%

-1.1%
2.0%
1.8%

1.6%
2.2%
2.2%

-0.7%
1.3%
1.2%

Source: US Bureau of Labor Statistics

The following table illustrates the employment by major industry statistics from October 2008 to
October 2009.
NON-AGRICULTURAL INSURED EMPLOYMENT BY MAJOR INDUSTRY DIVISION
October 2008 - 2009 Comparison - Not Seasonally Adjusted
NEW YORK CITY
Average Employment
Average Employment
INDUSTRY
October 2008 (000's)
SHARE
October 2009 (000's)***
SHARE
Construction & Mining
133.0
3.5%
119.3
3.2%
Manufactoring
93.3
2.4%
82.8
2.2%
T.T.C.P.U.*
576.2
15.1%
550.1
14.9%
Information
169.8
4.5%
160.3
4.3%
F.I.R.E.**
461.3
12.1%
428.8
11.6%
Professional & Business Services
607.7
15.9%
578.3
15.6%
Educational & Health Services
734.4
19.3%
750.1
20.3%
Leisure & Hospitality
311.8
8.2%
309.8
8.4%
Other Services
163.8
4.3%
162.9
4.4%
Government
561.3
14.7%
560.3
15.1%
TOTALS
3,812.6
100.0%
3,702.7
100.0%
* Trade,Tra nsporta tion, & Public Utilities

** Finance/Insurance/Real Estate

CHANGE
-11.5%
-12.7%
-4.7%
-5.9%
-7.6%
-5.1%
2.1%
-0.6%
-0.6%
-0.2%
-3.0%

*** Preliminary

Source: U.S. Bureau of Labor Statistics: Compiled by CB Richard Ellis, Inc.

Unemployment rate
The following table details the historical unemployment rate in New York City, the state, and the
nation as a whole.

9

 ATLANTIC YARDS DEVELOPMENT SITE 5   A REA A NALYSIS
UNEMPLOYMENT RATE
COMPARISON BY CITY, STATE, AND US
AVERAGE MONTHLY UNEMPLOYMENT RATE
New York City
State
10.3%
8.7%
6.3%
5.7%
AVERAGE ANNUAL UNEMPLOYMENT RATE
New York City
State
5.5%
5.4%
4.9%
4.7%
5.0%
4.8%
5.8%
5.3%
7.1%
6.4%
8.3%
7.4%
8.0%
7.3%
6.1%
5.5%
5.8%
5.1%

YEAR
Oct-09
Oct-08
YEAR
2008
2007
2006
2005
2004
2003
2002
2001
2000

US
10.2%
6.6%
US
5.8%
4.6%
4.6%
5.1%
5.5%
6.0%
5.8%
4.7%
4.0%

Source: Bureau of Labor Statistics
Complied by CB Richard Ellis, Inc

Unemployment rates have increased dramatically at the local, state and country level as the effects of
the national economic recession have taken their toll on the market.
ECONOMY.COM
Moody’s Economy.com provides the following New York City metro area economic summary as of
September 2009. The full Moody’s Economy.com report is presented in the Addenda.
NEW YORK CITY ECONOMIC ANALYSIS
Indicators

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Gross Metro Product, C$B

527.5

539.2

555.6

586.3

625.4

657.9

670.4

652.0

659.1

676.7

708.2

740.2

% Change
Total Employment (000)
% Change
Unemployment Rate
Personal Income Growth
Population (000)
Single-Family Permits
Multifamily Permits
Existing Home Price ($Ths)
Mortgage Originations ($Mil)
Net Migration (000)
Personal Bankruptcies

-2.2

2.2

3.0

5.5

6.7

5.2

1.9

-2.7

1.1

2.7

4.7

4.5

5,036.0

4,992.1

5,016.2

5,070.1

5,140.0

5,231.6

5,277.7

5,159.7

5,045.1

5,086.8

5,208.7

5,334.1

-2.5

-0.9

0.5

1.1

1.4

1.8

0.9

-2.2

-2.2

0.8

2.4

2.4

7.3

7.4

6.4

5.3

4.8

4.7

5.5

8.9

10.2

9.2

7.3

6.1

-0.8

1.6

7.0

7.3

8.7

7.6

4.1

-0.5

-0.1

4.0

6.1

6.0

11,415.0

11,448.2

11,494.8

11,534.9

11,566.7

11,627.9

11,696.7

11,761.0

11,807.5

11,842.3

11,865.1

11,876.1

4,599

4,508

4,053

4,340

3,532

2,905

2,126

1,256

1,633

2,449

4,035

4,266

20,926

23,534

30,335

37,219

36,366

38,402

37,636

5,017

11,129

24,196

32,546

32,560

344.8

385.5

432.1

503.5

518.2

537.6

493.4

416.9

354.7

350.4

371.6

401.7

77,512

116,677

92,753

106,286

104,454

96,936

68,682

76,436

65,712

62,517

63,371

67,351

-69.4

-99.1

-106.5

-119.1

-97.2

-62.5

-5.3

-18.5

-38.2

-51.5

-65.1

-78.5

35,462

38,266

40,203

58,292

11,410

15,793

20,363

30,474

40,729

45,000

39,860

34,650

Source: Moody's Economy.com

Though job losses in New York City have become smaller, there are still worrying signs that the
recession is far from over. Job losses in construction and leisure/hospitality have abated, but cuts in
financial activities, professional/business services and retail are still large and these industries
contribute much more to the metro division's economy. The unemployment rate at 10.3% is the
highest since the early 1990s and has risen quickly since the start of the year. Home sales have
stabilized at low levels but prices in both the single-family and condo markets are still falling. Also,
consumer credit quality is deteriorating rapidly and mortgage delinquency rates in New York City are
now above the national average for the first time since the recession began.

10

 ATLANTIC YARDS DEVELOPMENT SITE 5   A REA A NALYSIS

New York City's housing market will lag behind the national housing cycle, falling further and longer
than the rest of the nation. The relatively small single-family market in New York City has been in
decline since late 2006 and has lost 14% of its peak value. In comparison, the multifamily market in
New York City has only just begun its decline with condo prices contracting for the first time in the
third quarter of last year. The delayed impact of job losses in financial services and the reduction of
bonus payments mean that condo prices will fall further this year and next. While Moody's
Economy.com expects that house prices nationally will begin to rise again by the middle of next year,
house prices, both single- and multifamily, will not bottom out in New York City until the middle of
2011.
Job losses in New York City have been smaller than expected thus far, but there are significant risks
that the economy may deteriorate further through the end of the year. New York City has lost about
97,000 jobs since the peak in employment last fall; this is significantly less than expected back in
March. It appears that, after a sharp initial decline, the pace of losses have levered off largely due to
the rebound off the leisure & hospitality sector and continued growth on non cyclical sectors. During
the first quarter losses in financial services were relatively small despite the sweeping layoff
announcements by several large New York City-based banks. Losses in professional/business services
and in leisure/hospitality have been smaller than anticipated as well. However losses in financial
activities, professional/business services and retail and wholesale have become larger throughout the
year.
BETTER THAN EXPECTED
Job losses in New York City have been smaller than expected thus far, but there are significant risks
that the economy may deteriorate further through the end of the year. New York City has lost about
150,000 jobs since the peak in employment last fall; this is almost 100,000 jobs fewer than expected
back in March. During the first quarter losses in financial services were relatively small despite the
sweeping layoff announcements by several large New York City-based banks.
Losses in
professional/business services and in leisure/hospitality have been smaller than anticipated as well.
Losses in financial activities, mainly in securities and commodities brokerages, have become larger in
recent months however, and third quarter losses are tracking above our forecast.
WORRYING SIGNS
Other labor market indicators point to a still-severe recession in New York City and affirm the forecast
for a lagged recovery. In August, the unemployment rate for the five boroughs of New York City rose
from 9.5% to 10.3%--the highest jobless rate since 1993. More disturbing than the rate itself is the
pace of increase; since January, New York City's unemployment rate has risen 3.4 percentage points
compared to 2.1 percentage points for the nation. In four of the last eight months, increases in the
city's unemployment rate have been the largest on record back to the 1970s.

11

 ATLANTIC YARDS DEVELOPMENT SITE 5   A REA A NALYSIS

The extent of unemployment is also taking a toll on consumer credit in New York City. Delinquency
rates on all types of consumer credit soared in the first half of the year, rising above national average
rates. Mortgage credit quality is particularly bad; 30- and 60-day delinquencies are rising faster in
New York City compared to declines at the national level, suggesting the pipeline for foreclosures is
filling.
EMPTY SPACE
Losses in office-using jobs combined with a nearly-frozen CMBS market will continue to take a toll on
the commercial real estate market in New York City into next year. According to CBRE, office vacancy
rates in midtown Manhattan are just shy of their peak during the 2001 recession. There were some
hopeful signs in the August data though; leasing activity rose and the availability rate fell, though rents
continue to decline. In the past year, average asking rents are down by a third. Given the forecast
for office-using employment, expect the midtown vacancy rate to peak above 10% later this year.
CONCLUSION
The restructuring on Wall Street will take a toll on New York City’s economy, office market, and real
estate market over the next two years. After the area begins to recover from the downturn in late
2010, growth will be slower because of decreased productivity and profitability in the finance industry.
Employment growth will be slightly slower than the national average as well as lower than in other
U.S. financial centers.

12

 ATLANTIC YARDS DEVELOPMENT SITE 5   N EIGHBORHOOD A NALYSIS

NEIGHBORHOOD ANALYSIS

LOCATION
The subject is in the city of Brooklyn, located at the intersection of Atlantic and Flatbush Avenues,
bound by Pacific Street and 4th Avenue.
BOUNDARIES
The neighborhood boundaries are detailed as follows:

13

 ATLANTIC YARDS DEVELOPMENT SITE 5   N EIGHBORHOOD A NALYSIS

North:
South:
East:
West:

East River
Atlantic Avenue
Classon Avenue
East River

LAND USE
Land uses within the subject’s immediate neighborhood include multi-family uses, with commercial
uses located primarily along Avenues. The immediate surrounding properties consist of low-rise
residential walk-up buildings varying from 3 to 6 stories. Ancillary uses include the Atlantic Center
Mall, the renovated Atlantic Terminal Mall and the Atlantic Yards Development located across the
street. It should be noted, we have not considered the impact that the Atlantic Yards Development
project or the uses described in the Modified General Project Plan could have on the applicable value
of the subject. The subject property is located in Brooklyn Community District 2. According to 2010
figures produced by City Planning the surround uses situated within this district was 23.4% multi-family
housing and 17.1% of transportation/utility. The chart below further shows the land use within the
Brooklyn Community District 2.

14

 ATLANTIC YARDS DEVELOPMENT SITE 5   N EIGHBORHOOD A NALYSIS

GROWTH PATTERNS / ATLANTIC YARDS DEVELOPMENT PROJECT
Atlantic Yards is a large mixed use commercial and residential development in Prospect Heights,
Brooklyn. The Project will provide a first-class Arena, the Barclays Center, designed by Ellerbe Becket
and Shop Architects, needed to bring a professional sports team back to Brooklyn. The 22.0 acre
Project will transform the current rail yards and predominantly underutilized and industrial area into 17
new buildings creating approximately 5,325 to 6,430 affordable and market rate housing units, with
2,250 rental units being affordable to low-, moderate-, and middle-income families, while providing
approximately 336,000 square feet of Class A office space and a 180-room hotel. The Project would
result in a signature mixed-use, mixed income development at one of Brooklyn's most important
crossroads.
It is currently anticipated that the buildings would be based on a master plan prepared by Frank
Gehry, a world renowned architect. It is anticipated that the open space – which would be eight acres
of environmentally sustainable, publicly accessible open space, including, to the extent applicable, the
School Open Space – would be based on designs by landscape architect Laurie Olin, whose designs
include the open space in Battery Park City and Bryant Park. The buildings and open space will be
designed in accordance with the Design Guidelines.
The build-out of the Project is likely to occur in two phases, with the Project elements on the Phase I
Site and the Upgraded Yard (collectively, "Phase I") anticipated to be completed by 2014 and the
Project elements on the Phase II Site (collectively, "Phase II") anticipated to be completed by 2019.
The principal goal of the Atlantic Yards Land Use Improvement and Civic Project is to transform an
area that is blighted and underutilized into a vibrant, mixed-use, mixed-income community that
capitalizes on the tremendous mass transit service available at this unique location. In addition to
15

 ATLANTIC YARDS DEVELOPMENT SITE 5   N EIGHBORHOOD A NALYSIS

eliminating the blighting influence of the below-grade Yard and the blighted conditions of the area,
the Project aims, through this comprehensive and cohesive plan, to provide for the following public
uses and purposes:
Aforementioned, we have not considered the impact that the Atlantic Yards Development project or
the uses described in the Modified General Project Plan could have on the applicable value of the
subject.
ACCESS
The subject has ample service by the subway system with the N, Q, Q, B, D, 2, 3, 4, & 5 lines running
through the neighborhood and stopping at the Atlantic Avenue / Flatbush Avenue stop directly across
the street of the subject. Eleven bus lines serve the location including the B25, B26, B28, B37, B41,
B45, B52, B63, B65, B67 and B69. Bus service is available throughout the neighborhood and in
close proximity to an express bus to Manhattan. Light Rail service is also located across the street at
the Atlantic Terminal, with stops in Jamaica (with transfers available to all other lines) and Penn
Station.
DEMOGRAPHICS
Selected neighborhood demographics of the subject’s zip code are shown in the following table:

16

 ATLANTIC YARDS DEVELOPMENT SITE 5   N EIGHBORHOOD A NALYSIS

SELECTED NEIGHBORHOOD DEMOGRAPHICS
Zip Code 11217
Brooklyn, NY
Population
2015 Population
2010 Population
2000 Population
1990 Population
Growth 2010 - 2015
Growth 2000 - 2010
Growth 1990 - 2000
Households
2015 Households
2010 Households
2000 Households
1990 Households
Growth 2010 - 2015
Growth 2000 - 2010
Growth 1990 - 2000
2010 Median HH Inc
2010 Estimated Average Household Income
2010 Estimated Per Capita Income
2010 Median Value of all Owner-Occ HUs
Age 25+ College Graduates - 2010
Age 25+ Percent College Graduates - 2010

2010 Estimates
for 11217
35,309
35,261
34,944
34,188
0.14%
0.91%
2.21%
15,828
15,731
15,500
14,369
0.62%
1.49%
7.87%
$69,406
$93,560
$42,428
$884,430
15,775
59.0%

Source: CBRE

CONCLUSION
As shown above, the population within the subject neighborhood has increased slightly over the last
decade and is projected to increase over the next 5 years. The subject’s neighborhood is
characterized as a middle income demographic area. The subject property conforms well with the
surrounding uses and to the overall neighborhood. The outlook for the neighborhood is positive over
the long-term.

17

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

MARKET ANALYSIS
The market analysis forms a basis for assessing market area boundaries, supply and demand factors,
and indications of financial feasibility. Primary data sources utilized for this analysis includes REIS and
Claritas.
The subject consists of two one-story free standing retail buildings with possible redevelopment into
mixed use residential building. As such, we have considered the New York City residential rental
markets with specific emphasis on the Brooklyn submarket.
DEMOGRAPHIC ANALYSIS
Demand for additional residential property is a direct function of population change. Multi-family
communities are products of a clearly definable demand relating directly to population shifts.
Housing, Population and Household Formation
The following table illustrates the population and household changes for the subject neighborhood
with primary focus on the subject zip code.

POPULATION AND HOUSEHOLD PROJECTIONS
Zip Code 11217

2010 Estimates
for 11217

Brooklyn, NY
Population
2015 Population
2010 Population
2000 Population
1990 Population
Growth 2010 - 2015
Growth 2000 - 2010
Growth 1990 - 2000
Households
2015 Households
2010 Households
2000 Households
1990 Households
Growth 2010 - 2015
Growth 2000 - 2010
Growth 1990 - 2000

35,309
35,261
34,944
34,188
0.14%
0.91%
2.21%
15,828
15,731
15,500
14,369
0.62%
1.49%
7.87%

Source: CBRE

As shown, the subject’s neighborhood is experiencing moderate positive increases in both population
and households.

18

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

Income Distributions
Household income available for expenditure on housing and other consumer items is a primary factor
in determining the price/rent level of housing demand in a market area. In the case of this study,
projections of household income, particularly for renters, identifies in gross terms the market from
which the subject submarket draws. The following table illustrates estimated household income
distribution for the subject neighborhood.

HOUSEHOLD INCOME DISTRIBUTION
Zip Code 11217

2010 Estimates
for 11217

Brooklyn, NY
Households by Income Distribution - 2010
Less than $15K
$15K - $25K
$25K - $35K
$35K - $50K
$50K - $75K
$75K - $100K
$100K - $150K
$150K - $200K
$200K - $500K
$500K or more

15,731
14.44%
5.82%
5.66%
10.58%
17.18%
14.93%
14.39%
8.89%
6.37%
1.72%

Source: CBRE

The following table illustrates the median and average household income levels for the subject
neighborhood.

HOUSEHOLD INCOME LEVELS
Zip Code 11217

2010 Estimates
for 11217

Brooklyn, NY
2010 Median HH Inc
2010 Estimated Average Household Income
2010 Estimated Per Capita Income

$69,406
$93,560
$42,428

Source: CBRE

An analysis of the income data indicates that the submarket is generally comprised of lower to middle
income demographic.
Employment
An employment breakdown typically indicates the working class characteristics for a given market
area. The specific employment population within the indicated radii of the subject is as follows:

19

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

EMPLOYMENT BY INDUSTRY
Zip Code 11217

2010 Estimates
for 11217

Brooklyn, NY
Employment by Industry - 2010
Agr/Frst/Fish/Hunt/Mine
Construction
Total Manufacturing
Wholesale Trade
Retail Trade
Transport/Warehse/Utils
Information
Fin/Insur/RE/Rent/Lse
Prof/Sci/Tech/Admin
Mgmt of Companies
Admin/Spprt/Waste Mgmt
Educational Svcs
Health Care/Soc Asst
Entertainment & Rec Services
Accommdtn/Food Svcs
Oth Svcs, Not Pub Admin
Public Administration

18,827
0.05%
2.35%
2.55%
1.72%
7.13%
3.85%
9.44%
8.42%
18.41%
0.18%
3.01%
10.25%
11.05%
8.55%
4.96%
4.23%
3.85%

Source: CBRE

The previous table illustrates the employment character of the subject’s neighborhood, indicating a
predominantly middle-income employment profile, with most people holding jobs in the health
care/social services and F.I.R.E. sectors.
Outlook
Based on this analysis, the immediate area surrounding the subject is projected to experience
moderate, positive growth relative to households and population into the near future. The area is
comprised primarily of lower-middle income households. The pace of gentrification in the
neighborhood is likely to slow due to the onset of the national recession.
OVERVIEW
Demand in the current New York City rental apartment market has been weakened by job cuts
throughout the City. While layoffs have not been as severe as originally predicted, employers are likely
to continue to thin payrolls. In anticipation of declining residential demand, developers have begun to
alter plans. Multi-family permitting activity, an indicator of future supply, has dropped dramatically.
However, because of long planning and construction timetables, a continuing number of new
projects, which is not expected to wane until 2010, are still coming online. Manhattan’s market-rate
apartment rate inventory will expand by 3,180 units this year, the greatest supply increase since 2005.
In 2008, 1,225 units were completed. As a result, rent deductions are expected for market rate
20

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

housing going forward for the short-term. Conversely rent stabilized units, because of recent increases
authorized by the Rent Guidelines Board, will see rent increases. Investment demand has diminished
considerably, as investors are trying to gauge how falling revenues will affect values.
Unprecedented turmoil in the financial markets beginning in September 2008 led to a significant
decline in the New York City for-sale housing market. A sharp decline in contract activity coupled with
a substantial increase in listing inventory, as well as a decline in price level summarizes the sales
market for 2009 year-to-date. Additionally, the severe economic recession and the tightening of
financial requirements from lenders limited the pool of potential buyers. According to the Prudential
Elliman Manhattan Market Overview, Q2 2009, the Manhattan market, as measured by the median
sales price of re-sale apartments, fell 25.6% as compared to the same period last year. The overall
number of sales was 50.3% below the same period last year as a result of the tightening of credit,
rising unemployment and a recessionary economy. Market share of new development unit sales fell to
27% of all sales, their lowest level in 18 months and tend to lag market conditions by more than a
year.
In both the for-sale and rental apartment market, supply will exceed demand for several years.
Equilibrium in the rental market will return sooner than the for-sale market.
EXISTING INVENTORY
New York City has one of the nation’s largest and most diverse residential markets. The New York City
housing market comprises a significant number of regulated and non-regulated rental apartments as
well as owner occupied apartments. The following chart depicts the total inventory of residential units
within the five boroughs. The information was compiled from the initial findings of the Selected Initial
Findings of the 2008 New York City Housing and Vacancy Survey. The United States Bureau of the
Census conducts the Housing and Vacancy Survey every three years on behalf of the City of New
York. A summary of the results is presented on the following table:

21

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

NEW YORK CITY HOUSING SURVEY
Rental Units
Occupied
Vacant/Available
Total Rental Units
(Vacancy Rate)
Owner Units
Occupied
Ownership Rate
Vacant/Available
Total Owner Units
(Vacancy Rate)

Bronx

Brooklyn

Manhattan

Queens

Staten Island New York City Total

373,701
11,836
385,537
3.07%

648,145
15,530
663,675
2.34%

580,557
16,110
596,667
2.70%

428,275
14,707
442,982
3.32%

(a)
(a)
(a)
6.37% (a)

2,082,890
61,762
2,144,652
2.88%

106,699
22.20%

255,629
28.30%

182,824
24.00%

362,211
45.80%

112,002
68.00%

1,019,365
32.90%
26,588
1,045,953
2.54%

Vacant Units not available for sale/rent
Total Housing Units

509,632

138,043
962,741

839,134

838,670

178,471

3,328,648

(a) Too few units to report.
Source: Selected Initial Findings of the 2008 New York City Housing and Vacancy Survey

Initial findings of the survey indicate that:
Housing Inventory
The vacancy rate for units available for rent in the City during the period between February
and June of 2008 was 2.88 percent, down from 3.09 percent during the same period in
2005. The 2008 rental vacancy rate is lower than 5.0 percent and, thus, meets the legal
threshold mandated by State and City laws to justify the continuation of rent control and rent
stabilization.
The number of housing units in New York City was 3.33 million in 2008, the largest housing
stock in the 43-year period since the first survey was conducted in 1965. Between 2005 and
2008, the housing inventory increased by 68,000 units or 2.1 percent, the largest increase
since the survey was initiated.
Every borough saw an increase in housing inventory: The Bronx grew by 11,000 units (2.1
percent); Brooklyn by 18,000 units (1.9 percent); Manhattan by 24,000 units (2.9 percent);
Queens by 11,000 units (1.3 percent); and Staten Island by 5,000 units (2.7 percent).
Neighborhood and Housing Conditions
Neighborhood conditions were the best in the 30-year period since the survey began to
address this issue. The proportion of renter households near buildings with broken or
boarded-up windows on the same street fell to 5.1 percent in 2008 from 6.3 percent in 2005
and 8.7 percent in 2002.

22

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

Neighborhood satisfaction was the best in the 30-year period since the survey began
measuring perceptions of neighborhood quality in 1978. In the survey, 71.8 percent of renter
households rated the quality of their neighborhood buildings as “good” or “excellent,” up
from 63.1 percent in 1987 and 56.2 percent and in 1978.
In 2008, building conditions remained among the best since the survey started covering them.
For all occupied units, the dilapidation rate was 0.5 percent, remaining at an all-time low
since the survey began in 1965. The dilapidation rate for rental units was 0.6 percent in
2008, still the best ever recorded.
The proportion of renter-occupied units with five or more of the seven maintenance
deficiencies measured by the 2008 Survey was 4.4, one of the lowest ever recorded since
these conditions were first measured in 1991.
Rental and Ownership Rates
The number of rent controlled units remained relatively stable from 2005 to 2008, from
43,000 in 2005 to 40,000 in 2008. During the same period, the number of rent stabilized
units in buildings constructed before 1947 fell by 22,000, or 2.9 percent. This loss was offset
by an increase of 5,000 units in buildings constructed after 1947, for a net loss in rent
stabilized units of 17,000 or 1.6 percent.
The number of owner units, occupied and vacant, was 1,046,000, up by 14,000 between
2005 and 2008.
RENT CONTROL AND STABILIZATION
The New York State Rent Control and Stabilization statutes create a condition where the forces of
supply and demand are not solely responsible for the actions that take place in the market. The effects
of rent control and stabilization on the residential market in New York City make it one of the most
intricate in the nation. The laws apply to dwellings in buildings with six or more rental apartment units,
or unsold yet occupied rental units in converted buildings. The laws restrict the increases allowed in
residential rents. Rent control statutes (which apply to a particular tenant) and rent stabilization
statutes (which apply to a particular apartment) typically are more common in pre-war apartment
buildings.
Rent control is being phased out through vacancy de-control. Thus, if a rent controlled unit is vacated
the landlord is allowed to charge “whatever the market will bear.” From that point onward, the unit is
subject to rent stabilization increases. Through a program known by its original section number, J-51,
within the Real Property Tax Law, landlords are permitted by law to increase the rent of a below
market rent stabilized apartment following the renovation of the unit after the tenant vacates.
Allowable renovations include but are not limited to new kitchen appliances, counters, etc. and
23

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

bathroom sinks, tubs, toilets and tiling, upgraded electrical wiring and air conditioning units. The rate
of rental increase is based on 1/40th of the renovation cost. The renovation cost is subject to
approval by the DHCR and is further limited to an itemized list of allowable costs for each item
claimed. Another part of the 421-a program allows for increases in stabilized rents based on Major
Capitol Improvements or MCI’s. These relate to building wide improvements such as new windows,
roofs, intercoms, elevators, brickwork etc. As with individual renovations these building wide
renovations are subject to approval and an itemized cost schedule.
Overall, the Rent Regulation Reform Act of 1997 changed the following items pertaining to rent
guidelines in New York City.
Extended the Rent Stabilization Laws until June 15, 2003. (It has subsequently been extended
through 2011).
Provided a new formula for computing vacancy allowance.
Reduced the “succession” rights so an apartment can only be “passed down” for one
generation.
Requires tenants to pay rent into escrow accounts during certain Housing Court disputes.
Broadens “luxury decontrol” to households earning more than $175,000 (instead of
$250,000) in two consecutive years with rents of $2,000 or more.
The new regulations enhance the owner’s position by permitting faster adjustments in rent to market
levels, income during dispute mediation, limiting leasehold interest through succession and allows for
quicker demolition of older buildings. As noted, the new laws were passed on June 19, 1997 and will
expire in six years. The guidelines establish increases in rent that can be charged for a vacant
apartment and for a lease that is renewed by the same tenant. The following table reflects the
increases in rent permitted since 1990:
RGB ALLOWABLE RENT INCREASES
RGB Order
Number
#32
#33
#34
#35
#36
#37

1 Year

2 year

#39
#40

For Leases Starting Between
10/1/00 - 9/30/01
10/1/01 - 9/30/02
10/1/02 - 9/30/03
10/1/03 - 9/30/04
10/1/04 - 9/30/05
10/1/05 - 9/30/06 (see note 1)
10/1/05 - 9/30/06 (see note 2)
10/1/06 - 9/30/07 (see note 1)
10/1/06 - 9/30/07 (see note 2)
10/1/07 - 9/30/08
10/1/2008-9/30/09

4.00%
2.00%
4.50%
3.50%
3.00%
2.75%
2.25%
4.25%
3.75%
3.00%
4.50%

6.00%
4.00%
7.50%
6.50%
6.00%
5.50%
4.50%
7.25%
6.75%
5.75%
8.50%

#41

10/1/2009-9/30/2010

3.00%

6.00%

#38

Note 1: Heat is provided or required to be provided by owner at no charge to the tenant.
Note 2: Heat is neither provided nor required to be provided by the owner.
Source: NYC Rent Guidelines Board

24

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

The current permitted increases allow for a 4.5% increase in rents for tenants renewing their lease for
a one-year period and 8.5% for a two-year renewal, both of which represent increases from the
previous year figures. The higher allowable increase figures in 2003/2004 were established to offset
significant increases real estate taxes and operating expenses. As of June 23, 2009 order # 41 has
been approved, which states; beginning October 1, 2009, permitted increases will allow for a 3%
increase in rents for tenants renewing their lease for a one-year period and 6% for a two-year
renewal, both of which will represent decreases from the previous year figures.
Vacancy Allowance
The most striking part of the Rent Regulation Reform Act is the computation of a “Vacancy Allowance”
which states that if an apartment is leased for more than $500 per month for a two-year term, the
landlord will be entitled to a “Vacancy Allowance” upon tenant rollover. The allowance is based on
what the market will bear, up to a maximum of 20% for a two-year lease. In addition, if the same
apartment is leased for a one-year term, the maximum Vacancy Allowance is 20% less the difference
between the two and one-year rent increase. Under current rent guidelines, the one-year increase
would be 17.00% [20% - (6.0% - 3.0%)]. The new vacancy allowance has enhanced residential
ownership by allowing faster increases in rent, which has had a significant impact on residential
property values.
Vacancy Decontrol
Apartments with monthly rents in excess of $2,000 per month were decontrolled in 1997 under two
scenarios. Firstly, a rent stabilized unit which becomes vacant and could be offered at a legal
regulated rent of $2,000 or more per month is no longer subject to rent regulation.

The second

scenario represents occupied units, which must meet two criteria in order to become deregulated. In
conjunction with the $2,000 per month rent threshold, the decontrol of a stabilized unit is also based
on the annual income of the occupant. In other words, if a tenant's average annual income for the
two years preceding the lease renewal date is in excess of $175,000, the apartment unit may be
deregulated and a new market-oriented rent can be established. Both criteria must be met in order for
the unit to become deregulated.
NEW YORK CITY RENTAL RESIDENTIAL MARKET
REIS REPORTS
REIS, Inc. is an econometric forecasting group, which publishes market information on various
markets throughout the country. The data they compile is based on surveys conducted with building
owners and property managers. It is important to note that the survey includes all classes (A, B & C)
of multi-family residential buildings. In addition, the survey is only a representative sample of buildings
whose management or owners were willing to participate. As such the inventory reflected in the survey
is not representative of the overall size of the marketplace.

25

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

New York City Residential Market
The 1Q 2010 survey for New York City is shown on the following table:

NEW YORK APARTMENT MARKET 1Q2010
Year

Quarter

Inventory
(SF/Units)

Completions

1990 Year
100,048
2,624
1991 Year
102,089
2,041
1992 Year
103,538
1,449
1993 Year
105,061
1,523
1994 Year
106,738
1,677
1995 Year
108,852
2,032
1996 Year
111,294
2,341
117,125
3,308
1997 Year
1998 Year
123,869
5,398
1999 Year
130,008
6,139
2000 Year
133,491
3,483
2001 Year
139,031
5,540
2002 Year
142,061
3,030
2003 Year
145,955
4,360
2004 Year
148,316
2,515
2005
1
148,316
0
2005
2
149,053
882
2005
3
150,457
1,918
2005
4
150,135
1,082
2005 Year
150,135
3,882
2006
1
150,065
196
2006
2
150,070
500
2006
3
150,332
262
2006
4
149,519
721
2006 Year
149,519
1,679
2007
1
149,854
612
2007
2
150,301
447
2007
3
150,193
334
2007
4
151,623
1,430
151,623
2,823
2007 Year
2008
1
152,727
1,104
2008
2
153,143
328
2008
3
153,441
425
2008
4
153,945
240
2008 Year
153,945
2,097
2009
1
154,184
239
2009
2
155,111
927
2009
3
155,165
54
2009
4
155,540
375
155,540
1,595
2009 Year
2010
1
156,457
1,105
(Forecast)
2010 Year
162,561
7,209
2011 Year
164,199
1,638
2012 Year
165,236
1,037
2013 Year
166,794
1,558
169,464
2,670
2014 Year
Source: REIS, compiled by CBRE

Conversions

Vac % Vacant Stock

Occupied
Stock

Net
Absorption

Asking
Rent $

Asking Rent
% Chg

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
-466
-154
0
-145
-514
-1,404
-2,063
-266
-495
0
-1,534
-2,295
-277
0
-442
0
-719
0
88
-127
264
225
0
0
0
0
0
-188

2.3
2.8
1.5
1.4
1.7
1.1
1.3
1.3
1.5
2.0
1.3
2.9
3.9
4.0
3.3
3.3
3.0
2.9
2.9
2.9
2.8
2.9
2.5
2.2
2.2
2.6
2.4
2.2
2.1
2.1
2.3
2.3
2.1
2.3
2.3
3.4
3.2
2.9
2.9
2.9
2.8

2,341
2,813
1,508
1,457
1,857
1,235
1,436
1,522
1,810
2,630
1,734
3,986
5,566
5,863
4,921
4,954
4,536
4,382
4,279
4,279
4,139
4,353
3,753
3,343
3,343
3,833
3,636
3,354
3,244
3,244
3,491
3,547
3,275
3,545
3,545
5,207
4,957
4,491
4,452
4,452
4,449

97,707
99,276
102,030
103,604
104,881
107,617
109,858
115,603
122,059
127,378
131,757
135,045
136,495
140,092
143,395
143,362
144,517
146,075
145,856
145,856
145,926
145,717
146,579
146,176
146,176
146,021
146,665
146,839
148,379
148,379
149,236
149,596
150,166
150,400
150,400
148,977
150,154
150,674
151,088
151,088
152,008

2,426
1,569
2,754
1,574
1,277
2,736
2,241
5,745
6,456
5,319
4,379
3,288
1,450
3,597
3,303
-33
1,155
1,558
-219
2,461
70
-209
862
-403
320
-155
644
174
1,540
2,203
857
360
570
234
2,021
-1,423
1,177
520
414
688
920

$1,109
$1,134
$1,164
$1,184
$1,254
$1,300
$1,388
$1,561
$1,723
$1,914
$2,174
$2,219
$2,170
$2,202
$2,324
$2,335
$2,354
$2,415
$2,439
$2,439
$2,469
$2,511
$2,573
$2,629
$2,629
$2,654
$2,710
$2,810
$2,856
$2,856
$2,877
$2,912
$2,935
$2,884
$2,884
$2,831
$2,780
$2,773
$2,737
$2,737
$2,754

6.0
2.3
2.6
1.7
5.9
3.7
6.8
12.5
10.4
11.1
13.6
2.1
-2.2
1.5
5.5
0.5
0.8
2.6
1.0
4.9
1.2
1.7
2.5
2.2
7.8
1.0
2.1
3.7
1.6
8.6
0.7
1.2
0.8
-1.7
1.0
-1.8
-1.8
-0.3
-1.3
-5.1
0.6

N/A
N/A
N/A
N/A
N/A

3.9
3.5
2.9
2.7
2.9

6,267
5,761
4,846
4,520
4,877

156,294
158,438
160,390
162,274
164,587

5,206
2,144
1,952
1,884
2,313

$2,765
$2,814
$2,888
$2,988
$3,111

1.0
1.8
2.6
3.5
4.1

26

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

As previously mentioned, this survey is only a representative sample of buildings whose management
or owners were willing to participate. The inventory measured is not representative of the overall size
of the market, but of its trends. Also, the survey does not distinguish among the prices of studio, one-,
two-, and three-bedroom apartments. As of the first quarter of 2010, the vacancy rate in the overall
New York City market was approximately 2.8%. This figure has decreased 17% since 1Q2009. REIS
anticipates that the overall vacancy rate for the New York City residential marketplace will increase in
the near term future in the vicinity of 3.9% through 2010. Average asking rental rates have declined
approximately 2.7% over the last year. REIS forecasts rent to slightly increase over the next year and
are predicting an increase in rental rates going forward.
The overall New York City residential marketplace is broken down into nine different submarkets as
tracked by REIS Reports.

As shown in the map below the subject is located in the submarket

designated by REIS as Kings County.

The following tables present a summary of the various sub-markets.

27

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

New York Apartment 1Q 2010 Submarket Snapshot
Inventory Inventory
Free Rent
Submarket
(Buildings) (SF/Units) Asking Rent $ Vac %
(mos)
W Village/Downtown
108
21,334
$3,787
3.6
0.3
Stuyvesant
82
22,654
$3,464
3.0
0.4
Midtown West
92
20,017
$3,438
3.7
0.4
Upper East Side
63
16,302
$3,495
2.4
0.3
Upper West Side
64
14,839
$3,959
3.4
0.4
Morningside Hts
65
6,980
$2,070
4.2
0.8
Kings County
150
20,242
$1,389
2.5
0.4
Queens County
96
21,832
$1,401
1.8
0.5
Bronx County
78
12,257
$1,134
1.4
0.3
Source: REIS, compiled by CBRE

Expenses %
(Apartment)
52.1
55.4
52.1
53.1
52.7
54.9
56.6
55.4
56.2

The subject property is located within the Kings County submarket as defined by REIS.
Kings County Apartment Market
Within the Kings County submarket REIS Reports tracks 150 properties, with a total of 20,242 units,
which results in an average complex size of 134 units for the submarket. Of the submarkets within
NYC tracked by REIS Reports, the subject’s Kings County submarket has the fourth lowest vacancy rate
at 2.5%. In addition, rents in this marketplace are the second lowest with a current average asking
rental rate of $1,389per month. A historical and projected summary of the Kings County submarket
is presented on the following table:

28

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

New York Apartment 1Q 2010 SubTrend Futures
Inventory
(SF/Units)
17,477
17,844
18,216
18,808
18,936
19,122
19,122
19,122
19,122
19,122
19,122
19,378
19,378
19,378
19,378
19,428
19,428
19,428
19,428
19,428
19,672
19,746
19,746
19,746
19,746
19,746
19,834
19,866
19,866
19,866
19,866
19,866
19,920
20,295
20,295
20,242

Year Quarter
1995
Year
1996
Year
1997
Year
1998
Year
1999
Year
2000
Year
2001
Year
2002
Year
2003
Year
2004
Year
2005
1
2005
2
2005
3
2005
4
2005
Year
2006
1
2006
2
2006
3
2006
4
2006
Year
2007
1
2007
2
2007
3
2007
4
2007
Year
2008
1
2008
2
2008
3
2008
4
2008
Year
2009
1
2009
2
2009
3
2009
4
2009
Year
2010
1
(Forecast)
2010
Year
2011
Year
2012
Year
2013
Year
2014
Year
Source: REIS, compiled

21,767
22,335
22,454
22,640
23,005
by CBRE

Vacant Occupied
Net
Asking Rent Asking Rent
Stock
Absorption
Completions Conversions Vac % Stock
$
% Chg
371
n/a
1.8
315
17,162
364
$730
4.0
367
n/a
1.6
286
17,558
396
$766
4.9
372
n/a
1.7
310
17,906
348
$773
0.9
592
n/a
1.5
282
18,526
620
$804
4.0
128
n/a
2.3
436
18,500
-26
$874
8.7
186
n/a
1.5
287
18,835
335
$959
9.7
0
n/a
1.7
325
18,797
-38
$1,039
8.3
0
n/a
2.9
555
18,567
-230
$1,066
2.6
0
0
3.4
650
18,472
-95
$1,110
4.1
0
0
2.7
516
18,606
134
$1,131
1.9
0
0
3.3
631
18,491
-115
$1,124
-0.6
256
0
3.5
678
18,700
209
$1,145
1.9
0
0
3.0
581
18,797
97
$1,164
1.7
0
0
3.3
639
18,739
-58
$1,168
0.3
256
0
3.3
639
18,739
133
$1,168
3.3
50
0
3.4
661
18,767
28
$1,182
1.2
0
0
3.5
680
18,748
-19
$1,208
2.2
0
0
2.9
563
18,865
117
$1,229
1.7
0
0
2.5
486
18,942
77
$1,260
2.5
50
0
2.5
486
18,942
203
$1,260
7.9
244
0
3.6
708
18,964
22
$1,284
1.9
74
0
3.5
691
19,055
91
$1,316
2.5
0
0
3.6
711
19,035
-20
$1,363
3.6
0
0
3.2
632
19,114
79
$1,374
0.8
318
0
3.2
632
19,114
172
$1,374
9.0
0
0
3.1
612
19,134
20
$1,372
-0.1
0
88
2.3
456
19,378
244
$1,425
3.9
32
0
2.1
417
19,449
71
$1,426
0.1
0
0
1.8
358
19,508
59
$1,440
1.0
32
88
1.8
358
19,508
394
$1,440
4.8
0
0
4.2
834
19,032
-476
$1,419
-1.5
0
0
2.4
477
19,389
357
$1,411
-0.6
54
0
2.2
438
19,482
93
$1,414
0.2
375
0
2.4
487
19,808
326
$1,392
-1.6
429
0
2.4
487
19,808
300
$1,392
-3.3
135
-188
2.5
506
19,736
-72
$1,389
-0.2
1,660
568
119
186
365

n/a
n/a
n/a
n/a
n/a

4.3
3.9
3.1
2.7
3.4

936
871
696
611
782

20,831
21,464
21,758
22,029
22,223

1,023
633
294
271
194

$1,396
$1,421
$1,466
$1,516
$1,566

0.3
1.8
3.2
3.4
3.3

As previously mentioned, this survey is only a representative sample of buildings whose management
or owners were willing to participate. The inventory measured is not representative of the overall size
of the market, but of its trends. Also, the survey does not distinguish among the prices of studio, one-,
two-, and three-bedroom apartments.
The Kings County sub-market has historically enjoyed a relatively low vacancy rate, with generally
moderate increases in the average asking rent. In 2001 the vacancy rate began to increase, however
in 2003 the vacancy appeared to stabilize, with additional declines in vacancy throughout 2004. The
market vacancy for the Kings County submarket was 2.5% for 1Q2010, a significant decrease from
the first quarter 2009, which was 4.5%. REIS anticipates that average asking rents will increase for
2010 and 2011 with more significant increases occurring thereafter in 2012 and 2013.

29

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

RESIDENTIAL CONSTRUCTION
There are 5,067 units under construction in Brooklyn and 5,138 recently completed, according to
REIS. There are also 4,762units that are currently in the planning phase. Given the sharp downturn
in the residential market, the future of any development currently in the planning phases remains very
uncertain. Also, it is probable that many of the condominium projects nearing completion in the
short-term will be converted to rentals as developers struggle to sell their units. While the demand for
new residential construction is lower than in recent years, new development still represents a minimal
percentage of housing stock in the Brooklyn market. The following table provides the totals of recently
completed projects, projects under construction, as well as proposed residential developments
throughout Brooklyn.
The following table provides a complete listing of new construction within Brooklyn.

30

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

BROOKLYN NEW CONSTRUCTION 1Q2010
Property Name

Secondary Type

Street Address

1 NORTHSIDE PIERS
ATLANTIC COURT
BE @ SCHERMERHORN
BELLTEL LOFTS
NOVO
PALMER'S DOCK
RUGGED CROSS APARTMENTS

Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Subsidized/Low Income
Subsidized/Low Income
Condominiums
Condominiums
Condominiums
Condominiums
Subsidized/Low Income
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Subsidized/Low Income
Apartment
Apartment
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Subsidized/Low Income
Condominiums
Subsidized/Low Income
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Townhomes
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Apartment
Condominiums
Apartment
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Subsidized/Low Income
Apartment
Subsidized/Low Income
Subsidized/Low Income
Condominiums
Apartment
Apartment
Subsidized/Low Income
Townhomes
Apartment
Condominiums
Apartment
Condominiums
Apartment
Condominiums
Condominiums
Condominiums
Condominiums
Apartment
Subsidized/Low Income
Apartment
Condominiums
Apartment
Condominiums
Subsidized/Low Income
Condominiums
Apartment
Apartment
Subsidized/Low Income
Apartment
Condominiums
Condominiums
Apartment
Condominiums
Subsidized/Low Income
Condominiums
Condominiums
Apartment
Condominiums
Condominiums
Condominiums
Condominiums
Condominiums
Subsidized/Low Income
Condominiums
Condominiums
Apartment
Apartment
Condominiums
Subsidized/Low Income
Condominiums
Apartment
Condominiums

4 N 5TH ST @ KENT AVE
74 SMITH ST @ ATLANTIC AVE
SCHERMERHORN ST @ HOYT ST/LIVINGSTO
365 BRIDGE ST @ WILLOUGHBY ST
343 4TH AVE @ 3RD ST
164 KENT AVE @ N 5TH ST
12 PATCHEN AVE @ BROADWAY
606 BERGEN ST
410 4TH AVE @ 7TH ST
255 FIRST ST @ 4TH AVE
415 LEONARD ST
626 SUTTER AVE @ GRANVILLE PAYNE AVE
166 MONTAGUE ST @ CLINTON ST
306 GOLD ST @ TILLARY ST
125 N 10TH ST @ BEDFORD AVE
342 ELDERT ST @ IRVING AVE
80 METROPOLITAN AVE @ N 1ST ST
ATLANTIC AVE @ SUYDAM PL
257 GOLD ST @ TILLARY ST
277 GOLD ST @ TILLARY ST
230 ASHLAND PL @ FULTON ST
181 CLERMONT AVE @ MYRTLE AVE
161 N 4TH ST @ DRIGGS AVE
149 HURON ST @ MANHATTAN AVE
101 N 5TH ST @ BERRY ST
100 MASPETH AVE @ OLIVE ST
360 FURMAN ST @ JORALEMON ST
1 GRAND ARMY PLAZA @ EASTERN PKEY
110 4TH AVE @ WARREN ST
SARATOGA AVE @ PROSPECT PL
1671 W 10TH ST @ QUENTIN RD/KINGS HWY
60 SCHERMERHORN ST @ SMITH ST/HOYT S
120 N 7TH ST @ BERRY ST
275 S 1ST ST @ HAVEMEYER ST
111 STEUBEN ST @ MYRTLE AVE
251 7TH ST @ 4TH AVE
66 N 1ST ST @ KENT AVE
50 BAYARD ST
545 WASHINGTON AVE @ ATLANTIC AVE
137-145 JACKSON ST @ GRAHAM AVE
196-200 S 2ND ST @ DRIGGS AVE
150 N 5TH ST @ BEDFORD AVE
340 BOND ST @ CARROLL ST
431 AVENUE P @ E 2ND ST
103-115 3RD ST @ BOND ST
150 MYRTLE AVE @ FLATBUSH AVE
1600 BEVERLY RD @ E 16TH ST
METROPOLITAN AVE @ OLIVE ST/CATHERIN
125 N 10TH ST @ BERRY ST
229 N 8TH ST @ ROEBLING ST
72 BERRY ST @ N 10TH ST
90 N 5TH ST @ BERRY ST
1 POWERS ST @ HOPE ST
1040 EAST NEW YORK AVE @ E 94TH ST
500 4TH AVE @ 12TH ST
575 FIFTH AVE @ 16TH ST
KENT AVE @ DIVISION AVE
STANLEY AVE @ PINE ST/CRESCENT ST
ALBEE SQ @ FULTON ST
SURF AVE @ W 30TH ST
02 METROPOLITAN AVE @ KEAP ST/RODNEY
FLUSHING AVE @ 8TH AVE/VANDERBILT AVE
SMITH ST @ 5TH ST
STANLEY AVE @ SCHENCH AVE
DOCK ST @ WATER ST
205 WATER ST @ BRIDGE ST
470 VANDERBILT AVE @ FULTON ST
111 KENT AVE @ N 8TH ST
44 BERRY ST @ N 11TH ST
53 BROADWAY @ WYTHE AVE
85 FLATBUSH AVE @ LAFAYETTE AVE
9 WOODBINE ST @ BROADWAY
951 MADISON ST @ BROADWAY
WILLOUGHBY ST @ BRIDGE ST/DUFFIELD ST
3-37 TEN EYCK ST @ LORIMER ST/LEONARD S
414 HICKS ST @ WARREN ST/BALTIC ST
892 BERGEN ST @ FRANKLIN AVE
80 DEKALB AVE @ ROCKWELL PL
1 HANSON PL
N 8TH ST @ KENT AVE
N 6TH ST @ KENT AVE
307 ATLANTIC AVE @ SMITH ST
53 N 3RD ST @ KENT AVE
3015 BRIGHTON 6TH ST @ OCEANVIEW AVE
184 KENT AVE
164 KENT AVE @ N 5TH ST
669 ATLANTIC AVE
159 MYRTLE AVE @ GOLD ST/PRINCE ST
LINCOLN RD @ OCEAN AVE
9 & 21 COOK ST @ BROADWAY/VARET ST
96 ROCKWELL PL @ FULTON ST
144 N 8TH ST @ BEDFORD AVE
111 LAWRENCE ST @ HELEN KELLER PL
360 SMITH ST @ 2ND PL
122 WEST ST @ JAVA ST
755 LAFAYETTE AVE @ MARCUS GARVEY AVE
1138 OCEAN AVE @ FARRAGUT RD
1130 OCEAN AVE @ FARRAGUT RD
LIVONIA AVE @ JEROME ST
110 GREEN ST @ FRANKLIN ST
214 N 11TH ST @ ROEBLING ST
424 BEDFORD AVE @ S 8TH ST
3692 BEDFORD AVE @ KINGS HWY
2758 OCEAN AVE @ AVE W
519-521 ST MARKS AVE @ FRANKLIN AVE
70 BERRY ST @ N 10TH ST
34 BERRY ST @ N 12TH ST
313 GATES AVE @ BEDFORD AVE

166 MONTAGUE
ORO 306
125 N 10TH
550 IRVING PLAZA LOFTS
80 MET PH II
ATLANTIC AVENUE APTS
BKLYN GOLD BLDG 1
BKLYN GOLD BLDG 2
BROOKLYN FORTE
CLERMONT GREENE
NFORTH
NORTH GREENPOINT
NV-101 N, 5TH
OLIVE PARK
ONE BROOKLYN BRIDGE PARK
ONE PROSPECT PARK
PARK SLOPE COURT
PROSPECT PLAZA
QUENTIN TERRACE
SCHERMERHORN HOUSE
SEVENBERRY
SOLEIL
THE ABSOLUTE
THE ARGYLE
THE FACTORY LOFTS
THE IKON
THE ISABELLA
THE JACKSONIA
THE PAD
THE RIALTO
THE SATORI
THE VENETIAN
THIRD AND BOND
TOREN

ROSE PLAZA
THE SPRING CREEK ESTATES
CITY POINT
CONEY ISLAND COMMONS
METROPOLITAN AVENUE APARTMENTS
NAVY GREEN
PUBLIC PLACE
UNNAMED TOWNHOME PROJECT

AVALON WILLOUGHBY WEST
COLUMBIA HICKS
BERGEN STREET CONDOS
DKLB
ONE HANSON PLACE
THE EDGE PH I
THE EDGE PH I
KENT AVENUE APARTMENTS
184 KENT AVE
2 NORTHSIDE PIERS
ATLANTIC TERRACE
AVALON FORT GREENE
PARK TOWER
REV.DONALD J KENNA COURT
ROCKWELL PLACE
THE ALBERO
THE BROOKLYNER
THE OLIVER HOUSE
THE PENCIL FACTORY CONDOS
THE SHELTON
THE WATERFALLS ON OCEAN
THE WATERFALLS ON OCEAN
UNNAMED APARTMENT PROJECT
VIRIDIAN
WAREHOUSE ELEVEN
ZAZZA WILLIAMSBURG

Submarket

Source: Compiled by CBRE

31

Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings
Kings

County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County
County

Completion
Month

Completion
Year

09
03
10
05
02
03
03
02
07
08
02
02
01
08
06
09
06
01
11
03
03
04
12
01
07
08
03
12
11
06
03
06
04
03
04
12
10
04
09
07
10
04
04
12
10
08
12
07
05
08
09
09
12
07
11
04

2008
2008
2009
2008
2008
2008
2008
2009
2009
2008
2008
2008
2010
2008
2009
2009
2008
2008
2009
2010
2008
2009
2008
2009
2009
2008
2009
2008
2009
2009
2008
2009
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2009
2008
2009
2009
2008
2008
2009
2009
2009
2009
2009
2008
2008
2010

03

2014

10
05
07

2010
2010
2010

06
07

2010
2010

06
09
10
03

2010
2010
2010
2011

06

2010

08
11
10
04

2010
2010
2010
2010

05

2010

01
10
07

2011
2010
2010

Size SF/Units

Status

180
50
246
259
113
113
50
24
60
32
53
103
24
303
86
65
50
150
375
135
108
74
37
30
40
87
438
114
49
151
32
216
27
20
35
59
21
58
63
54
30
31
34
33
44
240
38
32
86
54
26
23
31
67
137
48
776
40
120
152
140
455
774
200
325
67
370
62
42
72
108
72
36
861
90
159
38
365
189
346
547
25
112
38
339
270
80
628
80
152
37
41
491
48
93
89
67
67
87
130
120
66
51
27
38
38
142
67

Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Complete
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Planned
Proposed
Proposed
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.
Under Constr.

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

Recent reports have indicated that the outlook for the New York housing market may actually be
worse than current sales and inventory statistics suggest. Industry experts point to a growing mountain
of so-called shadow inventory that is not reflected in the data. This includes units that are held by
developers in soon-to-be completed buildings, as well as those kept off the market by banks and by
individual owners who are waiting for conditions to improve before they tack up “For Sale” signs. In a
report on Manhattan residential real estate this spring, Jonathan Miller, of Miller Samuel Inc.,
estimated that in addition to the 10,445 condominiums that showed up in unsold inventory, there
were as many as 7,000 shadow units.

This additional shadow inventory is expected to exert

downward pressure on both the sales and rental market until it is absorbed.
MARKET OVERVIEW
Brooklyn has been transformed by the recent residential building boom in recent years. Thousands of
new housing units have been added throughout the borough. The residential boom has created new
demand for retail. The borough is often the first choice home for creative professionals and has a
firmly established, thriving arts scene. Soaring home prices have brought a new affluence to the
borough.
Despite its high population density and strong income demographics, Brooklyn has traditionally been
underserved by retail. A widely reported study in 2006 by the Brooklyn Chamber of Commerce
indicated that Brooklyn has just 10.8 square feet of retail space per capita. This is significantly less
than the national average of 36.4 square feet per capita. By comparison, Manhattan has 52.2
square feet per capita.
National retailers have historically shied away from Brooklyn. Part of the reason for this is because of
the lack of available space for larger stores. This has started to change in recent years with the
opening of several large big box stores. Ikea opened a store in Red Hook in 2008. H&M is opening
a new store in the Fulton Mall which is expected to open in 2010. Target’s Brooklyn store has been
reported to be its highest grossing store nationwide. The building boom has added significantly to the
borough’s supply of retail space and has created spaces large enough to attract interest from national
retailers.
Despite the recent downturn in the residential market, Brooklyn continues to remain a desirable place
to live, with sales prices and rents in the borough’s better neighborhoods achieving levels once
thought possible only in Manhattan.

Brooklyn continues to attract high income households and

retailers have begun to take notice of the new demographics in the borough. Barney’s Co-op, Trader
Joe’s, Pier 1 Imports, and Crate & Barrel are among the retailers who have either recently opened
stores in the borough or have been reported to be actively seeking space. According to Caroline
Padro, director of leasing for Two Trees Management, "these stores are now coming to the outer
boroughs because the retailers realize that the people who shop in Manhattan actually live in

32

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

Brooklyn. The demographics are changing and they realize there is a lot of money in Brooklyn, so
now it makes 100 percent sense that they want to expand there."
The following discussion illustrates some general observations in the surrounding retail market.
Market Summary
Market statistics for the Brooklyn in its entirety and the Brooklyn South submarket are shown in the
following table:
RETAIL MARKET STATISTICS
Category

Brooklyn

Existing Supply (SF)

South Brooklyn

54,207,223

Existing Supply (No. Of Buildings)

22,592,317

7,689

3,272

Delivered Inventory (SF)

30,500

11,462

Under Construction (SF)

592,115

307,738

Average Occupancy

96.3%

Average Rent PSF
Net Absorption

95.5%

$34.25

$37.620

126,147

48,212

Source: Costar 2nd Qtr 2010

Market Trends
The table below presents the quarterly trends in rental rates and occupancy for the Brooklyn area and
local submarket over the past two years:
RETAIL MARKET TRENDS
Brooklyn
Date

Rent PSF

South Brooklyn

Occupancy

Rent PSF

Occupancy

3rd Qtr. 2008

$37.82

93.9%

$36.82

94.2%

4th Qtr. 2008

$37.24

95.0%

$37.84

94.5%

1st Qtr. 2009

$37.26

94.7%

$38.92

93.7%

2nd Qtr. 2009

$37.92

95.0%

$43.26

94.0%

3rd Qtr. 2009

$35.18

95.6%

$38.92

95.2%

4th Qtr. 2009

$34.66

96.0%

$37.84

95.5%

1st Qtr. 2010

$33.42

96.1%

$36.82

95.3%

2nd Qtr. 2010

$34.25

96.3%

$37.62

95.5%

Source: Costar 2nd Qtr 2010

According to Costar, occupancy levels in Brooklyn have ranged from approximately 93.9% to 96.3%
over the past two years, while the local submarket has performed moderately lower at 93.7% to
95.5%. It should be noted that the Brooklyn retail market is somewhat unique from typical suburban
markets because the vast majority of the retail space is street retail and is not located in shopping
centers. Smaller retail spaces are not always tracked by Costar. It has been widely reported that retail

33

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

vacancies throughout the New York metropolitan region and Brooklyn rose substantially in 2009. The
latest market reports have indicated that leasing appears to have picked up as retailers have begun to
take advantage of opportunities to lease prime commercial spaces at prices significantly discounted
from the peak prices of 2008. Asking rents have dropped dramatically throughout the city.
CPEX Real Estate Survey
CPEX Real Estate released a survey of retail rents on prime retail corridors throughout New York City
in 2010. CPEX classifies the subject as part of the Flatbush/Park Slope retail corridor. According to
CPEX, rents in the subject’s corridor typically range from $50 to $65 per square foot. The top retail
corridors in Brooklyn are Fulton Street in Downtown Brooklyn, Montague Street in Brooklyn Heights,
Bedford Avenue in Williamsburg, and 86th Street in Bay Ridge and Bensonhurst.

34

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

Demand Generators
The subject property is situated in reasonable proximity to Manhattan and contains a densely
surrounding residential population .. High traffic counts near the Atlantic Terminal help the subject

35

 ATLANTIC YARDS DEVELOPMENT SITE 5   M ARKET A NALYSIS

draw shopper from a wider area than just the population of the immediate area.

Overall, we

anticipate that demand for retail space in the area will remain relatively stable through the near term.
CONCLUSION
The problems in the capital markets have significantly depreciated US residential housing. Causing
declines in both for-sales pricing and rental rates. Although market fundamentals in New York City
have remained stronger than the US average for most of 2008, unprecedented turmoil in the financial
markets beginning in September 2008 has led to a significant decline in the New York City for-sale
housing market. This housing decline has lead to developers to re-think their strategy and market
would be condominium units as rental properties, which has created increased inventory and
decreasing rental rates. Brooklyn has a significant amount of supply both for condominiums turned
rentals and new rental properties to absorb and it will probably take longer to recover than other New
York City neighborhood. In the long term, given the depth of the market, New York City is expected
to recover.

36

 ATLANTIC YARDS DEVELOPMENT SITE 5   S ITE A NALYSIS

SITE ANALYSIS
The following chart summarizes the salient characteristics of the subject site.
SITE SUMMARY
Physical Description
Gross Site Area

1.24 Acres

Primary Road Frontage

Atlantic Avenue

53,933 Sq. Ft.
194 Feet

Secondary Road Frontage

Flatbush Avenue

175 Feet

Additional Road Frontage

Pacific Street

340 Feet

Additional Road Frontage

Fourth Avenue

180 Feet

Surplus / Excess Land Area

None

Zoning District

C6-2

Flood Map Panel No. & Date

360490211F

Flood Zone

Zone X

5-Sep-07

Source: Various sources compiled by CBRE

The subject is situated on an entire block with exposure to 4 primary thoroughfares including Atlantic
Avenue, Flatbush Avenue, Pacific Street and 4th Avenue in Brooklyn. The subject has two street
addresses, 617 Pacific Street and 15 4th Avenue and it is legally identified as Block 927 Lots 1 & 16
by the New York City Department of Finance/Assessor’s Office. A map illustrating the layout of the
subject property is shown below:

37

 ATLANTIC YARDS DEVELOPMENT SITE 5   S ITE A NALYSIS

LAND AREA
The site is considered adequate in terms of size and utility. There is no unusable, excess or surplus
land area. Please refer to the Resource Verification table within the Scope of Work for the source of
the land area size.
SHAPE AND FRONTAGE
The site is generally irregular in shape and has adequate frontage along four primary thoroughfares
within the neighborhood.
INGRESS/EGRESS
Ingress and egress is available to the site via Pacific Street and Atlantic Avenue. Please refer to the
prior site/plat exhibit for the layout of the streets that provide access to the subject.
TOPOGRAPHY AND DRAINAGE
The site is generally level and at street grade. The topography of the site is not seen as an impediment
to the development of the property. During our inspection of the site, we observed no drainage
problems and assume that none exist.
SOILS
A soils analysis for the site has not been provided for the preparation of this appraisal. In the absence
of a soils report, it is a specific assumption that the site has adequate soils to support the highest and
best use.
EASEMENTS AND ENCROACHMENTS
There are no known easements or encroachments impacting the site that are considered to affect the
marketability or highest and best use. It is recommended that the client/reader obtain a current title
policy outlining all easements and encroachments on the property, if any, prior to making a business
decision.
COVENANTS, CONDITIONS AND RESTRICTIONS
There are no known covenants, conditions or restrictions impacting the site that are considered to
affect the marketability or highest and best use. It is recommended that the client/reader obtain a
copy of the e current covenants, conditions and restrictions, if any, prior to making a business
decision.

38

 ATLANTIC YARDS DEVELOPMENT SITE 5   S ITE A NALYSIS

UTILITIES AND SERVICES
The site is within the jurisdiction of the City of New York and is provided all municipal services,
including police, fire and refuse garbage collection. All utilities are available to the site in adequate
quality and quantity to service the highest and best use.
FLOOD ZONE
According to flood hazard maps published by the Federal Emergency Management Agency (FEMA),
the site is within Zone X, as indicated on Community Map Panel No. 360490211F. FEMA defines the
flood zone(s) as follows:
Zones C and X (unshaded) are flood insurance rate zones used for areas outside the
0.2-percent-annual-chance floodplain. No Base Flood Elevations (BFEs) or depths are
shown in this zone, and insurance purchase is not required.
ENVIRONMENTAL ISSUES
CBRE, Inc. is not qualified to detect the existence of potentially hazardous material or underground
storage tanks which may be present on or near the site. The existence of hazardous materials or
underground storage tanks may affect the value of the property. For this appraisal, CBRE, Inc. has
specifically assumed that the property is not affected by any hazardous materials that may be present
on or near the property.
ADJACENT PROPERTIES
The adjacent land uses are summarized as follows:
North:
South:
East:
West:

Retail Mall
Low-rise residential
Low-rise Residential with grade level retail
Atlantic Yards development site

CONCLUSION
The site is well located and afforded good access and visibility from roadway frontage. The size of the
site is typical for the area and use, and there are no known detrimental uses in the immediate vicinity
to any of the sites. Overall, there are no known factors which are considered to prevent the site from
development to its highest and best use, as if vacant, or adverse to the existing use of the site.

39

 ATLANTIC YARDS DEVELOPMENT SITE 5   Z ONING

ZONING
The subject property lies within C6-2 zoned area by the City of New York. The New York City Zoning
Resolution regulates the use to which a property may be put as well as the density, bulk, height, and
siting of any improvements to the property. Regulations are promulgated by the Department of City
Planning and are subject to review by the Board of Standards and Appeals and by the Board of
Estimate. The following chart summarizes the subject’s zoning requirements.
ZONING SUMMARY
Current Zoning

C6-2

Legally Conforming

Yes

Uses Permitted

Offices
or
commercial
uses
serving
neighborhoods and community needs

Zoning Change

Not likely

Category

Zoning Requirement

Maximum FAR/Density

6.00 : 1

Subject's Actual FAR

0.88 : 1

Source: Planning & Zoning Dept.

A zoning map is presented below:

40

 ATLANTIC YARDS DEVELOPMENT SITE 5   Z ONING

The zoning resolution regulates improvement size through a floor-area-ratio system. The FAR is the
gross square foot size of the improvement (less certain deductions) divided by the square foot area of
the site. The higher the FAR, the denser the improvements. Excluded from the gross square foot area
of a building are cellars, space used for mechanical equipment, space used for loading berths as long
as that space does not exceed 200% of the minimum area required, and space devoted to off-street
parking except if such spaces are located in a parking garage. In general, the resolution does not
regulate height although it does mandate setbacks with height.
We calculate the current as-of-right FAR for the subject site as follows:

Lot
1
16
Total

ZONING SUMMARY
Site Area
FAR
30,780
X
6
=
X
6
=
23,153
53,933

Buildable SF
184,680
138,918
323,598

The site is situated within the C6-2 commercial district, which has an FAR of 6.0 for commercial uses.
Based on the subject’s 53,933 square foot of land area, the property has an as-of-right development
envelope of 323,598 square feet of gross building area. The subject’s gross building area of 47,280
square feet is within the as-of-right envelope and thus the subject property appears to be legallyconforming. For additional zoning information please contact the New York City Planning
departments.

41

 ATLANTIC YARDS DEVELOPMENT SITE 5   T AX AND A SSESSMENT D ATA

TAX AND ASSESSMENT DATA
The subject property is assessed and taxed by the City of New York on an ad valorem basis. Real
property in New York State is not required to be assessed at 100% of market value, but all the
ratables within a taxing jurisdiction must be assessed at a consistent percentage of market value. The
state legislature exempted the City of New York from this requirement. As such, NYC is permitted to
classify real property by type and to assess classifications at different fractions of their market values
thus the legislature permitted the taxation burden to be shared inequitably among categories of
properties in this area.
In New York City, reassessments occur annually, and local authorities phase in changes over a fiveyear period. During the phase-in, the annual assessed values are "transitional values". The full
reassessed value is the "actual" or "target value". The first transitional value is the original assessed
value plus 20% of the difference between the original and target values. The 20% increments are
added to each prior year's transitional value until the full target value is reached in the fifth year. The
tax liability is typically based on the lower of the “actual” and “transitional” assessment. The subject
property is identified as Block 927 Lots 1 & 16 by the City of New York and its current and historical
transitional and actual assessments are as follows.
AD VALOREM TAX INFORMATION (PC Richard & Sons)
Block 927 Lot 1

2007/2008

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013*

(future)

(future)

Actual Assessment
Land

$720,000

$720,000

$720,000

$720,000

$720,000

$720,000

Building

$1,080,000

$1,130,000

$1,030,500

$1,174,500

$1,363,950

$1,363,950

Total

$1,800,000

$1,850,000

$1,750,500

$1,894,500

$2,083,950

$2,083,950

Transitional Assessment
Land

$68,000

$678,000

$678,000

$699,000

$720,000

$720,000

Building

$1,415,200

$899,800

$974,500

$1,056,100

$1,155,790

$1,212,580

Total

$1,483,200

$1,577,800

$1,652,500

$1,755,100

$1,875,790

$1,932,580

$10.059

$10.612

$10.426

$10.312

$10.152

$10.254

$180,986

$190,430

$198,157

General Tax Rate *
(per $100 A.V.)
Property Taxes

$149,195

$167,436

$172,290

* Tentative 2012/2013 assessment. Tax Rate assumed to increase by 1% over 2011/2012 rate.

Source: Assessor's Office

42

 ATLANTIC YARDS DEVELOPMENT SITE 5   T AX AND A SSESSMENT D ATA
AD VALOREM TAX INFORMATION (Modell's)
Block 927 Lot 16

2007/2008

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013*

(future)

(future)

Actual Assessment
Land

$549,000

$549,000

$549,000

$549,000

$549,000

$833,400

Building

$1,071,000

$1,255,500

$1,183,500

$1,174,500

$1,290,600

$1,312,650

Total

$1,620,000

$1,804,500

$1,732,500

$1,723,500

$1,839,600

$2,146,050

Land

$563,400

$549,000

$549,000

$549,000

$549,000

$605,880

Building

$593,700

$790,800

$975,300

$1,157,100

$1,195,020

$1,243,350

Total

$1,157,100

$1,339,800

$1,524,300

$1,706,100

$1,744,020

$1,849,230

$10.059

$10.612

$10.426

$10.312

$10.152

$10.254

$175,933

$177,053

$189,611

Transitional Assessment

General Tax Rate *
(per $100 A.V.)
Property Taxes

$116,393

$142,180

$158,924

* Tentative 2012/2013 assessment. Tax Rate assumed to increase by 1% over 2011/2012 rate.

Source: Assessor's Office

Tax payments are current according to the New York City department of Finance records.
FUTURE TAX INCREASES
The New York City Council sets the annual tax rate for each property class based on the total amount of
ratables and budget needs. The rate is typically established in June and takes effect on July 1st, however
at times the rate is established or changed in the middle of the tax year, resulting 1st half and 2nd half
rates. Below is a history summary of tax rates for the City of New York:
NYC TAX RATES
Tax Class 1
YE A R

Rat e

Tax Class 2

% C h an ge

R at e

Tax Class 3

% C h an ge

R at e

Tax Class 4

% C h an ge

Rat e

% Ch an ge

11/12 Blended 1st/2nd half

$18.202

4.83%

$13.433

0.60%

$12.473

-1.25%

$10.152

-1.55%

11/12 - 2nd half

$19.040

9.65%

$13.513

1.20%

$12.315

-2.50%

$9.992

-3.10%

11/12 - 1st half

$17.364

0.00%

$13.353

0.00%

$12.631

0.00%

$10.312

0.00%

10/11

$17.364

1.62%

$13.353

0.85%

$12.631

-0.88%

$10.312

-1.09%
-1.75%

09/10

$17.088

1.79%

$13.241

1.44%

$12.743

1.32%

$10.426

08/09 - 2nd half

$16.787

7.57%

$13.053

7.53%

$12.577

7.51%

$10.612

7.52%

08/09 - 1st half

$15.605

1.11%

$12.139

1.77%

$11.698

1.05%

$9.870

-1.88%

07/08

$15.434

-4.24%

$11.928

-6.35%

$11.577

-3.58%

$10.059

-8.53%

06/07

$16.118

2.36%

$12.737

2.75%

$12.007

-2.45%

$10.997

-2.73%

05/06

$15.746

4.32%

$12.396

1.47%

$12.309

-1.94%

$11.306

-2.18%

04/05

$15.094

3.74%

$12.216

-3.20%

$12.553

1.09%

$11.558

1.11%

03/04

$14.550

2.75%

$12.620

0.82%

$12.418

-1.17%

$11.431

-1.29%
18.45%

02/03 3rd/4th Qtr.

$14.160

18.63%

$12.517

18.49%

$12.565

18.46%

$11.580

02/03 1st/2nd Qtr.

$11.936

2.82%

$10.564

-2.11%

$10.607

0.63%

$9.776

0.66%

01/02

$11.609

3.15%

$10.792

-0.51%

$10.541

0.01%

$9.712

-0.57%

00/01

$11.255

0.79%

$10.847

-0.04%

$10.540

12.15%

$9.768

-2.21%

99/00

$11.167

1.88%

$10.851

1.04%

$9.398

6.80%

$9.989

-2.41%

98/99

$10.961

1.03%

$10.739

-2.78%

$8.800

6.25%

$10.236

0.71%

97/98

$10.849

0.59%

$11.046

-0.09%

$8.282

5.64%

$10.164

-0.86%

96/97

$10.785

0.56%

$11.056

2.30%

$7.840

-1.04%

$10.252

-1.44%

95/96

$10.725

0.29%

$10.807

2.42%

$7.922

2.86%

$10.402

-1.94%

94/95

$10.694

-1.89%

$10.552

1.76%

$7.702

4.02%

$10.608

-1.08%

93/94

$10.900

0.11%

$10.369

4.63%

$7.404

-42.13%

$10.724

0.24%

92/93

$10.888

0.00%

$9.910

0.25%

$12.794

-2.21%

$10.698

0.63%

91/92

$10.888

9.76%

$9.885

7.12%

$13.083

-13.93%

$10.631

6.27%

---

$15.200

---

$10.004

---

90/91
$9.920
Source: New York City Department of Finance

--$9.228
* RE Tax rates shown per $100 of A.V.

43

 ATLANTIC YARDS DEVELOPMENT SITE 5   T AX AND A SSESSMENT D ATA

Rates for Class IV properties have typically followed a gradual declining pattern with increase years
historically tied to recessionary periods for the City of New York. Going forward, we project that the
Class IV rate will grow at a long term rate of 1% per annum.
CONCLUSION
The subject’s assessment is reasonable in comparison to the tax comparables utilized within our
analysis. Based on the previous discussion of the assessment and tax rates, the subject’s projected
fiscal year tax liability is estimated at $387,769 in the initial year of our analysis. A summary of our
concluded future tax liability and assessment phase-in at the subject property is presented on the
following tables:

44

 $2,540,323

2021 /22

2022 /23

$2,442,637

$2,394,742

$2,347,787

CBRE/NYC Department of Finance

---

$2,490,513

2020 /21

$2,301,752

$190,430

$2,441,680

2019 /20

$2,256,619

Annual % Increase

$2,393,803

2018 / 19

$2,212,372

Annual Tax Liability

$2,346,866

2017 / 18

$2,168,992

$2,134,635

10.152

$2,300,849

2016 / 17

Tax Rate

$2,255,734

2015 / 16

$2,071,234

$1,875,790

$2,211,504

2014 / 15

$1,987,706

$2,083,950

$2,168,142

2013 / 14

$1,932,580

$37,890

$28,800

Current Actual Assessment

$2,125,629

2012 / 13

$1,875,790

$1,755,100

Taxable (min of Actual & Trans.)

$2,083,950

2011 / 12

($19,900)

$1,875,790

$2,083,950

2010 / 11

$1,652,500

$10,000

Current Trans. Assessment

$1,894,500

2009 / 10

$1,577,800

$63,900

$120,690

$1,750,500

2008 / 09

$1,483,200

$1,755,100

$1,850,000

2007 / 08

2011/
2012

Phase In

$1,800,000

Tax Yr.
/

Trans.
Assmt.

Previous Transitional

Full
Assmt.
,
,

4.06%

$198,157

10.254

$1,932,580

$2,083,950

$1,932,580

$56,790

$1,875,790

$0

$37,890

$28,800

($19,900)

$10,000

2012/
2013

3.88%

$205,848

10.356

$1,987,706

$2,125,629

$1,987,706

$55,126

$1,932,580

$8,336

$0

$37,890

$28,800

($19,900)

2013/
2014

5.24%

$216,643

10.460

$2,071,234

$2,168,142

$2,071,234

$83,528

$1,987,706

$8,503

$8,336

$0

$37,890

$28,800

2014/
2015

45

4.09%

$225,507

10.564

$2,134,635

$2,211,504

$2,134,635

$63,401

$2,071,234

$8,673

$8,503

$8,336

$0

$37,890

2015/
2016
,

$0

2.63%

$231,428

10.670

$2,168,992

$2,255,734

$2,168,992

$34,357

$2,134,635

$8,846

$8,673

$8,503

$8,336

2016/
2017
,

3.02%

$238,417

10.777

$2,212,372

$2,300,849

$2,212,372

$43,380

$2,168,992

$9,023

$8,846

$8,673

$8,503

$8,336

2017/
2018
,

R.E. TAXES - TRANSITIONAL ASSESSMENT PHASE-IN

3.02%

$245,618

10.884

$2,256,619

$2,346,866

$2,256,619

$44,247

$2,212,372

$9,203

$9,023

$8,846

$8,673

$8,503

2018/
2019
,

3.02%

$253,035

10.993

$2,301,752

$2,393,803

$2,301,752

$45,132

$2,256,619

$9,387

$9,203

$9,023

$8,846

$8,673

2019/
2020
,

3.02%

$260,677

11.103

$2,347,787

$2,441,680

$2,347,787

$46,035

$2,301,752

$9,575

$9,387

$9,203

$9,023

$8,846

2020/
2021
,

3.02%

$268,549

11.214

$2,394,742

$2,490,513

$2,394,742

$46,956

$2,347,787

$9,767

$9,575

$9,387

$9,203

$9,023

2021/
2022

3.02%

$276,660

11.326

$2,442,637

$2,540,323

$2,442,637

$47,895

$2,394,742

$9,962

$9,767

$9,575

$9,387

$9,203

2022/
2023

ATLANTIC YARDS DEVELOPMENT SITE 5   T AX AND A SSESSMENT D ATA

 $2,616,023

2021 /22

2022 /23

$2,515,426

$2,466,104

$2,417,749

CBRE/NYC Department of Finance

---

$2,564,728

2020 /21

$2,370,342

$177,053

$2,514,440

2019 /20

$2,323,865

Annual % Increase

$2,465,137

2018 / 19

$2,278,299

$2,233,626

Annual Tax Liability

$2,416,801

2017 / 18

10.152

$2,369,413

2016 / 17

$2,136,955

Tax Rate

$2,322,954

2015 / 16

$2,026,174

$1,744,020

$2,277,405

2014 / 15

$1,926,124

$1,839,600

$2,232,750

2013 / 14

$1,849,230

-$1,800
$23,220

Current Actual Assessment

$2,188,971

2012 / 13

$1,744,020

$1,706,100

Taxable (min of Actual & Trans.)

$2,146,050

2011 / 12

($14,400)

$1,744,020

$1,839,600

2010 / 11

$1,524,300

$36,900

Current Trans. Assessment

$1,723,500

2009 / 10

$1,339,800

-$6,000

$37,920

$1,732,500

2008 / 09

$1,157,100

$1,706,100

$1,804,500

2007 / 08

2011/
2012

Phase In

$1,620,000

Tax Yr.
/

Trans.
Assmt.

Previous Transitional

Full
Assmt.
,
,

7.09%

$189,611

10.254

$1,849,230

$2,146,050

$1,849,230

$105,210

$1,744,020

$61,290

$23,220

-$1,800

($14,400)

$36,900

2012/
2013

5.20%

$199,470

10.356

$1,926,124

$2,188,971

$1,926,124

$76,894

$1,849,230

$8,584

$61,290

$23,220

-$1,800

($14,400)

2013/
2014

6.25%

$211,930

10.460

$2,026,174

$2,232,750

$2,026,174

$100,050

$1,926,124

$8,756

$8,584

$61,290

$23,220

-$1,800

2014/
2015

46

6.52%

$225,752

10.564

$2,136,955

$2,277,405

$2,136,955

$110,781

$2,026,174

$8,931

$8,756

$8,584

$61,290

$23,220

2015/
2016
,

5.57%

$238,325

10.670

$2,233,626

$2,322,954

$2,233,626

$96,671

$2,136,955

$9,110

$8,931

$8,756

$8,584

$61,290

2016/
2017
,

3.02%

$245,522

10.777

$2,278,299

$2,369,413

$2,278,299

$44,673

$2,233,626

$9,292

$9,110

$8,931

$8,756

$8,584

2017/
2018
,

R.E. TAXES - TRANSITIONAL ASSESSMENT PHASE-IN

3.02%

$252,937

10.884

$2,323,865

$2,416,801

$2,323,865

$45,566

$2,278,299

$9,478

$9,292

$9,110

$8,931

$8,756

2018/
2019
,

3.02%

$260,576

10.993

$2,370,342

$2,465,137

$2,370,342

$46,477

$2,323,865

$9,667

$9,478

$9,292

$9,110

$8,931

2019/
2020
,

3.02%

$268,445

11.103

$2,417,749

$2,514,440

$2,417,749

$47,407

$2,370,342

$9,861

$9,667

$9,478

$9,292

$9,110

2020/
2021
,

3.02%

$276,552

11.214

$2,466,104

$2,564,728

$2,466,104

$48,355

$2,417,749

$10,058

$9,861

$9,667

$9,478

$9,292

2021/
2022

3.02%

$284,904

11.326

$2,515,426

$2,616,023

$2,515,426

$49,322

$2,466,104

$10,259

$10,058

$9,861

$9,667

$9,478

2022/
2023

ATLANTIC YARDS DEVELOPMENT SITE 5   T AX AND A SSESSMENT D ATA

 ATLANTIC YARDS DEVELOPMENT SITE 5   H IGHEST AND B EST U SE

HIGHEST AND BEST USE
In appraisal practice, the concept of highest and best use represents the premise upon which value is
based. The four criteria the highest and best use must meet are:
legal permissibility;
physical possibility;
financial feasibility; and
maximum profitability.
The highest and best use analysis of the subject is discussed on the following pages. This analysis
incorporates the information presented in the Market Analysis section, as well as any unique
characteristics of the subject described previously.
AS VACANT
Legal Permissibility
The legally permissible uses were discussed in the Site Analysis and Zoning Sections.
Physical Possibility
The subject is adequately served by utilities, has an adequate shape and size, sufficient access, etc., to
be a separately developable site. The subject site would reasonably accept a site layout for any of the
legally probable uses. There are no known physical reasons why the subject site would not support
any legally probable development. The existence of the present development on the site provides
additional evidence for the physical possibility of development.
Financial Feasibility
The determination of financial feasibility is dependent primarily on the relationship of supply and
demand for the legally probable land uses versus the cost to create the uses. As discussed in the
market analysis of this report, the subject retail/office market is generally stabilized. The recent
national economic recession and limited availability of capital led several proposed developments to
delay construction. Increased vacancy rates, significantly lower rents, and higher cap rates deterred
new development. However, the most recent data suggests that market conditions are improving and
new developments (with pre-leasing) in selected retail/office submarkets are once again moving
forward with construction plans. In the subject’s neighborhood, speculative retail/office construction
development is not considered feasible at this time.
Maximum Profitability
The final test of highest and best use of the site as if vacant is that the use be maximally productive,
yielding the highest return to the land. In the case of the subject as if vacant, the analysis has indicated
that a new commercial project would be most appropriate.
47

 ATLANTIC YARDS DEVELOPMENT SITE 5   H IGHEST AND B EST U SE

CONCLUSION: HIGHEST AND BEST USE AS VACANT
Based on the foregoing analysis, the highest and best use of the site, as vacant, would be to hold for
future commercial development when economic conditions improve.

48

 ATLANTIC YARDS DEVELOPMENT SITE 5   A PPRAISAL M ETHODOLOGY

APPRAISAL METHODOLOGY
In appraisal practice, an approach to value is included or omitted based on its applicability to the
property type being valued and the quality and quantity of information available. Based on
information contained in the Thirteenth Edition of The Appraisal of Real Estate, published in 2008,
depending on a specific appraisal assignment, any of the following four methods may be used to
determine the market value of the fee simple interest of land:
Sales Comparison Approach;
Income Capitalization Procedures;
Allocation; and
Extraction.
The following summaries of each method are paraphrased from the text.
The first is the sales comparison approach. This is a process of analyzing sales of similar, recently
sold parcels in order to derive an indication of the most probable sales price (or value) of the property
being appraised. The reliability of this approach is dependent upon (a) the availability of comparable
sales data, (b) the verification of the sales data regarding size, price, terms of sale, etc., (c) the degree
of comparability or extent of adjustment necessary for differences between the subject and the
comparables, and (d) the absence of nontypical conditions affecting the sales price. This is the
primary and most reliable method used to value land (if adequate data exists).
The income capitalization procedures include three methods: land residual technique, ground rent
capitalization, and Subdivision Development Analysis. A discussion of each of these three techniques
is presented in the following paragraphs.
The land residual method may be used to estimate land value when sales data on similar
parcels of vacant land are lacking. This technique is based on the principle of balance
and the related concept of contribution, which are concerned with equilibrium among the
agents of production--i.e. labor, capital, coordination, and land. The land residual
technique can be used to estimate land value when: 1) building value is known or can be
accurately estimated, 2) stabilized, annual net operating income to the property is known
or estimable, and 3) both building and land capitalization rates can be extracted from the
market. Building value can be estimated for new or proposed buildings that represent the
highest and best use of the property and have not yet incurred physical deterioration or
functional obsolescence.
The subdivision development method is used to value land when subdivision and
development represent the highest and best use of the appraised parcel. In this method,
an appraiser determines the number and size of lots that can be created from the
appraised land physically, legally, and economically. The value of the underlying land is
then estimated through a discounted cash flow analysis with revenues based on the
achievable sale price of the finished product and expenses based on all costs required to
complete and sell the finished product.

49

 ATLANTIC YARDS DEVELOPMENT SITE 5   A PPRAISAL M ETHODOLOGY

The ground rent capitalization procedure is predicated upon the assumption that ground
rents can be capitalized at an appropriate rate to indicate the market value of a site.
Ground rent is paid for the right to use and occupy the land according to the terms of the
ground lease; it corresponds to the value of the landowner's interest in the land. Marketderived capitalization rates are used to convert ground rent into market value. This
procedure is useful when an analysis of comparable sales of leased land indicates a range
of rents and reasonable support for capitalization rates can be obtained.
The allocation method is typically used when sales are so rare that the value cannot be estimated by
direct comparison. This method is based on the principle of balance and the related concept of
contribution, which affirm that there is a normal or typical ratio of land value to property value for
specific categories of real estate in specific locations. This ratio is generally more reliable when the
subject property includes relatively new improvements. The allocation method does not produce
conclusive value indications, but it can be used to establish land value when the number of vacant
land sales is inadequate.
The extraction method is a variant of the allocation method in which land value is extracted from the
sale price of an improved property by deducting the contribution of the improvements, which is
estimated from their depreciated costs. The remaining value represents the value of the land. Value
indications derived in this way are generally unpersuasive because the assessment ratios may be
unreliable and the extraction method does not reflect market considerations.
METHODOLOGY APPLICABLE TO THE SUBJECT
For the purposes of this analysis, we have utilized the sales comparison approach as this methodology
is considered most applicable when valuing vacant land and comparable sales are available. The
other methodologies are used primarily when comparable land sales data is non-existent. Therefore,
these approaches have not been used.
We have utilized the Direct Capitalization technique of the Income Capitalization Approach to value
the existing Modell’s and PC Richard & Son’s retail stores. The resulting values, along with our
estimate for the buy-out costs associated with the Modell’s lease and the client provided costs for the
Subway related infrastructure have been deducted from the concluded fee simple land value in order
to arrive at our Retrospective As Is Value for the additional development rights on Site 5.

50

 ATLANTIC YARDS DEVELOPMENT SITE 5   L AND V ALUE

LAND VALUE
The subject property consists of two parcels of land located at 15 4th Avenue and 617 Pacific Street.
The parcels feature a total developable area of 323,598 square feet as discussed in the Zoning
section of this report. It is important to note that the valuation contained herein is a retrospective
value, with an effective date of March 3, 2010.
The following map and table summarize the comparable data used in the valuation of the subject site.
A detailed description of each transaction is included in the addenda.

From our research of land sales within the local market and the surrounding areas of Brooklyn we
were able to find a sufficient number of sales to estimate the value of the subject site.

Details

regarding the comparable land sales used in the analysis are summarized in the following page.
For comparative purposes, varying adjustments are made to the comparable sale prices for elements
such as property rights, financing, conditions of sale, market conditions (time), and locational and
physical characteristics. Percentage adjustments are used to compare the recorded sales to the site
being appraised. Following are those considerations that are relevant to the subject. Property rights,
financing, conditions of sale, and market conditions are adjusted prior to adjustments for location and
physical characteristics

51

 ATLANTIC YARDS DEVELOPMENT SITE 5   L AND V ALUE
SUMMARY OF COMPARABLE LAND SALES
No. Location

Transaction
Type
Date

Zoning

Proposed
Use

Sale
Price

Size
(Acres)

Size
(SF)

Maximum
FAR (SF)

Price Per
SF (FAR)

1

205 Water Street
Brooklyn, NY

Sale

Dec-09

R8A, R7A

Mixed use/
Residential

$8,600,000

0.50

21,700

88,000

$97.73

2

392 Atlantic Ave
Brooklyn, NY

Sale

Jul-09

R6A/C2-4

Mixed use/
Residential

$610,000

0.04

1,800

5,400

$112.96

3

383 S 5th Street
Brooklyn, NY

Sale

Jul-09

R6

Residential

$2,750,000

0.26

11,507

27,962

$98.35

4

229 Duffield St
Brooklyn, NY

Sale

Jun-09

C6-4.5

Hotel

$4,970,000

0.10

4,345

52,138

$95.32

5

127-141 West St
Brooklyn, NY

Sale

Dec-08

R8-R6-C2-4

Residential

$84,015,000

2.36

103,000

420,240

$199.92

Compiled by CBRE

Market Conditions
It should be noted the paragraph below is based on information contained in a land value appraisal
report for an unrelated property that was prepared by CBRE in April 2010 and has been included to
illustrate the investment sentiment as of the retrospective value date.
With the onset of the national economic recession and the intensifying of the credit crisis, there has
been significantly reduced demand for land sites. This is primarily due to the lack of financing for new
development, although the likelihood of increased vacancy and lowered expectations for revenue
growth have contributed to the reduced demand. Additionally, based upon our conversations with
brokers, property values, and more specifically, land values, are seen to be down anywhere from 2060% in today’s market. Importantly, the lack of financing, capital, equity and debt, along with the risk
averse mindset in the marketplace, has further eroded value at the present time by limiting the number
of potential buyers, and severely limiting those that are able to obtain financing and put up the
required equity of somewhere between 40-50% in this market.
Hence, 2008 sales have received a downward adjustment for market conditions in varying degrees,
depending upon their sales dates. This adjustment reflects the change in market conditions from the
sale date of a comparable to the valuation date of the subject. Beginning in September 2007, credit
markets began to experience a tightening as a result of concerns regarding the performance of
subprime loans and the potential implications for the mortgage backed securities market. Over the
past 24 months, and even more so since September 2008, which following the collapse of Lehman
Brothers, was a major negative turning point in the economy, additional concerns have begun to
surface. Volatility in the stock markets, the softening of the real estate market, and a shift in market
fundamentals has caused banks to tighten lending standards due to liquidity concerns moving
forward. Current credit conditions have had a negative impact on the commercial real estate market,

52

 ATLANTIC YARDS DEVELOPMENT SITE 5   L AND V ALUE

as it has limited investors’ abilities to secure financing for investment and development. A recession
has been declared to have begun back in December 2007, and new development deals in particular
have been all but eliminated. Therefore, while there have been limited land sales in 2008 and quite
few in 2009, they required significant market condition adjustments. These market adjustments are
based on conversations and research in the marketplace with brokers, appraisers, investors and
participants in the market. The 2008 sales were adjusted downward to some degree based upon their
dates of sale in comparison to the date of valuation given the above factors.
Land values have been adversely impacted by a combination of multiple issues. Declines in market
rents and increasing vacancy and expenses have led to a decline in net operating incomes, while the
tightening of underwriting standards and general market conditions has led to an increase in
perceived risk, causing an increase in capitalization rates and required returns.
These changes, coupled with the increase in overall capitalization rates (approximately 100 to 150
basis points), have had tremendous consequences for property values, resulting in decreases of 30%50%. As previously discussed, land values are based on a residual analysis based on the concepts of
contribution (land, labor, capital, and coordination) and anticipation (net present value of a cash flow
over a holding period). Thus, values for development sites have been negatively impacted not only by
the deterioration in market metrics driving values for completed projects, but additionally by the
inherent risk associated with developing properties from the ground up, which has been intensified by
uncertainty with regard to future market conditions.
DISCUSSION/ANALYSIS OF LAND SALES
Land Sale One
This comparable represents a 21,700 square foot site at 205 Water Street in the DUMBO
neighborhood of Brooklyn. A portion of the site is zoned R8A with a maximum FAR of 6.02 and the
remainder is zoned R7A with a maximum FAR of 4.0. According to the listing broker, Carol Ann Flint
of Besen & Associates, the maximum buildable area of the site is 88,000 square feet. The property
sold in December 2009 for $8,600,000, or $97.73 per square foot of buildable area. The buyer of
this development site, Toll Brothers, cleared the first phase of the public review process in March 2010
when Community Board 2 approved its plan for a tower with 67 market rate units and 86
underground parking spaces.
An upward adjustment is warranted for the smaller size of this property, as the economies of scale
associated with larger development sites make larger sites more cost efficient for development. No
adjustment is warranted for the shape of this property as compared to the subject. The subject has
frontage along an entire block front directly across from the Atlantic Terminal Mall and thus warrants
an upward adjustment. The comparable benefits from its DUMBO location along the East River,

53

 ATLANTIC YARDS DEVELOPMENT SITE 5   L AND V ALUE

therefore a downward adjustment is warranted. Overall the subject property would likely achieve a
slightly higher price per FAR as compared to this transaction.
Land Sale Two
This comparable represents the sale of 392 Atlantic Avenue, a 1,800 square foot site the is situated
approximately 4 blocks west of the subject property. The site is zoned R6A with a C2-4 overlay which
indicates a zoning FAR of 3.0 for 5,400 square feet of developable rights. The property sold in July
2009 for $610,000 or $112.96 per square foot. The site was vacant at the time of sale and
subsequently the developer has improved the land with six residential units with grade level retail.
An upward adjustment is warranted for the smaller size of this property. No adjustment is warranted
for the shape. The subject has frontage along an entire block front directly across from the Atlantic
Terminal Mall and thus warrants an upward adjustment. No other adjustments are required as the
comparable is located along Atlantic Avenue in the subject’s neighborhood. Overall the subject
property would likely achieve a higher price per FAR as compared to this transaction.
Land Sale Three
This comparable represents the sale of three lots located at 383 South 5th Street in the East
Williamsburg neighborhood of Brooklyn. The 11,507 square foot site is zoned R6 and has a FAR of
2.43 for 27,962 square feet of developable rights. The property sold for $2,750,000 or $98.35 per
buildable square foot in July 2009.
An upward adjustment is warranted for the smaller size of this property. No adjustment is warranted
for the shape. The subject has frontage along an entire block front directly across from the Atlantic
Terminal Mall and thus warrants an upward adjustment. No location adjustment is required as the
comparable is located along Atlantic Avenue in the subject’s neighborhood. A downward adjustment
for zoning is warranted as this site has a higher density, yielding a larger developable site, than the
subject property. Overall the subject property would likely achieve a slightly higher price per FAR as
compared to this transaction.
Land Sale Four
This comparable represents the assemblage sale of 229 & 331 Duffield Street a 4,345 square foot
site to the northwest of the subject. The lots were bought in June and September of 2009 respectively.
We have analyzed the sale of both lots as one individual sale to reflect the developer’s motivations at
the time of sale. The comparable is zoned C6-4.5 which indicates a FAR of 12.0 for a total of 52,138
developable square feet. The comparable sold for $4,970,000 or $95.32 per developable square
foot. The buyer, V3 Hotels, has subsequently built a 19-story, 128-room hotel. According to the
developer’s website, the project is still under construction.

54

 ATLANTIC YARDS DEVELOPMENT SITE 5   L AND V ALUE

An upward adjustment is warranted for the smaller size of this property. No adjustment is warranted
for the shape. The subject has frontage along an entire block front directly across from the Atlantic
Terminal Mall and thus warrants an upward adjustment. No locational adjustment is required as the
comparable is located in the subject’s neighborhood. Overall the subject property would likely
achieve a slightly higher price per FAR as compared to this transaction.
Land Sale Five
This comparable represents the sale of 127 – 141 West Street, an entire square block located in the
Greenpoint neighborhood of Brooklyn. The comparable has been rezoned from an M zone to a
combination of R8/R6/C4-2, which allows for a maximum FAR of 4.08 or a total developable area of
420,240 square feet. At the time of sale the property was improved with a 103,000 SF industrial
building. After applying demolition costs, the adjusted price per buildable square foot is $199.20.
According to the seller, the comparable was under contract for at least one year prior to close, thus, a
significant downward adjustment is necessary for weakening market conditions since this property went
under contract and closed. The comparable property is near identical to the subject with regard to size
and shape, however it features direct water frontage, which is highly desirable for development and
would require a downward adjustment.

Overall, the subject property would likely achieve a lower

price per FAR as compared to this transaction.
SUMMARY OF ADJUSTMENTS
Based on our comparative analysis, the following chart summarizes the adjustments warranted to each
comparable.

55

 ATLANTIC YARDS DEVELOPMENT SITE 5   L AND V ALUE

LAND SALES ADJUSTMENT GRID
Comparable Number

1

2

3

4

5

Subject

Transaction Type

Sale

Sale

Sale

Sale

Sale

---

Transaction Date

Dec-09

Jul-09

Jul-09

Jun-09

Dec-08

---

R8A, R7A

R6A/C2-4

R6

C6-4.5

R8-R6-C2-4

C6-2

$8,600,000

$610,000

$2,750,000

$4,970,000

$84,015,000

---

0.50

0.04

0.26

0.10

2.36

Zoning
Actual Sale Price
Size (Acres)
Size (SF)

21,700

1,800

11,507

4,345

103,000

53,933

Allowable Bldg. Area (SF)

88,000

5,400

27,962

52,138

420,240

323,598

Price Per Bldg. Area

$97.73

$112.96

$98.35

$95.32

$199.92

Property Rights Conveyed
Financing Terms

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

Conditions of Sale

0%

0%

0%

0%

0%

Market Conditions (Time)

0%

0%

0%

0%

-30%

$97.73

$112.96

$98.35

$95.32

$139.95

5%

5%

5%

5%

0%

Shape

0%

0%

0%

0%

0%

Frontage/Corner

5%

5%

5%

5%

-20%

Location

-5%

0%

0%

0%

0%

Highest & Best Use

0%

0%

0%

0%

0%

Total Other Adjustments

5%

10%

10%

10%

-20%

$102.61

$124.26

$108.18

$104.86

$111.96

Subtotal
Size

Value Indication for Subject
Compiled by CBRE

MARKET PARTICIPANTS
We have surveyed market participants including brokers from Massey Knackel and CBRE who are
familiar with the subject’s neighborhood. Participants acknowledge the market was still recovering in
March 2010 and subsequently values have improved 15% to 25% since our date of value. A broker
quoted the subject’s value slightly north of $100 per square foot at that time.
CONCLUSION
The adjusted unit range is $102.61 to $124.26 per buildable square foot, with an average of
approximately per $110.37 buildable square foot. The subject property is located in a desirable area
across the street from the Atlantic Terminal Mall and benefits from its accessibility to the Atlantic
Terminal. Based on the discussion of each transaction and our interviews with market participants, we
have concluded to a market value that is in-line with the average of the adjusted range. Our value
conclusion for the fee simple interest in the land underlying the subject property is as follows:
0

56

 ATLANTIC YARDS DEVELOPMENT SITE 5   L EASED F EE A NALYSIS

LEASED FEE ANALYSIS – MODELL’S
As previously mentioned, in order to adjust the concluded fee simple value of the land to a value
reflective of the excess development rights, the value of the Modell’s property and the PC Richard &
Sons store must be deducted, along with the Modell’s lease buyout costs and the infrastructure costs
provided.
This section of the report addresses the leased fee value of the existing Modell’s store. The following
table provides a summary of the leased fee lease terms:

LEASED FEE SUMMARY
Lessee
Size (SF)

Modell's NY II, Inc.
16,980

Commence Date

6/15/2000

Expiration Date (Base Lease)

6/14/2020

Remaining Lease Term (Base Lease)

123 Months

No. & Term of Options

3 options @ 5 years

Expiration Date (Base + All Options)

6/14/2035

Remaining Lease Term (Base + All Options)

303 Months

Contract Rental Rate

Total $/Yr.

$/SF/Yr.

Years 1 to 8

$560,340

$33.00

Years 9 to 15 (current rent)

$644,391

$37.95

Years 16-20

$730,140

$43.00

Option Term (+12.5% increase ever 5 yrs.)

$815,040

$48.00

Expenses

Fixed reimbursement of $3.75+$0.80 psf.

% Rent Clause:

None

Source: Lease

The subject is currently leased to Modell’s on a 20 year lease with three 5-year renewal options. The
tenant reimburses $3.75 per square foot in real estate taxes and common area maintenance is
maximized at $0.80 per square foot. Rent comparables have been surveyed and are contained in our
analysis of the PC Richard & Son’s store in the following section. Based on our review of these
transactions, the contractual rent for the subject property (including reimbursements) is generally inline with market terms (currently paying $42.50 with reimbursements vs. market of $35.00 + Op.
Exp. + RE Taxes = $46.97). Although the current rent is slightly below market levels, with the $5.05
rent step in year 16, much of the differential is offset.
As discussed, we have utilized a direct capitalization to value this component of the subject property.
We have modeled the direct capitalization based on the contractual rent presented above, a market
oriented vacancy and collection loss figure of 5%, the real estate taxes presented in the tax analysis
section of this report and market oriented insurance and management expenses. We have taken the

57

 ATLANTIC YARDS DEVELOPMENT SITE 5   L EASED F EE A NALYSIS

resulting NOI and applied a market oriented capitalization rate of 7.25%. The rate was derived from
our review of comparable transactions in the marketplace (in the vicinity of our March 3, 2010 date of
value). A summary of the regional and national sales utilized in our rate selection are shown below:
SUMMARY OF COMPARABLE RETAIL SALES
No.

Name

Tenant

Transaction
Type
Date

Year
Built

GLA (SF)

Actual Sale
Price

Per SF

Price
1

Occ.

NOI
Per SF

OAR

1

18550 Dexter Ave
Lake Elsinore, CA

LA Fitness

Sale

Jun-10

1997

45,460

$8,805,000

$193.69

100%

$16.46

8.50%

2

905 Playa Avenue
Sand City, CA

Sports Authority
(sold vacant)

Sale

May-10

1997

27,486

$4,450,000

$161.90

0%

$13.76

8.50%

3

12401 Twinbrook Parkway
Rockville, MD

Guitar Center

Sale

Apr-10

1969

47,774

$5,250,000

$109.89

100%

$6.87

6.25%

4

10350 N. McCarran Blvd.
Reno, NV

PetCo

Sale

Mar-10

2008

17,875

$4,525,000

$253.15

100%

$19.18

7.58%

5

1200 Lowes Drive
Oneida, NY

Lowe's

Sale

Mar-10

2006

137,443

$8,225,000

$59.84

100%

$4.73

7.90%

6

7900 North 10th Street
McAllen, TX

Kohl's

Sale

Mar-10

2005

88,866

$7,300,000

$82.15

100%

$6.78

8.25%

7

900 State Street
Santa Babara, CA

Borders

Sale

Mar-10

n/a

38,014

$9,975,000

$262.40

100%

$17.92

6.83%

8

550 Barnes Drive
San Marcos, TX

Academy Sports

Sale

Jan-10

2009

74,863

$7,700,000

$102.85

100%

$8.02

7.80%

9

839 Route 130
Hightstown, NJ

Wal*Mart

Sale

Dec-09

2005

148,832

$4,720,000

$31.71

100%

$2.38

7.50%

10

585 24 1/2 Road
Grand Junction, CO

Best Buy

Sale

Dec-09

1992

30,701

$4,211,000

$137.16

100%

$10.84

7.90%

11

1103-1123 Myrtle Avenue
Brooklyn, NY

Misc. Freestanding

Sale

Dec-09

1931/2006

24,000

$11,435,775

$476.49

100%

$36.88

7.74%

12

620 N Green Bay Road
Waukegan, IL

Pep Boys

Sale

Oct-09

1998

22,146

$5,585,707

$252.22

100%

$18.92

7.50%

13

3111 Fostoria Way
San Ramon, CA

Office Depot

Sale

Aug-09

1995

30,185

$6,777,450

$224.53

100%

$16.56

7.38%

14

2511 Lemay Ferry Rd.
St. Louis, MO

Value City

Sale

Sep-09

1989

80,000

$3,220,000

$40.25

100%

$2.81

6.98%

15

650 N. University Drive
Coral Springs, FL

Best Buy

Sale

Sep-09

1993/2007

52,550

$6,239,500

$118.73

100%

$9.15

7.71%

16

74-25 Grand Ave
Maspeth, NY

Neighborhood/
Community Center

Sale

Apr-09

1997

99,986

$33,500,000

$335.05

100%

$25.46

7.60%

17

436-464 Nome Avenue
State Island, NY

Un-anchored Retail
Strip

Sale

Apr-09

1989

18,000

$6,335,000

$351.94

100%

$27.94

7.94%

18

8170 Old Carriage Court
Shakopee, MN

Best Buy

Sale

Jan-09

2007

30,000

$7,703,000

$256.77

100%

$19.01

7.40%

19

156-17 73rd Avenue
Flushing, NY

Misc. Freestanding

Sale

Nov-08

1981

7,016

$3,125,000

$445.41

100%

$32.07

7.20%

Compiled by CBRE

A summary of the direct capitalization for the leased fee interest in the Modell’s store is presented on
the following table:

58

 ATLANTIC YARDS DEVELOPMENT SITE 5   L EASED F EE A NALYSIS

DIRECT CAPITALIZATION SUMMARY - MODELL'S
Income
Base Rental Revenue

$/D

Expense Reimbursements
Vacancy & Credit Loss

5.00%

Effective Gross Income

Property Insurance
Management Fee

1.50%

Operating Expenses

Total

#

$37.95

#

$4.55

77,259

#

($2.13)

(36,083)

#

Expenses
Real Estate Taxes

$/SF/Yr

$644,391

$40.38

$685,568

$10.36

$175,933

$1.00

16,980

$0.61

10,284

$11.97

$203,197

$28.41

$482,371

Operating Expense Ratio

29.64%

Net Operating Income
OAR

/

Indicated Value - March 3, 2010
Rounded

7.25%
$6,653,392
$6,700,000

Value Per SF

$394.58

Matrix Analysis

Cap Rate

Compiled by CBRE

59

Value

7.00%

$6,891,000

7.25%

$6,653,400

7.50%

$6,431,600

 ATLANTIC YARDS DEVELOPMENT SITE 5   F EE S IMPLE A NALYSIS

FEE SIMPLE ANALYSIS (PC RICHARD)
As previously mentioned, in order to adjust the concluded fee simple value of the land to a value
reflective of the excess development rights, the value of the PC Richard & Sons property and the
previously concluded Modell’s value must be deducted, along with the Modell’s lease buyout costs
and the infrastructure costs provided.
This section of the report addresses the fee simple value of the existing PC Richard & Sons store. The
subject currently owner occupied by PC Richard and Sons. As there is no contractual rent for this
space, we analyzed market rent comparables in order to determine an appropriate market rent for the
space. A summary of the market rent comps is presented below:
Comp
No.
Address

Year
Built

Size
(SF)

Rental
Rent

Escalations

2010

800,000

Chuck E Cheese

Feb-10

20

17,883

$35.00

$5 psf step
every 5 years

2

Atlantic Center
1996
Flatbush & Atlantic Avenue
Brooklyn, NY

399,000

Best Buy

Nov-09

10

46,000

$31.25

Flat

3

150 Clermont Avenue
Brooklyn, NY

2006

N/A

Walgreens

Oct-09

n/a

8,600

$43.50

n/a

4

59 Junction Blvd
Rego Park, NY

2010

277,000

Kohl's

Sep-09

20

135,720

$35.00

Flat

Gateway at the Bronx
Terminal Market
Bronx, NY

2009

460,000

Bed, Bath & Beyond Aug-09

15

32,040

$36.00

10% every 5
years

College Point SC
136-03 20th Avenue
College Point, NY

1998

320,826

PC Richard & Sons

10

32,786

$34.82

n/a

1

Sky View Center

SUMMARY OF COMPARABLE RETAIL RENTS
Start
Term
GLA (SF)
Tenant
Date
(Yrs)

40-28 College Point Blvd
Flushing, NY

5
6

Mar-09

Compiled by CBRE

Comparables in the marketplace for freestanding retail spaces are generally signed with the tenant
responsible for real estate taxes and operating expenses. The subject benefits from good access to
mass transportation, but for our analysis of the neighborhood improvements from the the Atlantic
Yards redevelopment have been excluded and thus there is less differential between the comparable
locations and the subject. Based on the comparables listed above, we have concluded to a market
oriented rental rate of $35 per square foot for the subject property as of our 2010 date of value.

PC RICHARD
Size (SF)

30,300

Market Rental Rate

Total $/Yr.

Base Lease Term

$1,060,500

Expenses

$/SF/Yr.
$35.00
Paid by Lessee

Source: Lease

60

 ATLANTIC YARDS DEVELOPMENT SITE 5   F EE S IMPLE A NALYSIS

We have utilized a direct capitalization to value this component of the subject property. We have
modeled the direct capitalization based on the market rent presented above, a market oriented
vacancy and collection loss figure of 5%, the real estate taxes presented in the tax analysis section of
this report and market oriented insurance and management expenses. We have taken the resulting
NOI and applied a market oriented capitalization rate of 7.25% (comparables listed in previous
section). The rate was derived from our review of comparable transactions in the marketplace (in the
vicinity of our March 3, 2010 date of value). A summary of the direct capitalization for the leased fee
interest in the Modell’s store is presented on the following table:
A direct capitalization approach is presented below:
FEE SIMPLE ANALYSIS
Income
Base Rental Revenue

$/D

Expense Reimbursements
Vacancy & Credit Loss

5.00%

Property Insurance
Management Fee

$1,060,500

#

7.58

229,671

#

Expenses
Real Estate Taxes
1.50%

Operating Expenses

Total

$35.00

#

Effective Gross Income

$/SF/Yr

#

(2.13)

(64,509)

$40.45

1,225,662

$5.97

$180,986

1.00

30,300

0.61

18,385

$7.58

$229,671

Operating Expense Ratio

18.74%

Net Operating Income

$32.87

OAR

$995,991
/
7.25%
$13,737,813

Indicated Value - March 3, 2010

$13,700,000

Rounded
Value Per SF

$452.15

Matrix Analysis

Cap Rate

Compiled by CBRE

61

Value

7.00%

$14,228,400

7.25%

$13,737,800

7.50%

$13,279,900

 ATLANTIC YARDS DEVELOPMENT SITE 5   F EE S IMPLE A NALYSIS

MODELL’S LEASE BUYOUT
At the request of the client we have estimate the costs to buy Modell’s out of their leasehold position.
The reader is cautioned that lease buy outs are complicated transactions, whereby the motivations of
the tenant and landlord can have a significant impact on the resulting buy out figure. These
transactions are often handled in arbitration forums and there is no true way to have a “market”
estimate of what these costs will be. We have interviewed market participants that have handled these
types of transactions before and they indicated that the negotiation typically focuses on the following
points:
1) Any advantage between market rent and contractual rent is typically paid to the tenant.
2) Costs to move the tenant to the new premises are accounted for.
3) Costs to build out the new premises are accounted for.
4) Reimbursement of the tenants lost profit on sales for the period of time they are displaced
through the time the new premises reached stabilized/comparable sale levels.
5) A fee to compensate the tenant and keep them from litigating the buy-out and thus stalling the
development.
We have addressed the items listed above sequentially based on our review of market conditions,
discussions with brokers/leasing agents.
1) The Modell’s lease terms are summarized below. It should be noted that there is no material
differential between the contractual rent and market rent and thus no buy out cost associated
with this aspect of the lease.
LEASED FEE SUMMARY
Lessee
Size (SF)

Modell's NY II, Inc.
16,980

Commence Date

6/15/2000

Expiration Date (Base Lease)

6/14/2020

Remaining Lease Term (Base Lease)

123 Months

No. & Term of Options

3 options @ 5 years

Expiration Date (Base + All Options)

6/14/2035

Remaining Lease Term (Base + All Options)

303 Months

Contract Rental Rate

Total $/Yr.

$/SF/Yr.

Years 1 to 8

$560,340

$33.00

Years 9 to 15 (current rent)

$644,391

$37.95

Years 16-20

$730,140

$43.00

15-year Option Term (+12.5% increase ever 5 yrs.)

$815,040

$48.00

Expenses

Fixed reimbursement of $3.75+$0.80 psf.

Source: Lease

62

 ATLANTIC YARDS DEVELOPMENT SITE 5   F EE S IMPLE A NALYSIS

2) Costs to move the tenant to the new premises must be accounted for. This includes the costs
for payroll to pack up the inventory and the costs for the tenants shipping company to relocate
all of the merchandise to a new location. Broker’s interviewed regarding this cost indicated a
figure between $5 and $10 per square foot. We have utilized a figure of $7.50 per square
foot and rounded the conclusion to $125,000.
3) Costs to build out the new premises are accounted for. Broker’s interviewed regarding this
cost indicated a figure in the range of $50 per square foot would be reasonable for a single
level store typical of Modell’s build-out. At $50 per square foot for 16,980 square feet, the
total tenant building out would be roughly $850,000.
4) Reimbursement of the tenants lost profit on sales for the period of time they are displaced
through the time the new premises reached stabilized/comparable sale levels.

We have

estimate that is would take roughly 2 months to relocate the premises and an additional 2
months to stabilize the operations. A review of Modell’s sales figures from another top
location indicate that they can achieve sale of $500 per square foot in the right location.
Assuming that 15% of the sales revenue reaches the bottom line as profit (before corporate
overhead and salaries), that would result in $418,685 in lost profit.
5) A fee to compensate the tenant and keep them from litigating the buy-out and thus stalling the
development. This figure is highly subjective and can fluctuate depending on how badly the
tenant wants to stay and/or what type of problems the tenant can cause the landlord by
deciding to stay. Often this figure is tied to value of the remaining lease payments and this
includes a component of the lease duration (through 2020 + options for 15 years) and
quality of the space. Figures ranging between 5% and 15% of the lease value are reported to
be reasonable buyout costs and we have selected 10%. The remaining lease payments
included the option periods totals $21.27 million, with the corresponding 10% deduction at
$2,127,085.
Applying the previous factors results in an estimate of the lease buy out costs as follows:

MODELL'S LEASE BUY OUT COSTS
Relocation Costs - TI's ($50/SF)
$850,000
Moving Expenses
$125,000
Lost Profit on Sales
$418,685
Hold-out Cost (10% of Lease)
$2,127,085
Total Lease Buy Out Costs
Rounded

$3,520,770
$3,500,000

63

 ATLANTIC YARDS DEVELOPMENT SITE 5   R ECONCILIATION OF V ALUE

RECONCILIATION OF VALUE
In the sales comparison approach, the subject is compared to similar properties that have been sold
recently or for which listing prices or offers are known. The sales used in this analysis are considered
somewhat comparable to the subject, and the required adjustments were based on reasonable and
well-supported rationale. In addition, market participants are currently analyzing purchase prices on
investment properties as they relate to available substitutes in the market.

Therefore, the sales

comparison approach is considered to provide a reliable value indication.
The fee simple interest in the land is our concluded As-Is Retrospective value. We have utilized the
Direct Capitalization technique of the Income Capitalization Approach to value the existing Modell’s
and PC Richard & Son’s retail stores. The resulting values, along with our estimate for the buy-out
costs associated with the Modell’s lease and the client provided costs for the Subway related
infrastructure have been deducted from the concluded fee simple land value in order to arrive at our
Retrospective As Is Value for the Additional Development rights on Site 5.
Based on the foregoing, the market value of the subject has been concluded as follows:
MARKET VALUE CONCLUSION
Appraisal Premise

Interest Appraised

Date of Value

Value Conclusion

Fee Simple Estate - Land

March 3, 2010

$35,600,000

Less: As Is - Retrospective

Fee Simple Estate - PC Richard

March 3, 2010

($13,700,000)

Less: As Is - Retrospective

Leased Fee Estate - Modell's

March 3, 2010

($6,700,000)

Less:

Modell's Lease Buyout Cost

March 3, 2010

($3,500,000)

Subway Cost

March 3, 2010

($10,900,000)

Value Conclusion

March 3, 2010

$800,000

As Is - Retrospective

Less:
As Is - Retrospective - Development Rights
Compiled by CBRE

64

 ATLANTIC YARDS DEVELOPMENT SITE 5   A SSUMPTIONS AND L IMITING C ONDITIONS

ASSUMPTIONS AND LIMITING CONDITIONS
1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties
appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to title that
would adversely affect marketability or value. CBRE, Inc. is not aware of any title defects nor has it been advised of any
unless such is specifically noted in the report. CBRE, Inc., however, has not examined title and makes no
representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed
restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against
financial loss resulting in claims that may arise out of defects in the subject’s title should be sought from a qualified title
company that issues or insures title to real property.
2. Unless otherwise specifically noted in the body of this report, it is assumed: that the existing improvements on the
property or properties being appraised are structurally sound, seismically safe and code conforming; that all building
systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are in good working order with no major deferred
maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the
elements; that the property or properties have been engineered in such a manner that the improvements, as currently
constituted, conform to all applicable local, state, and federal building codes and ordinances. CBRE, Inc. professionals
are not engineers and are not competent to judge matters of an engineering nature. CBRE, Inc. has not retained
independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes
no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the
report: no problems were brought to the attention of CBRE, Inc. by ownership or management; CBRE, Inc. inspected
less than 100% of the entire interior and exterior portions of the improvements; and CBRE, Inc. was not furnished any
engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the
decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It
is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale,
obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building
systems. Structural problems and/or building system problems may not be visually detectable. If engineering
consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the
condition of improvements, such information could have a substantial negative impact on the conclusions reported in
this appraisal. Accordingly, if negative findings are reported by engineering consultants, CBRE, Inc. reserves the right to
amend the appraisal conclusions reported herein.
3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the
property, was not observed by the appraisers. CBRE, Inc. has no knowledge of the existence of such materials on or in
the property. CBRE, Inc., however, is not qualified to detect such substances. The presence of substances such as
asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may
affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or
in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any
expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if
desired.
We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect
conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in
the appraisal.
4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real
property, have been disregarded with only real property being considered in the report unless otherwise stated. Any
existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be
completed in a workmanlike manner according to standard practices based upon the information submitted to CBRE,
Inc. This report may be subject to amendment upon re-inspection of the subject subsequent to repairs, modifications,
alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the
information, conditions and projected levels of operation.
5. It is assumed that all factual data furnished by the client, property owner, owner’s representative, or persons designated
by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal
report. Unless otherwise specifically noted in the appraisal report, CBRE, Inc. has no reason to believe that any of the
data furnished contain any material error. Information and data referred to in this paragraph include, without being
limited to, numerical street addresses, lot and block numbers, Assessor’s Parcel Numbers, land dimensions, square
footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit
count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material
error in any of the above data could have a substantial impact on the conclusions reported. Thus, CBRE, Inc. reserves
the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should

65

 ATLANTIC YARDS DEVELOPMENT SITE 5   A SSUMPTIONS AND L IMITING C ONDITIONS
carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of
this report and should immediately notify CBRE, Inc. of any questions or errors.
6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of
Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power
of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this
appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or
conditions which occur subsequent to the date of the appraisal. However, CBRE, Inc. will be available to discuss the
necessity for revision resulting from changes in economic or market factors affecting the subject.
7. CBRE, Inc. assumes no private deed restrictions, limiting the use of the subject in any way.
8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposits or subsurface rights of
value involved in this appraisal, whether they are gas, liquid, or solid. Nor are the rights associated with extraction or
exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is
also assumed that there are no air or development rights of value that may be transferred.
9. CBRE, Inc. is not aware of any contemplated public initiatives, governmental development controls, or rent controls that
would significantly affect the value of the subject.
10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market
fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and
conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the
property, both physically and economically, on the open market.
11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the
information and assumptions contained within the report. Any projections of income, expenses and economic
conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market
expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating
economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary
from the projections considered herein. CBRE, Inc. does not warrant these forecasts will occur. Projections may be
affected by circumstances beyond the current realm of knowledge or control of CBRE, Inc.
12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct
or indirect recommendation of CBRE, Inc. to buy, sell, or hold the properties at the value stated. Such decisions involve
substantial investment strategy questions and must be specifically addressed in consultation form.
13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or
regulations governing use, density, or shape are being considered. The property is appraised assuming that all required
licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor
national government or private entity or organization have been or can be obtained or renewed for any use on which
the value estimates contained in this report is based, unless otherwise stated.
14. This study may not be duplicated in whole or in part without the specific written consent of CBRE, Inc. nor may this
report or copies hereof be transmitted to third parties without said consent, which consent CBRE, Inc. reserves the right
to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to
attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report
to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this
appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any
public document without the express written consent of CBRE, Inc. which consent CBRE, Inc. reserves the right to deny.
Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property
or to make a “sale” or “offer for sale” of any “security”, as such terms are defined and used in the Securities Act of
1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that
they should rely on their own independently secured advice for any decision in connection with this property. CBRE, Inc.
shall have no accountability or responsibility to any such third party.
15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into
fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in
the report.
16. The distribution of the total valuation in this report between land and improvements applies only under the existing
program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with
any other property or appraisal and are invalid if so used.
17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and
are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data
relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and
reliable. None of the exhibits are to be removed, reproduced, or used apart from this report.

66

 ATLANTIC YARDS DEVELOPMENT SITE 5   A SSUMPTIONS AND L IMITING C ONDITIONS
18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or
knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that
environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not
limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density,
allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been
made known to CBRE, Inc. unless otherwise stated within the body of this report. If the Consultant has not been
supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made
for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No
representation or warranty is made concerning obtaining these items. CBRE, Inc. assumes no responsibility for any costs
or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal
Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance.
19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special
assumptions set forth in this report. It is the responsibility of the Client, or client’s designees, to read in full, comprehend
and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CBRE,
Inc. assumes responsibility for any situation arising out of the Client’s failure to become familiar with and understand the
same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting
profession if so desired.
20. CBRE, Inc. assumes that the subject analyzed herein will be under prudent and competent management and ownership;
neither inefficient nor super-efficient.
21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and
laws unless noncompliance is stated, defined and considered in the appraisal report.
22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be
correct. It is further assumed that no encroachments to the realty exist.
23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of
possible readily achievable barrier removal construction items in this report, CBRE, Inc. has not made a specific
compliance survey and analysis of this property to determine whether it is in conformance with the various detailed
requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the
requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the
ADA. If so, this fact could have a negative effect on the value estimated herein. Since CBRE, Inc. has no specific
information relating to this issue, nor is CBRE, Inc. qualified to make such an assessment, the effect of any possible noncompliance with the requirements of the ADA was not considered in estimating the value of the subject.
24. Client shall not indemnify Appraiser or hold Appraiser harmless unless and only to the extent that the Client
misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client
approximately result in damage to Appraiser. Notwithstanding the foregoing, Appraiser shall have no obligation under
this Section with respect to any loss that is caused solely by the active negligence or willful misconduct of a Client and is
not contributed to by any act or omission (including any failure to perform any duty imposed by law) by Appraiser.
Client shall indemnify and hold Appraiser harmless from any claims, expenses, judgments or other items or costs arising
as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal
report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be
entitled to recover, from the other, reasonable attorney fees and costs.
25. As part of the client’s requested scope of work, an estimate of insurable value is provided herein. CBRE, Inc. has
followed traditional appraisal standards to develop a reasonable calculation based upon industry practices and industry
accepted publications such as the Marshal Valuation Service handbook. The methodology employed is a derivation of
the cost approach which is primarily used as an academic exercise to help support the market value estimate and
therefore is not reliable for Insurable Value estimates. Actual construction costs and related estimates can vary greatly
from this estimate.
This analysis should not be relied upon to determine proper insurance coverage which can only be properly estimated
by consultants considered experts in cost estimation and insurance underwriting. It is provided to aid the
client/reader/user as part of their overall decision making process and no representations or warranties are made by
CBRE, Inc. regarding the accuracy of this estimate and it is strongly recommend that other sources be utilized to develop
any estimate of insurable value.

67

 ATLANTIC YARDS DEVELOPMENT SITE 5 ADDENDA

ADDENDA

 

ATLANTIC YARDS DEVELOPMENT SITE 5 ADDENDA

ADDENDUM A

GLOSSARY OF TERMS

 

ATLANTIC YARDS DEVELOPMENT SITE 5   A DDENDA

assessed value Assessed value applies in ad valorem
taxation and refers to the value of a property according to
the tax rolls. Assessed value may not conform to market
value, but it is usually calculated in relation to a market
value base. †

cash equivalency

The procedure in which the sale
prices of comparable properties sold with atypical
financing are adjusted to reflect typical market terms.

client The party or parties who engage an appraiser (by
employment or contract) in a specific assignment. (USPAP)

contract rent The actual rental income specified in a
lease.

‡

disposition value

The most probable price which a
specified interest in real property is likely to bring under
all of the following conditions: 1) Consummation of a
sale will occur within a limited future marketing period
specified by the client; 2) The actual market conditions
currently prevailing are those to which the appraised
property interest is subject; 3) The buyer and seller is
each acting prudently and knowledgeably; 4) The seller
is under compulsion to sell; 5) The buyer is typically
motivated; 6) Both parties are acting in what they
consider their best interests; 7) An adequate marketing
effort will be made in the limited time allowed for the
completion of a sale; 8) Payment will be made in cash in
U.S. dollars or in terms of financial arrangements
comparable thereto; and 9) The price represents the
normal consideration for the property sold, unaffected by
special or creative financing or sales concessions granted
by anyone associated with the sale.‡

effective rent The rental rate net of financial concessions
such as periods of no rent during the lease term; may be
calculated on a discounted basis, reflecting the time value
of money, or on a simple, straight-line basis. ‡

excess land In regard to an improved site, the land not
needed to serve or support the existing improvement. In
regard to a vacant site or a site considered as though
vacant, the land not needed to accommodate the site’s
primary highest and best use. Such land may be
separated from the larger site and have its own highest
and best use, or it may allow for future expansion of the
existing or anticipated improvement. See also surplus
land. ‡

extraordinary assumption

An assumption directly
related to a specific assignment, which, if found to be
false, could alter the appraiser’s opinions or conclusions.
Extraordinary assumptions presume as fact otherwise
uncertain information about physical, legal, or economic
characteristics of the subject property; or about conditions
external to the property such as market conditions or
trends; or about the integrity of data used in an analysis.
See also hypothetical condition. ‡

fee simple estate Absolute ownership unencumbered by
any other interest or estate, subject only to the limitations
imposed by the governmental powers of taxation, eminent
domain, police power, and escheat. ‡

floor area ratio (FAR) The relationship between the
above-ground floor area of a building, as described by
the building code, and the area of the plot on which it
stands; in planning and zoning, often expressed as a
decimal, e.g., a ratio of 2.0 indicates that the permissible
floor area of a building is twice the total land area; also
called building-to-land ratio. ‡

full service lease

A lease in which rent covers all
operating expenses. Typically, full service leases are
combined with an expense stop, the expense level
covered by the contract lease payment. Increases in
expenses above the expense stop level are passed
through to the tenant and are known as expense passthroughs.

going concern value Going concern value is the value

of a proven property operation.
It includes the
incremental value associated with the business concern,
which is distinct from the value of the real estate only.
Going concern value includes an intangible enhancement
of the value of an operating business enterprise which is
produced by the assemblage of the land, building, labor,
equipment, and marketing operation.
This process
creates an economically viable business that is expected
to continue. Going concern value refers to the total value
of a property, including both real property and intangible
personal property attributed to the business value. †

gross building area (GBA) The total floor area of a
building, including below-grade space but excluding
unenclosed areas, measured from the exterior of the
walls.
Gross building area for office buildings is
computed by measuring to the outside finished surface of
permanent outer building walls without any deductions.
All enclosed floors of the building including basements,
mechanical equipment floors, penthouses, and the like
are included in the measurement. Parking spaces and
parking garages are excluded. ‡

hypothetical condition That which is contrary to what
exists but is supposed for the purpose of analysis.
Hypothetical conditions assume conditions contrary to
known facts about physical, legal, or economic
characteristics of the subject property; or about conditions
external to the property, such as market conditions or
trends; or about the integrity of data used in an analysis.
See also extraordinary assumption. ‡

intended use The use or uses of an appraiser’s reported
appraisal, appraisal review, or appraisal consulting
assignment opinions and conclusions, as identified by the
appraiser based on communication with the client at the
time of the assignment (USPAP).

 ATLANTIC YARDS DEVELOPMENT SITE 5   A DDENDA
intended user

The client and any other party as
identified, by name or type, as users of the appraisal,
appraisal review, or appraisal consulting report by the
appraiser on the basis of communication with the client at
the time of the assignment (USPAP).

investment value Investment value is the value of an
investment to a particular investor based on his or her
investment requirements. In contrast to market value,
investment value is value to an individual, not value in the
marketplace. Investment value reflects the subjective
relationship between a particular investor and a given
investment. When measured in dollars, investment value
is the price an investor would pay for an investment in
light of its perceived capacity to satisfy his or her desires,
needs, or investment goals. To estimate investment value,
specific investment criteria must be known. Criteria to
evaluate a real estate investment are not necessarily set
down by the individual investor; they may be established
by an expert on real estate and its value, that is, an
appraiser. †

leased fee
See leased fee estate

leased fee estate

An ownership interest held by a
landlord with the right of use and occupancy conveyed by
lease to others. The rights of the lessor (the leased fee
owner) and the leased fee are specified by contract terms
contained within the lease.‡

leasehold
See leasehold estate

leasehold estate The interest held by the lessee (the
tenant or renter) through a lease conveying the rights of
use and occupancy for a stated term under certain
conditions.‡

liquidation value

The most probable price which a
specified interest in real property is likely to bring under
all of the following conditions: 1) Consummation of a
sale will occur within a severely limited future marketing
period specified by the client; 2) The actual market
conditions currently prevailing are those to which the
appraised property interest is subject; 3) The buyer is
acting prudently and knowledgeably; 4) The seller is
under extreme compulsion to sell; 5) The buyer is typically
motivated; 6) The buyer is acting in what he or she
considers his or her best interests; 7) A limited marketing
effort and time will be allowed for the completion of a
sale; 8) Payment will be made in cash in U.S. dollars or in
terms of financial arrangements comparable thereto; and
9) The price represents the normal consideration for the
property sold, unaffected by special or creative financing
or sales concessions granted by anyone associated with
the sale. ‡

market rent

The most probable rent that a property
should bring in a competitive and open market reflecting
all conditions and restrictions of the specified lease

agreement including term, rental adjustment and
revaluation, permitted uses, use restrictions, and expense
obligations; the lessee and lessor each acting prudently
and knowledgeably, and assuming consummation of a
lease contract as of a specified date and the passing of
the leasehold from lessor to lessee under conditions
whereby: 1) lessee and lessor are typically motivated; 2)
both parties are well informed or well advised, and acting
in what they consider their best interests; 3) a reasonable
time is allowed for exposure in the open market; 4) the
rent payment is made in terms of cash in U.S. dollars and
is expressed as an amount per time period consistent with
the payment schedule of the lease contract; and 5) the
rental amount represents the normal consideration for the
property leased unaffected by special fees or concessions
granted by anyone associated with the transaction. ‡

market value

Market value is one of the central
concepts of the appraisal practice.
Market value is
differentiated from other types of value in that it is created
by the collective patterns of the market. Market value
means the most probable price which a property should
bring in a competitive and open market under all
conditions requisite to a fair sale, the buyer and seller
each acting prudently and knowledgeably, and assuming
the price is not affected by undue stimulus. Implicit in this
definition is the consummation of a sale as of a specified
date and the passing of title from seller to buyer under
conditions whereby: 1) A reasonable time is allowed for
exposure in the open market; 2) Both parties are well
informed or well advised, and acting in what they
consider their own best interests; 3) Buyer and seller are
typically motivated; 4) Payment is made in terms of cash
in U.S. dollars or in terms of financial arrangements
comparable thereto; and 5) The price represents the
normal consideration for the property sold unaffected by
special or creative financing or sales concessions granted
by anyone associated with the sale.§

marketing period The time it takes an interest in real
property to sell on the market subsequent to the date of
an appraisal. ‡

net lease Lease in which all or some of the operating
expenses are paid directly by the tenant. The landlord
never takes possession of the expense payment. In a
Triple Net Lease all operating expenses are the
responsibility of the tenant, including property taxes,
insurance, interior maintenance, and other miscellaneous
expenses. However, management fees and exterior
maintenance are often the responsibility of the lessor in a
triple net lease. A modified net lease is one in which
some expenses are paid separately by the tenant and
some are included in the rent.

net rentable area (NRA) 1) The area on which rent is
computed. 2) The Rentable Area of a floor shall be
computed by measuring to the inside finished surface of
the dominant portion of the permanent outer building
walls, excluding any major vertical penetrations of the

 ATLANTIC YARDS DEVELOPMENT SITE 5   A DDENDA
floor. No deductions shall be made for columns and
projections necessary to the building. Include space such
as mechanical room, janitorial room, restrooms, and
lobby of the floor. *

completes the interior finish, which can include wall,
ceiling, and floor finishes; mechanical systems, interior
electric, and plumbing. Typically these are long-term
leases with tenants paying all or most property expenses. ‡

occupancy rate The relationship or ratio between the

surplus land Land not necessary to support the highest

income received from the rented units in a property and
the income that would be received if all the units were
occupied.‡

and best use of the existing improvement but, because of
physical limitations, building placement, or neighborhood
norms, cannot be sold off separately. Such land may or
may not contribute positively to value and may or may not
accommodate future expansion of an existing or
anticipated improvement. See also excess land. ‡

prospective value opinion A forecast of the value
expected at a specified future date. A prospective value
opinion is most frequently sought in connection with real
estate projects that are proposed, under construction, or
under conversion to a new us, or those that have not
achieved sellout or a stabilized level of long-term
occupancy at the time the appraisal report is written. ‡

reasonable exposure time The estimated length of
time the property interest being appraised would have
been offered on the market prior to the hypothetical
consummation of a sale at market value on the effective
date of the appraisal; a retrospective opinion based upon
an analysis of past events assuming a competitive and
open market. ††

rent
See
full service lease
net lease
market rent
contract, coupon, face, or nominal rent
effective rent

shell rent

The typical rent paid for retail, office, or
industrial tenant space based on minimal “shell” interior
finishes (called plain vanilla finish in some areas). Usually
the landlord delivers the main building shell space or
some minimum level of interior build-out, and the tenant

usable area 1) The area actually used by individual
tenants. 2) The Usable Area of an office building is
computed by measuring to the finished surface of the
office side of corridor and other permanent walls, to the
center of partitions that separate the office from adjoining
usable areas, and to the inside finished surface of the
dominant portion of the permanent outer building walls.
Excludes areas such as mechanical rooms, janitorial
room, restrooms, lobby, and any major vertical
penetrations of a multi-tenant floor. *

use value

Use value is a concept based on the
productivity of an economic good. Use value is the value
a specific property has for a specific use. Use value
focuses on the value the real estate contributes to the
enterprise of which it is a part, without regard to the
property’s highest and best use or the monetary amount
that might be realized upon its sale. †

value indication An opinion of value derived through
application of the appraisal process. ‡

††

†

The Appraisal of Real Estate, Thirteenth Edition, Appraisal
Institute, 2008.

‡

The Dictionary of Real Estate Appraisal, Fifth Edition,
Appraisal Institute, 2010.

§

Office of Comptroller of the Currency (OCC), 12 CFR Part
34, Subpart C – Appraisals, 34.42 (g); Office of Thrift
Supervision (OTS), 12 CFR 564.2 (g); Appraisal Institute,
The Dictionary of Real Estate Appraisal, 5th ed. (Chicago:
Appraisal Institute, 2010), 122-123. This is also compatible
with the RTC, FDIC, FRS and NCUA definitions of market
value as well as the example referenced in the Uniform
Standards of Professional Appraisal Practice (USPAP).
*

2000
BOMA
Experience
Exchange
Report,
Income/Expense Analysis for Office Buildings (Building
Owners and Managers Association, 2000)

Statement on Appraisal Standard No. 6, Appraisal
Standards Board of The Appraisal Foundation, September
16, 1993, revised June 15, 2004.

 ATLANTIC YARDS DEVELOPMENT SITE 5 ADDENDA

 

ADDENDUM 

LAND SALE DATA SHEETS

 

LAND SALE No. 1
205 Water Street
Location Data
Location:

205 Water Street
Brooklyn, NY 11201

County:

Kings

Parcel No:

Block 31, Lot 14, 114

Atlas Ref:

Physical Data
Type:

Multi-Family

Land Area:

Gross

Acres:
Square Feet:

Usable
0.498

0.498

21,702

21,700

Financial Data

Topography:

Level, At Street Grade

Transaction Type:

Sale

Shape:

Rectangular

Date:

12/2009

Marketing Time:

NA

Utilities:
Zoning:

R8A, R7A

Grantor:

205 Water Street LLC

Allowable Bldg Area:

88,000 SF

Grantee:

Toll NY IV LP (Toll Brothers)

Floor Area Ratio:

4.06

Document No.:

No. of units:

0

Sale Price:

$8,600,000

Max FAR:

4.25

Financing:

Not Available

Frontage:

Water St - ;

Cash Eq.Price:

$8,600,000

Analysis

Onsite/Offsite Costs:

$0

Use At Sale:

vacant

Adj. Sale Price:

$8,600,000

Proposed Use or Dev.

67 market rate units + parking

Verification:

Price Per Acre:

$17,262,144

Carol Flint- list broker
212-689-8488

Price Per SF of Land:

$396.31

Price Per Unit:

$0

Price Per SF of Bldg:

$97.73

Comments
Toll Brothers cleared the first phase of the public review process in March 2010 when Community Board 2 approved its plan for a
tower with 67 market rate units and 86 underground parking spaces. No affordable housing is required on this site.
A portion of the site is zoned R8A (max FAR of 6.02) and the remainder is zoned R7A (max FAR of 4.0). Total buildable area is based
on broker's projections.

 LAND SALE No. 2
392 Atlantic Ave
Location Data
Location:

392 Atlantic Ave
Brooklyn, NY 11217

County:

Kings

Parcel No:

00183-0030

Atlas Ref:

Physical Data
Type:

Industrial

Land Area:

Gross

Usable

Acres:

0.041

Square Feet:

1,800

Financial Data

Topography:

Transaction Type:

Sale

Shape:

Date:

8/2009

Utilities:

Marketing Time:

NA

Zoning:

R6A

Grantor:

Fairview Home Builders Inc

Allowable Bldg Area:

5,400 SF

Grantee:

The Park Avenue Bank

Floor Area Ratio:

3.00

Document No.:

No. of units:
Max FAR:

Sale Price:
3.00

Frontage:

Cash Eq.Price:

Analysis

$610,000

Financing:
$610,000

Onsite/Offsite Costs:

Use At Sale:

Industrial / Land

Adj. Sale Price:

$610,000

Proposed Use or Dev.

Redevelopment

Verification:

Public Record

Price Per Acre:
Price Per SF of Land:
Price Per Unit:
Price Per SF of Bldg:

Comments

$112.96

 LAND SALE No. 3
383 South 5th Street
Location Data
Location:

383 South 5th Street
Brooklyn, NY 11211

County:

Kings

Parcel No:

0241-0001

Atlas Ref:

Physical Data
Type:

Planned Development

Land Area:

Gross

Acres:

Usable
0.264

Square Feet:

11,495

Financial Data

Topography:

Level, At Street Grade

Transaction Type:

Sale

Shape:

Rectangular

Date:

7/2009

Marketing Time:

NA

Utilities:
Zoning:

R6

Grantor:

385 South 5th Realty LLC

Allowable Bldg Area:

27,937 SF

Grantee:

BH South LLC

Floor Area Ratio:

2.43

Document No.:

No. of units:

Sale Price:

Max FAR:

2.00

Financing:

Frontage:

South 5th Street - ;

Cash Eq.Price:

Analysis
Commercial Land

Adj. Sale Price:

Proposed Use or Dev.

Redevelopment

Verification:

Price Per Acre:
Price Per SF of Land:
Price Per Unit:

Comments

$2,750,000

Onsite/Offsite Costs:

Use At Sale:

Price Per SF of Bldg:

$2,750,000

$98.44

$2,750,000

 LAND SALE No. 4
229 Duffield Street
Location Data
Location:

229 Duffield Street
Brooklyn, NY 11201

County:

Kings

Parcel No:

00146-0014

Atlas Ref:

Physical Data
Type:

Retail/Commercial

Land Area:

Gross

Acres:

Usable
0.100

Square Feet:

4,343

Financial Data

Topography:

Level, At Street Grade

Transaction Type:

Sale

Shape:

Rectangular

Date:

6/2009

Marketing Time:

NA

Utilities:
Zoning:

C6-4.5

Grantor:

Car Park Systems

Allowable Bldg Area:

86,548 SF

Grantee:

V3 Hotels

Floor Area Ratio:

19.93

Document No.:

No. of units:

Sale Price:

Max FAR:

12.00

Financing:

Frontage:

Duffield Street - ;

Cash Eq.Price:

Analysis

$4,970,000
$4,970,000

Onsite/Offsite Costs:

Use At Sale:

Land

Adj. Sale Price:

$4,970,000

Proposed Use or Dev.

Redevelopment Hotel

Verification:

Public Record

Price Per Acre:
Price Per SF of Land:
Price Per Unit:
Price Per SF of Bldg:

$57.42

Comments
Sale price includes the sale of 229 Duffield Street and 231 Duffield Street.

 LAND SALE No. 5
127-141 West Street
Location Data
Location:

127-141 West Street
Brooklyn, NY 11222

County:

Kings

Parcel No:

02538-0001

Atlas Ref:

Physical Data
Type:

Industrial

Land Area:

Gross

Acres:
Square Feet:

Usable
2.360

2.360

102,802

102,802

Financial Data

Topography:

Level, At Street Grade

Transaction Type:

Sale

Shape:

Rectangular

Date:

12/2008

Marketing Time:

NA

Utilities:
Zoning:

R8

Grantor:

West Street Partners

Allowable Bldg Area:

1,324,249 SF

Grantee:

Stanford Strenger

Floor Area Ratio:

12.88

Document No.:

No. of units:

Sale Price:

$83,500,000

Max FAR:

6.02

Financing:

Frontage:

West Street - ;India Street - ;Java
Street - ;

Cash Eq.Price:

$83,500,000

Onsite/Offsite Costs:

$515,000

Adj. Sale Price:

$84,015,000

Analysis
Use At Sale:

Warehouse

Proposed Use or Dev.

Redevelopment Mix use

Price Per Acre:

$35,599,576

Price Per SF of Land:

$817.25

Verification:

Price Per Unit:
Price Per SF of Bldg:

$63.44

Comments
5 Dollars per sq. ft of demolition for existing 103,000 sq ft structure added to sale price.

 ATLANTIC YARDS DEVELOPMENT SITE 5 ADDENDA

 

ADDENDUM 

LEGAL DESCRIPTION

 

Err/2532985 16:83 7189238599 FOREST CITY RQTNER PAGE 83

num- anus-Inn um tum f-J-c-?Ow-ll?l: Io: .mm mum Dace: 619/00 TIrne: 11:06:34 AM Flags 4 of 1.1

SCHEDULE A
DESCRIPTION

Lot 1

ALL that certain plot, piece or parcel of land, situate, lying and being in the Borough Brooklyn,
County of Kings, City and State ofNew York, bounded and described as follows:

BEGINNING at a point on the northerly side of Paci?c Street distant 290.1 feet westerly ?om the
scuthwesterly sideline of Flatbu sh Avenue;

THENCE westerly ?along said side of Paci?c Street, 171.44 feet to the easterly side of 4th
Avenue;

THENCE northerly along said side of 4th Avenue, 180.15 feet to the southerly side of Atlantic
Avenue;

THENCE easterly along said side of A?mtic Avenue, 170.80 feet,

THENCE south 31 degrees 45 minutes 00 seconds west, 180.15 feet to the point of
BEGINNING.

Lot 16

All that certain plot piece 0r parcel of land situate, lying and being in the Borough of Brooklyn,
Colony of Kings, City and State of New York, bounded and described as follows:

BEGINNING at the intersectimt of tile northerly side of Paci?c Street with the southwesterly side
of Flatbush Avenue;

RUNNING THENCE along the northerly side of Paci?c Street North 58 degrees 15 minutes 00
seconds West 290.1 feet to a point;

THENCE north 3] degrees 45 minutes 00 seconds east 180.15 feet to the southerly side of
Atlantic Avenue;

THENCE along the southerly Side of Atlantic Avenue south 5% degrees 15 minutes 00 seconds
east 22.85 feet to the sou?twesterly line of Flatbush Avenue;

THENCE alcmg the southwesterly side of Flatbush Avenue south 24 degrees 16 minutes 00
seconds east 322.31 feet to the point or place of BEGINNING.

END OF SCHEDULE A

ATLANTIC YARDS DEVELOPMENT SITE 5   A DDENDA

ADDENDUM D
PRÉCIS METRO REPORT - ECONOMY.COM, INC.

 nEW YorK
EMPLOYMENT
GROWTH RANK

RELATIVE EMPLOYMENT PERFORMANCE (1997=100)

VITALITY

2011-2013

97
2nd quintile

125

RELATIVE

RANK

97%

190

U.S.=100%

Best=1 Worst=384

115

LIVING

128% 151%

Best=1, Worst=392

U.S.=100%

LIFE CYCLE PHASE

2006

100

BUSINESS

156
2nd quintile

95
97

Mature

2007

2008

2009

110
105

RELATIVE COSTS

2011-2016

2005

120

98

2010

2011

638.9
670.0
681.5
682.2
657.3
693.7
716.8
5.3
4.9
1.7
0.1
-3.6
5.5
3.3
5,071.9 5,140.3 5,231.7 5,276.3 5,115.4 5,128.0 5,213.3
1.1
1.3
1.8
0.9
-3.0
0.2
1.7
5.3
4.8
4.7
5.4
9.0
9.3
8.8
6.8
9.8
7.7
3.2
-5.8
5.1
5.5
11,344.8 11,319.8 11,345.7 11,420.4 11,511.6 11,591.7 11,670.1
4,340
3,532
2,905
2,126
1,381
1,490
1,262
37,219 36,366 38,402 37,636
8,078
8,514 11,193
503.7
518.1
537.5
493.4
434.5
450.3
441.9
98,542 93,844 86,046 52,980 52,932 46,623 46,559
-205.3 -178.3 -116.1
-9.4
9.9
-2.0
-6.9
58,292 11,410 15,793 20,363 26,901 28,914 26,305

STRENGTHS & WEAKNESSES
strEnGtHs
Financial capital of the world.
High per capita income and limited exposure
to manufacturing.
High level of international immigration.

WEaKnEssEs
High business costs, especially for energy.
Very unaffordable housing and high tax
burdens on residents.
High income inequality.

CURRENT EMPLOYMENT TRENDS
% cHanGE Yr aGo, 3-Mo Ma
aug 11 dec 11
Total
2.0
1.4
Construction
1.2
2.6
Manufacturing
-1.1
-0.7
Trade
2.0
2.1
Trans/Utilities
2.2
0.2
Information
1.0
0.2
Financial Activities
2.1
1.8
Prof & Business Svcs.
4.2
4.2
Edu & Health Svcs.
1.8
0.4
Leisure & Hospitality
5.8
3.3
Other Services
2.2
0.7
Government
-1.3
-1.1

apr 12
1.7
-1.5
-0.0
3.0
-1.3
0.9
1.8
5.0
0.8
3.1
2.0
-0.7

LONG
TERM

X

W

FORECAST RISKS
SHORT
TERM

RISK-ADJUSTED
RETURN, ’11-16

0.41%

UPsIdE
Europe’s recession is mild, and NEY avoids a
major slowdown in trade and tourism.
State and city budgets stabilize and require no
further public sector layoffs.

doWnsIdE
Wall Street layoffs are more severe and
protracted than forecast.
Financial regulatory reform severely limits the
profitability of NEY’s largest banks for years
to come.

99

00

01

data Buffet Msa code: dmNeY
®

02

03

04

05

06

U.S.

IndIcators

07

08

10

11 12F 13F 14F 15F 16F

NEY

2012

Gross metro product (c$B)
% change
total employment (000)
% change
Unemployment rate
Personal income growth
Population (000)
single-family permits
Multifamily permits
Existing-home price ($ ths)
Mortgage originations ($ mil)
net migration (000)
Personal bankruptcies

09

2013

2014

2015

2016

732.6
753.9
783.0
814.6
840.3
2.2
2.9
3.9
4.0
3.2
5,310.7 5,410.4 5,520.3 5,653.5 5,765.0
1.9
1.9
2.0
2.4
2.0
8.7
7.4
7.0
5.6
4.9
5.3
5.6
6.1
6.4
5.6
11,749.4 11,814.9 11,865.4 11,901.5 11,933.6
1,633
1,800
3,846
4,937
4,884
23,928 37,622 37,101 38,432 38,296
419.1
430.2
457.3
483.1
504.2
51,276 36,580 37,062 42,246 46,887
-9.8
-25.2
-41.7
-57.3
-62.4
20,149 20,476 21,912 19,545 19,508

ANALYSIS
Recent Performance. New York City’s jobs recovery is complete. Payroll employment reached a new
peak in April, though private-sector employment had
done so in January. NEY is one of only 30 metro areas
to achieve this feat out of nearly 400. Roughly twothirds of the metro division’s industries are growing
payrolls, including financial services, where layoffs on
Wall Street are tapering off. The recovery appears to
be favoring those who commute into the city from
the suburbs of New Jersey and Connecticut over residents of the five boroughs. The unemployment rate,
at 8.9%, is back above the national rate.
Both single- and multifamily building are off
their recessionary lows, particularly multifamily,
where strong demand has resulted in a shortage of
rental units. Trade through the customs district has
slowed, but is still higher compared with a year ago.
Wall Street. Financial services will muddle
through the second quarter, but growth should return by the third quarter when investment banks
complete layoffs. There have been a couple thousand
job losses on Wall Street since the start of the year,
but cuts are tapering off. Yet, while there has been no
major layoff announcement in the past few months,
employment data likely do not fully capture the
layoffs to date. Many firms pay six months or more
of severance to laid-off workers, who subsequently
remain on payrolls during this time. Also, data
through September 2011 from the Quarterly Census
of Employment and Wages show that when the Bureau of Labor Statistics revises its monthly estimates
of payroll employment next year, financial services
will look much worse in late 2011 than it does now.
Delay. House prices in NEY will take longer to recover in light of the state attorneys’ general settlement
with large mortgage lenders. Those holding loans that
are not backed by Fannie and Freddie will be required
to attempt to write down principals. This will affect
jumbo mortgages that are above the conforming loan

MOODY’S ANALYTICS / Précis U.S. Metro / Northeast / May 2012

limit. As a result, getting high-priced homes through
the foreclosure process will take longer, lengthening
the already-long foreclosure timeline in the state.
Fortunately, higher-priced homes have retained their
values better than those under the conforming loan
limit of $625,000. At the end of 2006, one in three
homes purchased in NEY was nonconforming; the
national ratio was one in 20. Sturdier home values at
the high end may help to mitigate some of the delay
caused by the new regulation since fewer homeowners will be under water and less likely to foreclose.
Resilient. NEY’s economy has been resilient to
the European recession, but the region still represents one of the biggest threats facing the metro
division given its relatively high exposure to EU
exports, tourism and financial markets. The downturn in trade going to Europe has been small, and
growth in leisure/hospitality employment coupled
with data on hotel occupancy and room rates suggest little impact on tourism. Hotel occupancy
rates are the highest since 2007 and average room
rates are up 25% from their 2009 trough.
Payback from a record first quarter that was
juiced by an extremely warm winter will cause job
growth in New York City to slow in the second
quarter. Thereafter, the metro division will add
about 9,000 jobs per month until 2014 and 2015
when a firming national economy fuels another
growth spurt. Longer term, a very highly educated labor force, concentration of finance and
media, cultural amenities, and international linkages will work in NEY’s favor and lead it to outperform other northeastern areas. However, high
costs, including a lack of affordable housing, and
slow population growth will constrain expansion.
The metro division will perform in line with the
nation over the extended forecast horizon.
Marisa Di Natale
May 2012
63

 EMPLOYMENT & INDUSTRY
TOP EMPLOYERS

MIGRATION FLOWS

INDUSTRIAL DIVERSITY

Metropolitan Transportation Authority
New York City Health and Hospitals Corp.
JPMorgan Chase & Co.
Citigroup Inc.
North-Shore Long Island Jewish Health System
Continuum Health Partners Inc.
Mount Sinai Medical Center
NYU Langone Medical Center
Macy’s Inc.
Columbia University

66,240
36,964
24,927
24,442
19,872
18,974
18,386
15,705
15,100
15,080

New York University
City University of New York
Morgan Stanley
Consolidated Edison Inc.
New York-Presbyterian Healthcare System
Bank of America
Verizon Communications
Memorial Sloan-Kettering Cancer Center
Medisys Health Network Inc.

14,341
13,090
13,000
12,348
12,217
12,000
11,100
10,929
10,622

Into nEW YorK, nY

Most Diverse (U.S.)

Nassau, NY
Newark, NJ
Edison, NJ
Philadelphia, PA
Poughkeepsie, NY
Bridgeport, CT
Los Angeles, CA
Atlanta, GA
Orlando, FL
Washington, DC
Total In-migration

Least Diverse

Relative to U.S.

Source: Crain’s New York Business - April 2011

96

100

PUBLIC
Federal
State
Local

66,107
75,569
612,489

2011

Not due to U.S.

Due to U.S.

NEY

Nassau, NY
Newark, NJ
Edison, NJ
Poughkeepsie, NY
Bridgeport, CT
Philadelphia, PA
Washington, DC
Los Angeles, CA
Atlanta, GA
Orlando, FL
Total Out-migration

32,378
25,302
17,541
8,923
8,394
5,898
5,490
5,121
5,071
4,148
255,815

net Migration

-66,358

U.S.

COMPARATIVE EMPLOYMENT AND INCOME
Sector

% of Total Employment
nEY
0.0%
3.2%
3.1%
42.1%
57.9%
3.4%
4.3%
9.2%
3.9%
10.4%
15.4%
19.6%
8.7%
4.2%
14.5%

Mining
Construction
Manufacturing
Durable
Nondurable
Transportation/Utilities
Wholesale Trade
Retail Trade
Information
Financial Activities
Prof. and Bus. Services
Educ. and Health Services
Leisure and Hosp. Services
Other Services
Government

nY
0.1%
3.5%
5.3%
59.3%
40.7%
3.0%
3.8%
10.3%
2.9%
7.9%
13.1%
19.9%
8.8%
4.3%
17.1%

U.s.
0.6%
4.2%
8.9%
62.0%
38.0%
3.7%
4.2%
11.1%
2.0%
5.8%
13.2%
15.1%
10.1%
4.1%
16.8%

nY
$38,287
$64,523
$77,875
$80,133
$74,727
$56,182
$83,563
$35,468
$136,958
$101,241
$84,395
$50,643
$31,792
$37,553
$75,703

U.s.
$70,081
$53,795
$73,041
$75,070
$69,828
$60,610
$75,460
$31,162
$91,647
$46,508
$60,384
$49,569
$24,000
$33,510
$66,559

Sources: Percent of total employment — Moody’s Analytics & BLS, 2011; Average annual earnings — BEA, 2010

HOUSE PRICES

NAICS INDUSTRY

Source: FHFA, 1996Q1=100, NSA

MOODY’S RATING

aa2
64

cItY
as oF dEc 10, 2010

15,000
10,000
5,000
0
-5,000
-10,000
-15,000
08

Domestic
Foreign
Total

09

10

11

2008

2009

2010

2011

-90,089
80,648
-9,442

-69,658
79,588
9,929

-78,585
76,652
-1,933

-70,890
64,002
-6,888

Sources: IRS (top), 2010; Census Bureau, 2011

LEADING INDUSTRIES
GVsL
7225
6221
6241
5231
6113
5511
6216
5411
5613
4451
6211
5311
4481
5221

nEt MIGratIon, nEY
Net Migration, NEY

Average Annual Earnings
nEY
nd
$74,358
$84,715
nd
nd
nd
$95,824
$41,599
$152,627
$133,198
$102,408
$53,034
$39,105
$39,938
$79,470

20,370
17,990
10,042
5,752
5,215
4,474
4,437
4,080
3,908
3,707
189,457

FroM nEW YorK, nY

EMPLOYMENT VOLATILITY
Due to U.S. fluctuations

nUMBEr
oF MIGrants

PER CAPITA INCOME

EMPLOYEES (000)

State & Local Government
Restaurants and Other Eating Places
General Medical and Surgical Hospitals
Individual and Family Services
Sec. & Commod. Cont. Intermed. & Brokerage
Colleges, Universities & Professional Schools
Management of Companies and Enterprises
Home Health Care Services
Legal Services
Employment Services
Grocery Stores
Lessors of Real Estate
Clothing Stores
Depository Credit Intermediation

688.1
265.0
195.4
134.1
130.5
105.2
103.9
103.3
91.4
91.0
84.4
80.7
75.0
74.9
69.1

High-tech employment
As % of total employment

214.5
4.1

Sources: BLS, Moody’s Analytics, 2011

53,974

NEY

48,596

39,937

NY

U.S.

Source: Bureau of Economic Analysis, 2010

MOODY’S ANALYTICS / Précis U.S. Metro / Northeast / May 2012

 nEW YorK

NEY’s financial services industry is on the mend, with financial
activities payroll continuing to edge up in the first few months of
2012. Gains in portfolio and wealth management, real estate and
traditional banking have so far been able to offset the loss of several
thousand high-paying Wall Street jobs in investment banking and
trading. The diversification of the economy over the past several
decades has made the metro division less reliant on finance; other
engines of job growth such as healthcare, professional services and
high tech are now at the forefront of NEY’s recovery.

MOODY’S ANALYTICS / Précis U.S. Metro / Northeast / May 2012

One of NEY’s engines of growth, high tech, is responsible for an
outsize share of the jobs added since the labor market began its
recovery more than two years ago. Though composing just 4% of
total employment, high-tech has accounted for more than 5% of
the jobs added since early 2010. Facebook, Google and Microsoft
are opening and expanding engineering hubs in the city. These tech
companies are being drawn to NEY to take advantage of its vast
network of advertising and media companies, which are becoming
increasingly important in social networking and web development.

65

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102

MOODY’S ANALYTICS / Précis U.S. Metro / Northeast / May 2012

 ATLANTIC YARDS DEVELOPMENT SITE 5   A DDENDA

ADDENDUM E
REQUIRED CLIENT INFORMATION

 11-047NY-0714

     McGuire, John @ New York
From:
Sent:
To:
Cc:
Subject:

Godfrey, Mark @ New York City
Monday, April 02, 2012 4:32 PM
Tarabokija, Kimberly @ New York; McGuire, John @ New York
Pecorino, Michael @ New York City; Jacobson, Helene @ New York City
FW: confidentiality agreement

This is for prior job #11 047NY 0714, which was moved to 12 047NY 0410…official instruction to proceed from our client.

Mark T. Godfrey   Vice President
CBRE   Valuation & Advisory Services
One Penn Plaza   Suite 1835   New York, NY 10119
T 212 715 5719   F 212 207 6169   C 516 978 1520
mark.godfrey@cbre.com   www.cbre.com/

This communication and any attachments may be confidential or legally privileged. If you received this message in error or are not the intended recipient, you
should destroy the e-mail message and any attachments or copies, and you are prohibited from retaining, distributing, disclosing or using any information
contained herein. Please inform us of the erroneous delivery and thank you for your cooperation.

From: Hoyt, Winthrop [mailto:whoyt@
Sent: Monday, April 02, 2012 4:26 PM
To: Godfrey, Mark @ New York City
Cc: Lester, James
Subject: RE: confidentiality agreement

Mark:
Please consider this email as authorization to proceed under our contract of June of 2011.
The “as of” date for the appraisal should be March 3, 2010 (the applicable Title Vesting Date from the appraisal instructions
below is March 4, 2010). We believe that the city’s air rights being appraised approximate 308,000 zsf (the difference between
the 1 FAR as built and the zoning FAR of 6.02).
Please see attached for the city’s approved deductions to value – there are $10.9MM in extraordinary development costs, plus
the costs of condemning the PC Richards fee and the Modell’s leasehold and fee. I am attaching a summary of the Modell’s
lease – let me know if you need the entire document.
As a reminder, the appraisal instructions relevant to this property are below:
1. the fair market value of each City Property [in this case, Site 5] shall be determined on a “stand alone” basis;
2. zoning and other conditions existing as of the day before the applicable Title Vesting Date, including any encumbrances,
physical conditions or other considerations that reasonably could bear upon the fair market value of the City Properties
shall be considered;
3. the impact that the Project or the uses described in the MGPP could have on the applicable value shall not be
considered; and
4. the [appraisal] shall be subject to review by each of the City and AYDC before completion.
Let me know what other information you need to get started.
Best,
Winthrop Hoyt
From: Godfrey, Mark @ New York City [mailto:Mark.Godfrey@cbre.com]
Sent: Monday, March 26, 2012 2:19 PM
1

 QUALIFICATIONS OF
HELENE JACOBSON, MAI
Managing Director
CBRE, Inc.
One Penn Plaza, Suite 1835
New York, New York 10119
(212) 207-6106
EDUCATION
Master of Science in Real Estate: Valuation and Analysis, New York University
New York, NY
Bachelor of Business Administration - Finance, George Washington University Washington, D.C.
Appraisal Institute Course work at NYU Masters Program fulfills all requirements for Appraisal
Institute courses.
Standards of Professional Practice A & B.
LICENSES/CERTIFICATIONS
Certified Real Estate General Appraiser: State of New York State (#46000026005)
Certified Real Estate General Appraiser: State of New Jersey (RG 01924)
General Appraiser: Pennsylvania (GA-001790-R)
Certified General Real Estate Appraiser: Connecticut (RCG.0001334)
PROFESSIONAL
Appraisal Institute
Designated Member (MAI), Certificate No. 11050
EMPLOYMENT EXPERIENCE
20 years of Real Estate appraisal and Consulting experience throughout the Northeast region.
1992 - Present
1989-1991

CBRE, Inc.
Office of Thrift Supervision

New York, New York
Bowie, Maryland

Assignments include full and partial interest appraisals of office buildings, commercial lofts, malls,
shopping centers, apartments, cooperatives, condominiums, townhouses, industrial facilities,
residential and office market studies, portfolio valuations and multi-property assignments.

 QUALIFICATIONS OF
MARK T. GODFREY
VICE PRESIDENT
CBRE, INC.
VALUATION & ADVISORY SERVICES
One Penn Plaza, Suite 1835
New York, NY 10119
(212) 715 5719
PROFESSIONAL
Associate Member of the Appraisal Institute (membership #400010)
Certified Real Estate General Appraiser: State of New York State (#46000041668)
Certified General Real Estate Appraiser: State of Connecticut (#RCG.0001332)
EDUCATION
Bachelor of Business Administration, Specialization in Accounting
Hofstra University, Hempstead, New York, 1995
Certificate in the Appraisal of Investment Properties
New York University SCPS, New York, New York, Spring 2002
Completed all required coursework and examinations to qualify for MAI designation
Appraisal Institute & NYU, New York, NY
EMPLOYMENT EXPERIENCE
1998-present

CBRE, Inc.
Vice President

New York, NY

1995-1997

CBRE, Inc.
Regional Director of Research

New York, NY

Engaged in the appraisal and consultation of commercial real estate throughout the Northeastern
United States. Assignments include full and partial interest appraisals of investment grade office
buildings, data centers, hotels, high-rise residential buildings, condominium conversions, garden
apartment complexes, industrial buildings, headquarters facilities, laboratory facilities, regional malls,
community retail facilities, automobile dealerships, self-storage facilities, stand-alone retail properties
and golf courses.

 To: Hoyt, Winthrop
Subject: RE: confidentiality agreement

Winthrop – You were going to forward over our authorization to proceed and the dates/language/excluded costs, etc. for us to
get started.
Thanks,
Mark
Mark T. Godfrey   Vice President
CBRE   Valuation & Advisory Services
One Penn Plaza   Suite 1835   New York, NY 10119
T 212 715 5719   F 212 207 6169   C 516 978 1520
mark.godfrey@cbre.com   www.cbre.com/

This communication and any attachments may be confidential or legally privileged. If you received this message in error or are not the intended recipient, you
should destroy the e-mail message and any attachments or copies, and you are prohibited from retaining, distributing, disclosing or using any information
contained herein. Please inform us of the erroneous delivery and thank you for your cooperation.

From: Hoyt, Winthrop [mailto:whoyt@
Sent: Tuesday, July 12, 2011 12:49 PM
To: Godfrey, Mark @ New York City
Subject: confidentiality agreement

Mark:
Here’s the CA we discussed on the phone yesterday. Take a look at it, and if there are no issues please sign and return it.
Thanks –
Winthrop
Winthrop Hoyt
Forest City Ratner Companies
One MetroTech Center
Brooklyn, NY 11201
(718) 923-8718 (f)
whoyt@

NOTICE: This message is intended only for the personal and confidential use of the designated recipient(s) named
above. If you are not the intended recipient of this message you are hereby notified that any review, dissemination,
distribution or copying of this message is strictly prohibited. This communication is for information purposes only and
should not be regarded as an offer to sell or as a solicitation of an offer to buy any financial product, an official
confirmation of any transaction, or as an official statement of Forest City Ratner Companies, First New York Partners,
Forest City Enterprises or their affiliates. Email transmission cannot be guaranteed to be secure or error-free. Therefore,
we do not represent that this information is complete or accurate and it should not be relied upon as such. All
information is subject to change without notice. This message may contain information that is privileged, confidential,
legally privileged, and/or exempt from disclosure under applicable law.

2

 ATLANTIC YARDS DEVELOPMENT SITE 5   A DDENDA

ADDENDUM F
QUALIFICATIONS