Forest City Ratner finds success by tapping the enormous sales potential of three northeastern states.
It's impossible to talk about Forest City Ratner Co., the Brooklyn-based development and real estate firm, without mentioning its parent, Cleveland-based Forest City Enterprises, Inc. The latter, which owns commercial and residential properties in 21 states and the District of Columbia, is one of the largest publicly traded development companies in the United States. In addition to acquiring, managing and developing properties, Forest City Enterprises conducts land development programs and is one of the nation's largest lumber wholesalers.
Though privately held, Forest City Ratner is a partnership and was founded in 1985. It is operated by its founder, president and CEO, Bruce Ratner, a respected business and civic leader in New York. Ratner's company mainly focuses its operations in New York, New Jersey and Connecticut, but it has engaged in one project each in Rhode Island and Philadelphia. In all, Forest City Ratner has developed and currently owns more than 8 million sq. ft. of commercial, retail and hotel properties.
Committed to building superior, long-term value for its stakeholders, Forest City Ratner specializes in build-to-suit development. It has constructed nine new projects in New York City during the last decade, and ranks among the most experienced developers in the Northeast. Recent New York projects include the MetroTech Center in Brooklyn, the New York Mercantile Exchange in Manhattan, and an entertainment retail work-in-progress on 42nd Street.
Sandeep Mathrani, executive vice president, explains that Forest City Ratner focuses on major, complex projects that are appropriate to the company's size and strengths. While Forest City Enterprises develops throughout most of the U.S., it leaves New York, New Jersey and Connecticut to Forest City Ratner, which has developed a thorough understanding of the development climate in the three states. "Originally, Forest City Ratner engaged in the land business," Mathrani notes. "But it soon realized the development potential in these states."
Untapped potential Forest City Ratner takes on the task of acquiring real estate in this region, then sets out to convince local tenants of the potential for strong retail sales. Studies indicate an untapped demand of $3 billion in potential retail sales annually, Mathrani says. "We realized people in these areas have disposable income but don't have places to spend it. Consequently, they travel to targeted stores an average of every two weeks to shop in New Jersey, Long Island and Connecticut, spending about $1 billion.
"We've proven this to tenants," Mathrani continues. "We've been able to show them average sales potentials that exceed $400 per square foot across the board."
Large project? No problem Forest City Ratner has developed in New York for 15 years and has built an average of one building each year. "This level of progression and experience has allowed us to embark on a continuity of major projects - those that normally would deter others from entering because of their complexity," Mathrani says. "We're not afraid of the risks involved in this market. We understand the demographics, construction and every other detail involved with projects of elaborate proportion."
Mathrani notes that Forest City Ratner doesn't acquire properties. It acquires land and develops properties, usually on an immense scale. "The largest deal we engaged in during 1999 was Queens Place in Queens," he says. "It's a 434,098-sq.-ft. retail project slated for completion in August 2001."
Forest City Ratner acquired the property, which had been a Macy's department store, from Federated Department Stores, and is now in the process of retrofitting and extending the building. The center is on six levels: a basement and five above-grade floors. It will house Best Buy, Target and an Outback Steak House restaurant, Mathrani says, adding that the transaction is valued at approximately $120 million.
Other retail centers recently completed by Forest City Ratner include the 330,000-sq.-ft. Columbia Park Center in North Bergen, N.J., a retail center that opened in November 1999. Tenants include ShopRite Supermarket, Circuit City, Staples, Old Navy Clothing Co., Party City, Mandee Shops, and Regal Cinemas.
The 42nd Street retail, hotel and entertainment complex, a 350,000-sq.-ft. project, opened in June 2000, and is the new home to the Madame Tussaud's Wax Museum. The Battery Park City retail, hotel and entertainment complex in Manhattan is located across the street from the World Financial Center and 50 yards away from the Battery Park City esplanade. The 165,000-sq.-ft. project opened in summer 2000.
Slated for groundbreaking before the end of 2000 is Atlantic Terminal in Brooklyn. The 361,235-sq.-ft. retail center is adjacent to Atlantic Center, another Forest City Ratner retail project completed and opened in November 1996. Atlantic Terminal is the second phase, with a completion date of March 2002. Its tenants will include The Gap, The Limited, Victoria's Secret and Target.
In-house expertise Unlike a boutique developer that subcontracts out many aspects of its business, Forest City Ratner maintains legal, accounting, contracting, designing and other services in house, employing about 150 people. "Our success is based on the fact that we don't have to rely on outside sources. This was a key component to how we managed to develop our own track record."
Because of the scope of potential development in the areas where it focuses, Mathrani says, Forest City Ratner hasn't had a reason to move into other areas or use alternative methods. "We did engage in the Hunting Park Plaza in Philadelphia, a 134,275-sq.-ft. retail project that opened in July 1998, because of a study we compiled in 1993 and 1994."
The results indicated a deficit of retail spending was prime for Forest City Ratner's approach. And the site was close enough in proximity for company officials to commute. In general, however, Forest City Ratner will continue to focus on its bread and butter, the states of New York, New Jersey and Connecticut.
Forest City Ratner plans its projects in three-year increments, with current plans (slated through 2003) of approximately $125 million to $150 million each year.
One recently announced project came after a rigorous review of many New York City developers by the client, The New York Times Co., which chose Forest City Ratner for development of its new headquarters.
The project will encompass approximately 1 million sq. ft. in Manhattan, with the completion date to be announced in the future.
Other projects include: Retail/Entertainment: 42nd Street Retail and Entertainment Complex, New York City, 350,000 sq. ft., completed summer 2000.
Retail: Atlantic Terminal, Brooklyn, New York, 361,235 sq. ft., slated for completion in March 2002.
Retail/Hotel: Battery Park City Retail and Entertainment Complex, New York City, 165,000 sq. ft., completed summer 2000.
Retail: Bensonhurst Center, Brooklyn, New York, 95,000 sq. ft., slated for completion in fall 2001.
Retail/Hotel: Embassy Suites Hotel, New York City, 463 suites, completed in summer 2000.
Retail: Forest Avenue Cinemas, Staten Island, 68,000 sq. ft., completed in October 2000.
Retail: Forest Avenue Commons, Staten Island, New York, 235,000 sq. ft., slated for completion in September 2002.
Retail: Queens Place, Queens, New York, 434,098 sq. ft., slated for completion in August 2001.
Retail: Springfield Gardens Plaza, Queens, New York, 118,516 sq. ft., completed in November 2000.
Retail: The Heights, Brooklyn, New York, 102,507 sq. ft., completed in summer 2000.