Analysts: New Atlantic Yards Deal A ‘Significant Positive’ for Forest City Ratner

After a renegotiation of the terms of the $4.9 billion Atlantic Yards project, financial analysts have warmed to the project.

A look at a recent rating of Forest City Enterprises by investment firm Keefe, Bruyette & Woods shows that the development company, which is the parent of Atlantic Yards developer Forest City Ratner, seems to be making at least a little bit of a comeback. After months of tanking stock prices—the stock fell from $69 a share in early 2007 to a low of $3.26 before stabilizing around $6.50—there is now some reason for optimism with regard to Atlantic Yards.

The KBW analysis comes after the developer renegotiated its deal with the M.T.A. last week. Now Forest City Ratner is giving the agency $20 million instead of $100 million in an upfront payment, pushing the other $80 million years down the road.

This pleased the analysts, who gave Forest City a rating of “outperform,” which is better than “neutral” though less strong than “buy.” From the report:

While many of the details have not been completely outlined publicly, we believe staging a takedown of the land and paying for the air rights portion starting in 2012 is a significant positive for Forest City. While the stretched-out takedown and payments will require a higher total outlay (implied 6.5% annual interest rate) over the 19-year period starting in 2012, this reduces current cash outlays in 2009 and near term. In addition, this means that Forest City’s takedown of the additional parcels (or air rights) will be more closely matched with vertical development of stages of the project.”

The analysts, Sheila McGrath and Bill Carrier, also found it ironic that opponents of the project were in an uproar after Frank Gehry was dropped from the project, because, they write, a more functional, cheaper and far less dazzling arena is better than more delay:

The irony at this juncture is that the opposition is citing the delays in the project and a change of architect that should be considered as a negative to vote against Forest City and the project. If this project had not been tied up in litigation for years by the opposition, the MTA would have closed on the land for an upfront payment of $100 million several years ago, and affordable housing would already have been under construction. The litigation has increased the cost of the project and dragged timing of closing into one of the deepest recessions in decades and certainly a most difficult financing environment.

The report went on to highlight the next major step for the developer : the sale of $530 million in tax-free bonds to help pay for the $772 million arenapart of the project. Now, Forest City faces a ticking clock as it tries to sell those bonds, as the I.R.S. has set a Dec. 31 deadline for the developer to qualify for the tax-exempt status.

Also noteworthy in the report was a statement that the arena now has $100 million in sponsorship commitments beyond the naming rights, which Barclays Bank previously agreed to purchase for $400 million over 20 years. Analysts: New Atlantic Yards Deal A ‘Significant Positive’ for Forest City Ratner