The Arizona State Retirement System has sold its equity interest in B2 BKLYN, a 363-unit high-rise modular apartment building at Pacific Park Brooklyn, formerly known as Atlantic Yards. The project currently is tied up in litigation between Forest City and Skanska USA, the construction contractor on B2 BKLYN. Work on the project recently halted after Skanska shut down construction at the property and closed the factory to build the modular units.
Forest City’s buyout of Arizona’s equity interest, which sold for $40.5 million, thereby removes B2 BKLYN from a $400 million residential development fund between ASRS and Forest City. The company also has assumed the pension plan’s share of the debt on the project.
“We felt it was prudent to make this incremental investment now, rather than cloud the future of the fund as a result of litigation related to a single property,” said David LaRue, Forest City president and chief executive officer, in a statement.
The two parties originally launched the fund in late 2012 to invest in multifamily development projects primarily in five US core markets: New York City; Washington, DC; Boston; Los Angeles and San Francisco. ASRS will contribute 75 percent of the capital in the venture, while Forest City will kick in the remainder.
B2 BKLYN, along with 2175 Market Street in San Francisco, were the two earliest projects out of the fund. 2175 Market Street, an 88-unit apartment community, will be the first completed development in the fund, with an opening scheduled for this quarter. Meanwhile, B2 BKLYN is the first residential tower at Pacific Park, and originally was scheduled to open in the fourth quarter. According to Forest City’s second-quarter results, however, the opening has now been delayed by a year.
“Our relationship with ASRS continues to be very strong, and both organizations remain bullish on the Brooklyn market,” LaRue added. “Together, Forest City and ASRS continue to move the fund forward with additional multifamily opportunities in core markets around the country.”
Indeed, Forest City revealed in its second-quarter results that it anticipated starting on five additional apartment projects on behalf of the ASRS fund in the near term, including two projects in Los Angeles, two in Washington DC and one in Philadelphia. Of these five projects, the company recently closed on two: Arris at The Yards in Washington, a 327-unit building with a total cost of $142.7 million; and Blossom Plaza, a 237-apartment property in Los Angeles, at a total cost of $106.7 million. Arris is slated to open in the first quarter of 2016, while Blossom Plaza is expected to debut in the second quarter of that year.