Monday, February 01, 2010

Another reason not to trust the KPMG report to the ESDC on the housing market

There's yet another reason not to trust the report (dated August 31) that KPMG delivered to the Empire State Development Corporation on the housing market in Brooklyn.

Remember, the report claimed that Richard Meier's On Prospect Park was 75% sold. However the New York Times reported September 27 that the developer asserted that half of the units had been sold and the web site StreetEasy.com documented only 25 closings.

KPMG also claimed that the Oro Condos in Downtown Brooklyn were 75% sold. That didn't ring right.

In September, Crain's reported that prices at Oro had been slashed 25%. And yesterday the New York Times reported that the building is 44 percent sold. (Click on graphics to enlarge.)

From the KPMG report


From the Times

Why it matters

Why does this matter?

Because the ESDC relied on the "expert" KPMG to validate its dubious estimate that the Atlantic Yards housing could be absorbed in a decade, a crucial defense in the case challenging the ESDC's approval of the 2009 Modified General Project Plan and the failure to issue a Supplementary Environmental Impact Statement (SEIS).

The information on Oro further undermines KPMG's expertise.

Impact on prices

As I wrote, in legal papers the ESDC criticized consultant Joshua Kahr (representing the Council of Brooklyn Neighborhoods) for citing $600 per square foot as the upper limit of the quarterly average dollar per square foot sale price for residential condominiums in Brooklyn, noting that KPMG instead cited recent prices in neighborhoods near the project site.

Forest City Ratner is counting on sales prices of $1217/sf in 2015 up to $1369/sf in 2019. Even though the average high sales price in the three surrounding neighborhoods is $970/sf, the KPMG study stated that only a "modest inflation factor" would allow the expected prices to be reached.

That went unrebutted in the petitioners' papers, but could have been responded to by pointing out that KPMG's figures on sales were extremely unreliable, thus rendering its entire report suspect. After all, the more vacancies, the more likely prices will grip.

And that "average" high sales price depends, in part, on some units in the Meier building, which has many, many vacancies.

Meanwhile, the couple cited in yesterday's Times article bought a two-bedroom two-bath unit in the Oro for $740,000, two years after the asking price was $1.075 million--a 31% decrease.

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