Friday, October 31, 2014

Atlantic Yards, Pacific Park, and the Culture of Cheating (links)

I offer a framework to analyze and evaluate Atlantic Yards (in August 2014 rebranded as Pacific Park) and the Barclays Center: Atlantic Yards, Pacific Park, and the Culture of Cheating.

Note: this post is post-dated to remain at the top of the page. Please send tips to the email address above, rather than posting a comment here.





A model shown to potential immigrant investors in China in 2014, though not shown publicly in Brooklyn.

From a deceptive 2006 Forest City Ratner brochure, suggesting 6 acres of railyard would become a 22-acre project.



Monday, October 20, 2014

Breaking: Ratner's selling share of Barclays Center (at a loss?)

NetsDaily, drawing on Sports Business Journal's paywalled report, tells us Bruce Ratner selling majority share in Barclays Center. And while the publication did not report the projected sales price, it suggested that the arena's worth $750 million based on revenue flow, with Ratner's 55% share (part of a consortium with about 100 other investors) valued at a little more than $400 million.

That's an interesting number, because the arena, the transit connection, and site work cost $934 million, Forest City has said. Another accounting put project costs at $845 million.

I don't doubt the calculations regarding the sale are complicated, but that $750 million figure on its face looks like a loss.

In the first year, arena revenues were well below the expected figure, though they improved in the second year. The advent of the Islanders in 2015 should deliver a steadier revenue flow, even if concerts diminish.

So it's curious that the arena's for sale; perhaps Forest City recognizes that the upside from the Islanders is most available now, or perhaps Cleveland has decreed it. But Ratner has called the arena "fortress real estate," meaning it's something that can't be easily duplicated.

SBJ writer Daniel Kaplan suggested that potential owners could be Nets owner Mikhail Prokhorov, who owns a 45% share of the arena, or the new owners of the Islanders, former Capitals owner Jonathan Ledecky and London-based investor Scott Malkin.

If Prokhorov controls the arena, that would mean that foreign owners control all of Atlantic Yards.

Photo & GIF show 550 Vanderbilt rendering skewed to diminish size; model released in China (but not U.S.) suggests full Atlantic Yards bulk

What's wrong with the rendering at right of 550 Vanderbilt, the planned condo tower at the northwest corner of Vanderbilt Avenue and Dean Street?

It's not just that, as I wrote, the rendering offers a selective perspective, which minimizes the scale transition between low-rise buildings on Vanderbilt and this 202-foot tall, 17-story, 275-unit tower.

It's that the perspective itself is a lie. It makes the three-story, mixed-use red brick building across the street look shorter and wider than the reality. That allows the tilted tower to fit in the rendering.

Let's try a GIF to compare a photo of that three-story building at 552 Vanderbilt, which has the restaurant Chuko Ramen on the ground floor, with a similarly cropped piece of the rendering.
Vanderbilt & Dean on Make A Gif
It's odd, isn't it. The top left corner of the photo and rendering pretty much start with the same sliver of the adjacent building, then extend to the cornice of 552 Vanderbilt. And the bottom right border is the southwest corner of Vanderbilt and Dean.

In the rendering, however, the three-story building at 552 Vanderbilt is stretched and tilted. The far side of the building points down, and both the windows and the brick between them seem widened.

The result? Minimizing the scale of 550 Vanderbilt, which is actually one of the smallest buildings planned for Atlantic Yards.

In China, a huge project

Ironically enough, in China, potential immigrant investors  in "Atlantic Yards II"--the second round of immigrant investor funding, now on its third round--were in January 2014 shown the model below, which emphasizes the full scale of the project and may exaggerate at least some of the towers.

(They were shown the model at an event sponsored by the Qiao Wai migration consultancy, which works with the U.S. Immigration Fund, the "regional center" packaging the low-interest loan under the EB-5 program. The U.S. Immigration fund was working with Forest City Ratner and, presumably, the Greenland Group, its pending partner. Surely the model was produced in cooperation with Forest City.)

This model has not been shown publicly in the United States. In China, the audience is different: the immigrant investors wouldn't care about community impact but rather would be impressed by the project's grandeur. And Greenland, now the 70% owner of Atlantic Yards (minus one tower and the arena), loves to build big.

Consider that the southern wall of 550 Vanderbilt, at the southeast corner of the site, is ten stories, while the current plan, as shown in the rendering above, is for seven stories. Also note how the open space--remember, Pacific Park?--seems minimized.


Also note that the model may indicate a change in the project plan--or simply was an expedient but incorrect interim representation. The tallest building on the eastern third of the site, Building 9, over the railyard between Carlton and Vanderbilt avenues, is supposed to rise 419 feet.

But it looks nearly as tall as the 511-foot B1 and the 510-foot B4, both on the arena block. Could some buildings will be taller or smaller than previously represented? Stay tuned. As I've said, Atlantic Yards is a "never say never" project.

The tight view of Vanderbilt and Dean: photo


The tight view of Vanderbilt and Dean: rendering



The full view of Vanderbilt and Dean: photo


The full view of Vanderbilt and Dean: rendering



552 Vanderbilt, from Google Street View

From Google Street View

OK, Pacific Street between Carlton and Vanderbilt will be restored to two-way traffic tomorrow

A message from the developers of Atlantic Yards/Pacific Park:
On Tuesday, October 21, 2014 at 11:30 AM Pacific Street between Carlton Avenue and Sixth Avenue will be restored to TWO-WAY TRAFFIC.
Last Tuesday, 10/14/14, I cited the latest project Construction Alert, which indicated that Pacific Street between Sixth and Carlton avenues were to be restored to two-way traffic a day later, weather permitting.

Sunday, October 19, 2014

If the use of "game mechanics" can improve the democratic process, would it have helped with Atlantic Yards? No.

So, the epic Atlantic Yards hearing in August 2006 serves as the distinct "Don't" lead anecdote in Making Democracy Fun, the recent book by Josh Lerner. He's Executive Director of The Participatory Budgeting Project, "a non-profit organization that empowers communities across North America to decide how to spend public money."

What's the solution? As noted in a book excerpt published in the October 2014 Utne Reader, What the Democratic Process Can Learn From Good Game Design, "Implementing game mechanics, such as collaborative competition, can make the democratic process more effective and even enjoyable."

That may well be true, but it has nothing to do with the hearing on the Atlantic Yards Draft Environmental Impact Statement. As I now know, though didn't convey in my coverage (which was among the sources Lerner drew on), the hearing wasn't meant to produce a meaningful outcome.

It could have been less of a charade, with some of the reforms Lerner suggests below. But it still would not have led to collaborative decisions, the way, say, participatory budgeting does.

Instead, under New York State law, an environmental review produces a disclosure document, aimed to disclose but not necessarily mitigate impacts. It does not involve decisionmaking. The public hearing is the publicly theatrical part of a process that also includes an opportunity to comment in writing--and the comments made in writing have exactly the same (minor amount of) weight.

The disclosure document can disclose some options that represent changes around the edges--say, reducing the amount of parking in the project--but that is relatively rare.

Rather, the environmental review is a document, required under the state's legal framework, aimed to avoid lawsuits. The deal and the project arrive already cooked by the parties that matter. Their big fear--as has emerged in more than once in the Atlantic Yards saga--is a lawsuit.

From the book/article: Atlantic Yards

Lerner writes:
Everyone loves democracy—except for most of the time, when they hate it. Despite its wide appeal, democracy has a remarkable ability to be fantastically boring, bitterly painful, and utterly pointless. This ability is so incredible that, in mere hours, democracy can transform a thousand passionate activists into a room full of lifeless faces and empty chairs.
Case in point: A public hearing on the largest development project in New York City history—Brooklyn’s Atlantic Yards.[actually it's Brooklyn history] On a late August afternoon in 2006, hundreds of opponents and supporters crammed into a university auditorium, with latecomers lined up outside. Officially, the hearing’s goal was to collect input on the project’s Draft Environmental Impact Study [Statement, not study]. In other words, to help determine if the developer could plant a new basketball stadium and 16 soaring apartment towers in the middle of Brooklyn’s brownstone neighborhoods. And if so, how?
The hearing was a nasty battle. Opponents protested that they only had 66 days to review 4,000 pages of technical documents. They warned about endless traffic jams and sketchy guarantees of affordable housing, claiming that the new apartments would just be “rich folks’ housing.” Unions and other supporters praised the new jobs, housing, and basketball team that the project vowed to deliver. Amid the chaos, the hearing organizers called in the police to remove an outspoken critic. Speakers faced constant heckling and threats. “The bulldozers are coming,” boasted an ironworker, “and if you don’t get out of the way, they’re going to bulldoze right over you.”
The Atlantic Yards hearing was about as much fun as, well, your average municipal hearing. After listening to waves of repetitive presentations and canned rhetoric, most of the crowd left early. Those who remained looked dazed. Many walked away frustrated, after signing up to present and not having time to speak. Thousands of other ‘concerned citizens’ had, no doubt, opted to stay home entirely, to avoid a futile shouting match. In the end, the hearing also failed to deliver a clear sense of how to improve the Environmental Impact Study.
The problems that plagued the Atlantic Yards hearing are typical of democratic participation. Governments and organizations are calling on citizens to engage more actively in political processes, beyond voting in elections. In most cases, though, participation is dominated by the ‘usual suspects’ and extreme voices, and widely dismissed as pointless. It rarely resolves conflicts or changes decisions. For most people, these opportunities to participate are simply not very attractive, compared with the countless other ways to pass time.
From the book/article: AY & game design

Lerner offers these suggestions:
Once I looked at public participation through the lens of game design, I began to question what I thought I knew about democracy. I reflected back on my experience as an urban planner and facilitator, designing and leading scores of workshops and meetings for community development programs in North America, Latin America, and Europe. I revisited the lessons learned from years researching participatory democracy in a dozen countries. And I realized, more so than ever before, why some meetings worked better than others. I glimpsed the power of good game design.
In the case of Atlantic Yards, game design concepts explain why the hearing was not fun, and how it was designed to fail. The organizers made conflict more antagonistic, asking presenters to explicitly identify as either for or against the development. They offered no opportunities to tackle problems collaboratively. They did not announce the hearing rules in advance, and the facilitator ignored rules about speaking time limits for many politicians and project supporters. People did not really know what they could accomplish by attending, and they had no way to measure progress toward any particular outcomes. There were almost no engaging visuals or sound effects. Combined, these design choices doomed the hearing.
In part, I don't disagree--there was no room for people to claim a more nuanced stance and it was irresponsible not to explain the hearing rules in advance or adhere to time limits--but those reforms would not have helped. Nor would better design choices have helped.

Consider: more recently, the public hearings have been somewhat better run, but the fundamental issue remains unchanged.

There was, in the initial and later rounds of environmental review, a huge goal at stake--for Forest City Ratner to get to "entitlement," or the permission to build the project as proposed. The goal was not to hear the public offer tweaks.

What's democracy?

If "games are designed to be enjoyable, and democracy is not," as Lerner aptly writes, the Atlantic Yards hearing was designed not to be democracy in the first place. There was no shared goal. There was no plan. There was no common resource that was the subject of tabula rasa decisionmaking.

The Empire State Development Corporation (aka Empire State Development) was set up to avoid "red tape," to push through projects without the messy democracy of a legislative review.

Lerner writes:
To maximize the fun and minimize the dangers, I propose that governments and organizations redesign democratic processes to include 5 kinds of games and 26 game mechanics. When appropriate, they should use animation, team-building, capacity-building, analysis, and decision-making games. But, more important, they should design democracy to be more like a game, by drawing on game mechanics that engage the senses, establish legitimate rules, generate collaborative competition, link participation to measurable outcomes, and create experiences designed for participants.
Those sound fine, but with Atlantic Yards and other ESD projects, there was, and is, no way to "link participation to measurable outcomes."

Even finding a way to incorporate public participation going forward has been a challenge--and the subject of another article.

Gehry gets big retrospective in Paris. Atlantic Yards *context* gets ignored.

Updated to clarify that a model of Atlantic Yards is included, just no context.

Los Angeles Times architecture critic Christopher Hawthorne yesterday wrote, Comprehensive 'Gehry' retrospective in Paris draws sociological blank:
The exhibition is an impeccable vacuum. The curators have worked strenuously, if invisibly, to keep at bay the full range of issues that have given the rest of the architecture world a full-on identity crisis in the last decade or so.
The curators cast Gehry in a well-worn mold: as one of the Great Men of contemporary architecture, a lone creative genius who has navigated a path from teenage Canadian immigrant in postwar Los Angeles to global superstar, churning out unorthodox houses, museums and concert halls all the while.
...Other banished subjects include Gehry's complicated relationship with Los Angeles, his adopted hometown; the uncertain fate of his proposed memorial to Dwight D. Eisenhower near the Mall in Washington, D.C.; the political uproar that greeted his plan, sponsored by Bruce Ratner, to drop more than a dozen separate buildings and an NBA arena into the middle of Brooklyn; and recent controversy surrounding labor conditions for construction crews in Abu Dhabi, where Gehry's firm is designing a massive Guggenheim satellite due to be completed in 2017.
Hawthorne makes the case that museums can treat architecture exhibitions more broadly, and urges curators at the Los Angeles County Museum of Art, where the Gehry show is scheduled to appear in September 2015, to broaden the frame.

Here are a couple of Gehry retrospectives.

And just as the curators omitted the context of Atlantic Yards from Gehry's history--there is a model in the show--so have the new owners of the project written out Atlantic Yards, converting the project to Pacific Park Brooklyn. Except in China.

Saturday, October 18, 2014

The spiffy future of 470 Vanderbilt

It's quite interesting to see the way RXR Realty, which bought a nearly 75-year lease on 470 Vanderbilt, the factory turned server farm turned office space at the northwest corner of Vanderbilt and Atlantic Avenues, expects to see it spiffed up, with upscale retail on the ground floor. (And with city's tallest public housing tower in the background.)

Presumably that retail will become more attractive when Atlantic Yards/Pacific Park towers open across Atlantic, first between Dean and Pacific streets, later between Pacific Street and Atlantic Avenue.


As RXR states:
470 Vanderbilt Avenue is a Class A office building prominently situated on a 3-acre, full city block bounded by Atlantic Avenue and Fulton Street. Just minutes away from the Barclays Center and the Atlantic Yards Development, 470 Vanderbilt has recently undergone a $74 million dollar capital improvement program transforming it into one of the most state-of-the-art assets in this emerging neighborhood.
Crain's wrote in February:
The 10-story property is largely leased. In 2011, GFI Development, the firm that sold the leasehold to RXR Realty in the deal, leased six floors of the building, space totaling about 400,000 square feet, to the city's Human Resources Administration for 20 years. It was a homerun transaction for a property that for years had struggled to find tenants and sat vacant.
RXR's one-page ad

Friday, October 17, 2014

Poor timing for Popular Mechanics article saluting modular breakthrough with B2 tower

In what looks like unfortunate timing, likely based in part on a long lead time, Popular Mechanics on 10/7/14 published Building a High-Rise, One Room at a Time: The United States' first modular skyscraper is coming together in Brooklyn.

The article is written in the present tense, though construction as been stalled at Forest City Ratner's B2 site (aka 461 Dean) since August:
At the 461 Dean construction site in downtown Brooklyn, there is no barking foreman. There's no screeching chop saw or pounding jack hammer. The loudest thing you hear is a hand-driven pulley, rattling like an anchor chain through a hawsehole as a lone worker in a hard hat uses it to tension the lift cables attached to what looks like a particularly sleek trailer home.
Except it's not a trailer home. It's a finished apartment. Sitting on a flatbed.
There is an interesting anecdote in the piece:
A project of 461 Dean's scale involves many people, but it was primarily the brainchild of two: Roger Krulak, a senior vice president at Forest City Ratner, a leading property developer in New York; and David Farnsworth, a principal with Arup, the famed architectural engineers. They met in 2008, when the Great Recession had put a premium on streamlined construction methods. Despite finding that modular high-rise construction was both plausible and cheaper than conventional methods, with big money for projects tight, the two had to put their idea on the shelf—until Forest City Ratner CEO Bruce Ratner saw a viral video of a Chinese company building a hotel in 15 days. He sent Krulak an email: "How do we build this here?"
Skating lightly over impasse

But it skates very lightly over the current bitter battle:
Unfortunately they couldn't perfect the partnership, as FCS and Skanska are currently at a legal impasse, but the two men did create a system that will revolutionize construction.
Are we sure? As I wrote in September, the stalled tower may be not just delayed but also defective.

"It is impossible to predict that the building when completed will perform as designed; and in particular, it is impossible to predict that the curtain wall joints will be and, over time, will remain effective barriers to the passage of air and water,” warned Skanska USA Building in a 146-page letter August 8 to estranged partner Forest City Ratner.

“[I]n simple terms, no one knows if the building is going to leak,” Co-Chief Operating Officer Richard Kennedy wrote, arguing that the system did not work.

Is it a breakthrough?

According to the Popular Mechanics article, "461 Dean is built from blueprints of the sort used in the aerospace industry" and the "placement of every component is predetermined and referenced to a single, fixed point." But that's not working, according to Skanska.

Yes, Skanska is seeking advantage in a legal proceeding, so its claims--as well as Forest City Ratner's counter-charge that Skanska early on signed off on the building's constructability--deserve some measure of skepticism. 

At the same time, celebration seems premature. But Farnsworth and Krulak were honored by the magazine with a Breakthrough Award, as noted by Real Estate Weekly.

Thursday, October 16, 2014

In China, Nets' visit boosts "Atlantic Yards III": deceptive pitch for cheap financing from Chinese millionaires seeking green cards under EB-5

Nets vs. Kings in Beijing
The Brooklyn Nets, in China for the NBA's Global Games, have played in Shanghai and Beijing. The Nets sold "Hello China" t-shirts. The Brooklynettes saw the Great Wall. The team revamped a gym in Beijing with a Nets theme.

Tweets, press releases, and articles piled on publicity.

A quieter--at least to an American audience--but cynical and deceptive activity was also under way: a third effort to essentially sell visas to Chinese millionaires (and their families) in exchange for short-term low-interest loans of $500,000 that purportedly create ten jobs.

The"Atlantic Yards III" promotion--aiming at $100 million from 200 investors--should save Greenland Forest City Partners tens of millions of dollars in interest, while delivering big fees to the middlemen, including lawyers, immigration consultancies, and the U.S. Immigration Fund, the federally-authorized regional center that packages the investment.

It comes on top of $228 million raised in 2010 by Forest City Ratner under the federal government's EB-5 program, and $249 million raised earlier this year by Forest City, in combination with Greenland. (In the Chinese EB-5 market, the Atlantic Yards brand has enough cachet that they're not calling the project Pacific Park.)

From the opening seminar Oct. 10 in Shanghai; Nicholas
Mastroianni III of U.S. Immigration Fund at left
Why bother, when the partners presumably have a significant amount of equity? Because they need loans to proceed with the project, and they want a bargain.

“It’s a very low-cost way to fill out your capital stack," a real estate lawyer has said, comparing a 12% interest rate for a mezzanine loan to an EB-5 loan in "the low single digits."

(The immigrant investors care more about getting green cards, and getting their money back after five years, than a robust interest rate.)

Reasons for cynicism about EB-5

The federal government's EB-5 program should inspire significant cynicism on its face, given that it's dubious to let the wealthy, especially ones with no special skills, jump the immigration line.

Also, it's fundamentally dubious to hand out green cards when no actual new jobs need be counted (indirect jobs are OK) and when private companies--not the public--are the major beneficiaries.

The EB-5 track record should inspire further cynicism, given that, to qualify for the $500,000 investment, the regional centers gerrymander the map to ensure that the project is located in an area of high unemployment. (Remember the "Bed-Stuy Boomerang" that encompasses Atlantic Yards?)

Indeed, the gold rush is such that EB-5 has generated some clear scandals, such as the one that inspired a Fortune cover story in July, or the one that's become a huge topic in the race for Senate in South Dakota.

"[B]ecause the EB-5 industry is virtually unregulated, it has become a magnet for amateurs, pipe-dreamers, and charlatans," observed Fortune, which offered a good primer on EB-5.

Why this EB-5 project is even more questionable

With Atlantic Yards III, the scandal is what's legal or--apparently--tolerated by agencies that pay too little attention.  But it should inspire more cynicism (as with "Atlantic Yards II") for three major reasons:
At the opening seminar: shooting hoops with Sam Perkins (?)
  • the publicity for the project accents the Barclays Center and basketball, but the investment under consideration cannot go into the already-constructed arena
  • the publicity claims support not only from officials no longer in office but also a current top State Department diplomat
  • Greenland Forest City Partners, the joint venture that will reap the savings from a below-market loan, is 70% owned by the Greenland Group, itself owned by the Shanghai government
In other words, as with the second round of Atlantic Yards fundraising, a foreign government is profiting by marketing a scarce U.S. public resource--green card slots under the EB-5 program--to its own citizens. 

This is, as far as I know, unprecedented. And the role of Greenland (see the green logo at top left in the advertisement below) enhances the investment for a Chinese audience.
Web advertisement for Oct. 10 investment seminar for "Atlantic Yards III" in Shanghai. Note pebbled basketball surface.
If this is legal, it's unimaginable this scenario was contemplated by Congress when it authorized the program in 1990, aiming to compete with other countries that were welcoming the world's wealthy in the wake of uncertainty in Hong Kong.

In other words, it's twisting the spirit, if not the letter, of the law even more than the dubious 2010 first round of Atlantic Yards EB-5 fundraising.

First round of EB-5, 2010
Then again, Forest City Ratner and Greenland, two hard-charging companies willing to push the envelope, seem to have good company with the Qiao Wai Group, itself questioned in the Chinese press in 2011, and the U.S. Immigration Fund.

The firm's leader, Nicholas Mastroianni II, as Fortune just reported, "has a long history of legal problems, failed ventures, and unpaid debts—which have continued even as his professional fortunes have turned sharply upward—leaving a legacy of conflicts, judgments, and entanglements."

(Earlier this year Mastroianni hired Charles Gargano to promote EB-5 projects. As former head of the Empire State Development Corporation, New York state's economic development agency, he can offer the patina of government support, which provides an edge before Chinese audiences.)

Misleading pitch, claiming diplomat's nod

One immigration lawyer has decried a "pandemic of hype-driven EB-5 marketing," particularly in China. The promotion for "Atlantic Yards III" sure qualifies, where a not-so-savvy audience can be seduced by the glamor of an arena and the NBA.


While advertisements for the first seminar (see left) showed the planned three towers around the arena, of course, there was no mention that the first tower, built via experimental modular technology, is stalled and mired in lawsuits.

It's misleading, notably under the heading of the Chinese terms for "government support," as indicated in the graphic below right.

The proponents of the "Atlantic Yards III" investment, on a web page set up by the Qiao Wai Group migration consultancy, include elected officials like Mayor Mike Bloomberg, Gov. David Paterson, and Borough President Marty Markowitz, who are no longer in office.

There's no way they can support the specific $100 million investment in Atlantic Yards III, which presumably will be aimed at construction of residential towers and/or infrastructure--unless it's somehow deployed to pay off previous EB-5 loans.

From Qiao Wai web site
Their comments, according to a machine translation, represent general support for the arena, Atlantic Yards, and jobs, not the specific EB-5 investment,

Also, this is the first time I've ever seen EB-5 promoters claim that a top U.S. diplomat is in support, in this case Charles Rivkin, Assistant Secretary of State for Economic and Business Affairs. As far as I can tell from a machine translation, Rivkin is saying optimistic things about Atlantic Yards.

It's highly doubtful, however, that if he said such things, he did so in official support of the overall Atlantic Yards project, much less official support of this specific EB-5 investment. (I've queried the State Department.)
Zhang (l.) & Rivkin. Photo: Greenland

According to a press release from Greenland, Rivkin on 9/5/14 met with Greenland Group President Zhang Yuliang and six other Chinese entrepreneurs on U.S.-China trade and economic relations.

That press release apparently triggered coverage in the Chinese press, including reported praise from Rivkin for Atlantic Yards.

But I'm pretty sure that no State Department official would ever favor one EB-5 investment over another or offer official support.

The opening seminar

Machine translation of Chinese headline
As noted in the screenshot of the translated headline at right, the visit by the NBA teams was promoted, at least in China, as part of the EB-5 immigration program. One article from Qiao Wai promised VIP tickets for the a Nets game

And, as shown in a photo near the top of the page, at the Oct. 10 event, visitors got to shoot a basket with a very tall ex-professional basketball player, apparently Sam Perkins.

According to a Chinese language news account of the event, Perkins was joined by current Net Jarrett Jack as well as Chocolate Thunder himself, the retired Darryl Dawkins, who also participated in the 2010 effort at EB-5 fundraising. (I wrote in 2010 how project promoters relied on the distraction of basketball.)

Darryl "Chocolate Thunder" Dawkins helps hawk green cards
Also participating were CEI Ding Ying of Qiao Wai, Nicholas Mastroianni III of the U.S. Immigration Fund, and Chris Clayton of Forest City.

The apparent success of the previous Atlantic Yards EB-5 fundraising--numerous investors have seen their I-829 petitions granted, thus allowing permanent residency after a two-year conditional period--has fueled similar claims about Atlantic Yards III.

According to the news account, 14 Chinese families signed up on the spot, a good start to the 200-investor quota.

Then again, the entire history of EB-5 promotion has stressed the arena and basketball, even though the money was not going into the arena.

Due diligence investigation by immigration firm?
Check out the photo at right, from the web site of the Kunpeng immigration consultancy, which shows Kunpeng affiliates visiting the arena and holding basketball, joined by noncredible pitchman Gregg D. Hayden of the New York City Regional Center (the middleman for the first round of EB-5 money) and, I believe, Rebecca D'Eloia of Forest City Ratner.

The Qiao Wai web site also apparently suggests that, according to a machine translation, "the government will provide an additional $18.3 million" in subsidies and tax breaks. It's unclear what that means, but it may refer to the subsidies assigned to one or more residential towers.

One final element of the pitch is that the fourth and fifth stages of Atlantic Yards--who knew it was divided that way?--will not be open to EB-5 investors. (We'll see.)

Who's involved

As shown in the screenshot below, the promotion from Qiao Wai touts the role of several "heavyweight guests" (according to machine translation), some of whom may not be formally involved in the EB-5 pitch.

In the top left is Qiao Wai's Ding Ying, followed by Forest City Ratner's Melissa Burch, Chris Clayton, and Jeffrey Rosen. At top right is the U.S. Immigration Fund's Nicholas Mastroianni II, and at bottom left is his son Nicholas Mastroianni II.
From Qiao Wai web site
Then, oddly enough, come the retired players Perkins and Dawkins, as well as current Nets players Mason Plumlee and Jarrett Jack. As noted above, Jack apparently attended one promotional seminar. Perhaps Plumlee was assigned to the other

Fun fact: Plumlee is described in Chinese---at least according to imperfect machine translation--as "the American version of Yao Ming." That's is a disservice both to the legendary, post-playing 7'6" Chinese center and the mobile, promising 6'11" second-year Nets center-forward.

Who's in charge? Greenland

It's notable that the Qiao Wai web site portrays the partners with Greenland's Zhang above Forest City Enterprises CEO David La Rue. (It also associates him with the subsidiary Forest City Ratner.

By contrast, when "Atlantic Yards II" was presented to potential buyers, the Greenland deal was announced by not consummated, and LaRue came first.

The text below about Greenland, according to a machine translation, describe the history of the company, its significant growth internationally, and the process to take 70% ownership of Atlantic Yards.
From Qiao Wai web site
The text about Forest City describes the company's history, range of activities in key markets, and previous EB-5 immigrant investor projects, according to a machine translation.

Promoting Barclays Center

Remember, the arena is irrelevant to the EB-5 investment at hand, but the Qiao Wai web page still promotes it.

There's an approving quote from Nets player Mirza Teletovic, as well as "local retired teacher Andrea Cave," whose quote apparently comes from her statement to the Daily News that the area "was really crappy" at one time but is "much safer now."

From Qiao Wai web site
More glaringly, there's a screen shot of the free daily Metro, which offered an enthusiastic "sneak peek at Barclays Center" in August 2012. Unmentioned here, of course, is that the section was an advertorial

Then again, in China, pay-for-play is so routine "many publications and broadcasters even have rate cards listing news-for-sale prices," the New York Times reported in 2012.
From Qiao Wai web site
More seminars coming

The launch seminar, on October 10, was only the first. As the screenshot at right indicates, 12 such seminars were scheduled around China.

Reassuring investors

One article from Qiao Wai detailed the history of events at the arena and reported that several reporters from Chinese news outlets visited the Barclays Center and reported that it was a good example of an EB-5 project.

They are apparently in the photo below.

Previous postings on Chinese web sites include photos of Forest City Ratner and Greenland executives cordially memorializing their transaction.
Bruce Ratner and Zhang Juliang shake hands
Ratner apparently signs papers as executives from both companies look on

Wednesday, October 15, 2014

Former ESDC head "Ambassador" Gargano, "classy political opportunist," now a leader of EB-5 firm promoting Atlantic Yards investment

Update: see how U.S. Immigration Fund is pitching "Atlantic Yards III" in China.

The "Ambassador" is back, and the circularity is stunning.
Charles Gargano, official handout
photo from U.S. Immigration Fund

Charles Gargano, the chairman of the Empire State Development Corporation when Atlantic Yards was proposed and first approved, now has a job promoting Atlantic Yards and other EB-5 projects to green card-seeking immigrant investors in China.

Gargano, a "classy political opportunist" who was embarrassingly evasive about the project in TV and radio interviews, is now part of a scheme that has several dubious beneficiaries.

He's now Executive Director of the U.S. Immigration Fund, which despite its official-sounding name and logo (below), is a private company, based in Palm Beach, FL, which has gone through the requisite hoops to market such investments.

He's helping companies like Greenland Forest City Partners--the new developer of Atlantic Yards/Pacific Park, 70% controlled by the Shanghai city government-owned Greenland Group--gain below-market loans thanks to a loosely regulated federal program. 

Not only is he helping Forest City increase profits by exploiting a public asset--green cards--that is too easily provided by the federal government, he's helping a Chinese government make money by marketing a previous quota of U.S. residency slots to Chinese citizens.

And he's helping the U.S. Immigration fund, whose leader, Nicholas Mastroianni II, Fortune just reported, "has a long history of legal problems, failed ventures, and unpaid debts—which have continued even as his professional fortunes have turned sharply upward—leaving a legacy of conflicts, judgments, and entanglements."

The deceptions at the core of EB-5 

In that program, immigrant investors and their families get green cards in exchange for a $500,000 investment that purportedly creates ten jobs.

However, the jobs are calculated on paper, not a head count, and the job creation can be calculated based on the entire project cost, not merely the immigrant investors' share. 

So no new jobs need actually be created, and it's often "margin for the developer," as one analyst has said. It's an astonishing benefit to entrepreneurs and developers, as the federal government essentially gives away a precious public resource rather than ensure that the resource reaps public benefits.

The alchemy is such that Andrew Kimball, when he headed the Brooklyn Navy Yard, the first local recipient of EB-5 funds, gave a revealing quote to Crain' s in 2012, seemingly incredulous at the opportunity to leverage public assets for private gain.

“At first, we were sort of scratching our heads, thinking, is this real?” Kimball said. “The next thing we knew, we were falling out of our chairs.”

As Dartmouth's John Vogel wrote 2/22/13 in U.S. News:
Question No. 4: Are there good alternative uses for the EB-5 money? One of the oddities about the EB-5 program is that the U.S. government is giving out the green cards, but the entrepreneur who puts together the investment gets the money. This scheme seems inefficient and open to corruption. If our government really believes that it is a good idea to sell green cards, maybe we should drop the pretense that this is a job creation program. It might be more efficient to have the money go directly to the U.S. Treasury and reduce the deficit by billions of dollars a year. In fact, the U.S. government could auction off these green cards and perhaps raise even more money.
Enter the Ambassador

For Gargano, a longtime operator, there's surely a reward, and the job surely is distant enough from his government service to pass muster with any conflict-of-interest rules.

Promoted as "Ambassador Gargano" in the press release below, he served as Ambassador to the Republic of Trinidad and Tobago from 1988 to 1991, a notable political appointment as thank-you for his prodigious fund-raising on behalf of Republican candidates.

It's part of a pattern in which former government officials offer a pretense of governmental presence, support, and sanction for private companies pitching EB-5, thus reassuring Chinese investors. 

(Former Gov. David Paterson took a job briefly with an EB-5 firm. Sen. John Sampson, while in office also took a purported volunteer role with an EB-5 firm, but was dropped after he was indicted.)

In March, when Gargano's appointment was announced, photo distributed (above right)  shows him posed in front of an American flag.

The U.S. Immigration Fund is led by Mastroianni, a construction executive and developer in Florida who has expanded to organize and promote EB-5 projects, and reap a rich array of fees.'

It has pitched the second round of EB-5 fundraising for Atlantic Yards, for $249 million, and now the third round of EB-5 fundraising, for $100 million. (Another middleman company handled the $228 million first round.)

Gargano promotes 101 TriBeCa
Gargano appeared at a 10/10/14 presentation in Shanghai promoting the latest EB-5 fundraising for Atlantic Yards. 

Earlier this year, he pitched another project, 101 TriBeCa, a 63-story, 433,800 square-foot luxury residential condominium tower marketed by the U.S. Immigration Fund

In June, he promoted another Fund project, known as 701TSQ, a 39-story hotel/retail project in Times Square

One news article/press release about the latter project even used an October 1995 photo of Gargano with Gov. George Pataki and others to promote the Ambassador's standing.

It's hard to imagine that any of these projects are truly targeted at employing people in areas of high unemployment, which is required by statute when immigrant investors invest $500,000, rather than $1 million. 

After all, nearly every EB-5 project competes for investors by ensuring they are in such Targeted Employment Areas, often through creative gerrymandering that somehow connects a wealthy area like Midtown Manhattan, Lower Manhattan, or the Atlantic Yards site with poorer districts. And that's OK to federal regulators.

Gargano's background

“I like Charlie. The guy has taste,” said attorney Edward Hayes in 1999. “Many people think of Charlie Gargano as a shady political opportunist. He is not. He is a classy political opportunist.”

As the Times reported 9/3/95:
Mr. Gargano is the colorful, sometimes controversial, immensely successful chief fund-raiser who collected $14.5 million to finance Mr. Pataki's upset victory last fall and who continues to be chairman of $1,000-a-plate Republican fund-raising events.
Mr. Gargano is also the Commissioner of the State Department of Economic Development, a job he has held since February that gives him enormous leeway in handing out millions of dollars worth of contracts to businesses across New York.
At times these last seven months, it has been hard to know which Charles Gargano was sitting at the table -- the one asking state business leaders for money or the one giving them the taxpayers' money.
The latter, most likely, was in evidence in 2006 when, dissembling about eminent domain, Gargano was said by WNYC's Brian Lehrer, who typically avoids harsh judgments about Atlantic Yards, to have displayed "classic political evasiveness."

In March 2007, the Village Voice's Tom Robbins found "several cases in which Gargano had the public pay his fare and ignored his own agency's stiff standards on expense reimbursement."
The press release, in full, issued 3/26/14:
U.S. Immigration Fund Appoints Ambassador Charles Gargano as Executive Director
NEW YORK, NY--(Marketwired - March 26, 2014) - U.S. Immigration Fund, a national leader in EB-5 financing, appointed Ambassador Charles Gargano as Executive Director of the organization March 1, 2014. In this role, Gargano will oversee the future development and success of the U.S. Immigration Fund portfolio of USCIS-approved Regional Centers.
Charles Gargano has spent more than 20 years in public service at the State and Federal level, serving Presidents Ronald Reagan and George Bush, and New York Governor George Pataki. His governmental roles have included:
Deputy Administrator of the Federal Urban Mass Transportation Administration in 1981;
Ambassador to the Republic of Trinidad and Tobago from 1988 to 1991;
Chairman and CEO of the Empire State Development Corporation and Vice Chairman of the Port Authority of New York and New Jersey from 1995 to 2007.

Prior to entering public service, Mr. Gargano, a Professional Engineer, was a partner in Posillico Construction and Engineering Corporation for 21 years.
As Executive Director of U.S. Immigration Fund, Gargano will be responsible for business development and relationship management, project negotiation and operational oversight.
"I am confident that Charles Gargano will be an undeniable asset to our company," explains Nick Mastroianni, President of U.S. Immigration Fund. "His successful career in both the public and private sectors is indicative of his drive to form reliable, long-lasting partnerships and dedication to improving not only New York City, but the U.S. as a whole, through well-planned growth and development."
Mastroianni continues, "We look forward to a long and prosperous future with Mr. Gargano."
Mr. Gargano will primarily represent U.S. Immigration Fund's New York Regional Center, a Manhattan-based operation that will facilitate over $1 billion in EB-5 financing through 2014.
About U.S. Immigration Fund
U.S. Immigration Fund provides worthwhile opportunities for foreign investors and their families to obtain permanent U.S. residency through the EB-5 Visa Program. U.S. Immigration Fund has partnered with investors and leading developers to facilitate more than $3.5 billion in real estate development and more than $900 million in EB-5 financing, which will create more than 27,000 U.S. jobs.