Thanks to a professional translator, we can now understand much more how the New York City Regional Center (NYCRC) is misleadingly promoting the EB-5 investment into Atlantic Yards, overpromising the number of jobs, muddying the definition of the "project" at hand, and using (and misusing) quotes from dignitaries such as Mayor Mike Bloomberg and Senator Chuck Schumer.
The information comes from the web site set up by Kunpeng International Business Consulting, authorized agent for the NYCRC. (Here's another example of the NYCRC misleading investors.)
Also, we learn what collateral Forest City Ratner is offering: development rights to Phase 2 of the project, a highly problematic guarantee, given the complexity of development.
Misleading ties to NBA
Kunpeng International is promoting an October 12 conference for investors in Beijing as the "New York NBA Coliseum (Stadium) and Infrastructure Construction Project" and the "Brooklyn Stadium and Infrastructure Project." Nets stars Brook Lopez and Devin Harris are at the top.
The text states:
U.S. Investment Immigration Annual Presentation (Contribution)!Not the arena
Ticket Hotline: 400-886-9955 (Limited seats, please purchase in advance)
Hotline during the period of National Day: [phone numbers provided]
Time: October 12, 2010 (Tuesday); Sign in at 7:00 PM
Location: Beijing Diaoyutai Hotel Banquet Hall
New York NBA Coliseum (Stadium) and Infrastructure Construction Project (China) Large-Scale Conference
Signed clients will be given a ticket to the NBA Houston Rockets vs. the New Jersey Nets match at the Beijing Division and a basketball with NBA star’s autographs [no plural used, so quantity of autographs unclear]. First come, first serve!
The basketballs with the NBA star’s autographs have already arrived at the office.
But the investment sought has little or nothing to do with the arena.
Rather, the $249 million in low-cost (no-cost?) financing sought by Forest City Ratner--$500,000 from 498 millionaires, who each must create or retain ten direct or indirect jobs--would support a new railyard and perhaps help pay off a land loan, Ratner told the Wall Street Journal.
Financing and the buying of green cards
According to another Kunpeng page (translated), immigrant investors must put in $538,000 and, after five years, get the full return of the $500,000 principal and green cards for the entire family. There's no financial gain.
While investors in other EB-5 projects can get a financial return, this confirms the charge that the EB-5 program can allow the buying of a green card--even though defenders, like Vermont Commerce Secretary Kevin Dorn, claim that "it's somebody investing in the United States in a important job-creating activity in the United States for which they expect a return and for which they also get a green card."
This suggests that, after the NYCRC gets its cut, Forest City Ratner would get financing at no cost or a very low cost.
Overblown claims of jobs
On the Kunpeng website, various dignitaries are shown at the groundbreaking in March. It's worth a look at the claims.What does the website say?
The Brooklyn Stadium and Infrastructure Project is a new project collaborated by the New York City Regional Center and the New York State as well as City government. The project is located in the Brooklyn Atlantic Yards and is at the moment New York City’s most important development initiative as well as one of the projects that will create most jobs in the next 10 years to come.It would create the most jobs?
Well, the second quote comes from Mayor Mike Bloomberg: "The Atlantic Yards (project) is an investment project that will create the most number of jobs in the history of Brooklyn."
I don't think he said precisely that. What he did say in March: "The Barclays Center at Atlantic Yards is the first piece of what will be one of the largest private investments and job generators in Brooklyn’s history." (Emphasis added)
Even the overall claim is an enormous stretch, but the version in Chinese ignores the multiple phases.
Governor David Paterson is quoted as saying "The project will bring in 1.5 billion dollars of profit in the economic development of New York State in the next 30 years."
I assume that means new tax revenues.
What's the "project"?
But Paterson was talking about the project as a whole. So was Bloomberg.
The NYCRC's agent is misleading Chinese investors by suggesting that the investment they are considering involves the entire $4.9 billion Atlantic Yards project.
The website states:
The project includes the following developments:
- Barclays Center- A sports and entertainment arena for the NBA team New Jersey Nets.
- A new and modern railway and train services for the Long Island Railroad so as to improve the efficiency of operations
- Residential units in line with the purchasing power of thousands of residents in the future that will meet the needs of construction and operation of the stadium
More importantly, the $1.448 billion "project" as defined by the NYCRC consists of an arena, associated infrastructure, and a new railyard. It does not involve the apartments.
And the investment sought would go only (or mainly) into the railyard, not the arena.
Ten project advantages
The next section details "Ten Advantages of the Project"
Let's take a look:
1. The project is located on U.S. state-owned land: City Landmark Project [presumably a "landmark city project"]
2. The State and City of New York highly value and invest in the project
3. Super valued collateral
4. Extremely high employment creation guaranteed
5. Will be developed and constructed by the nation’s largest real estate listed company – Forest City Company – as appointed by the New York State Government
6. A signed completion guarantee between the development company and the New York State Government
7. New home to the NBA Nets
8. EB-5 investment funds are accounted for only 17% of the total investment, and enters last into the project
9. EB-5 investments receive the first priority in the repayment of funds
10. EB-5 investors may check the development of the project online 24 hours a day
Well, there may be something lost in the translation, but let's look at the text above that I've bolded for emphasis.
While the NYCRC may have calcuated "extremely high employment creation," it requires enormous fudging to do so.
Forest City has been approved by the state government, not quite "appointed," which sounds like a coronation.
The "completion guarantee" is presumably the Development Agreement, which offers much flexibility, with penalties applied to the whole project only after 25 years.
EB-5 funds would represent only 17% of the total investment only if the project were described as arena plus railyard plus infrastructure. However, above they define the project as including residential units.
Breaking down the numbers
This chart is key.
Here's the translation. (Click to enlarge)
Note that $511 million in government bonds does not represent a direct subsidy but government-authorized funds that save the developer well more than $100 million because of their tax-free status. It's misleading to classify it as government funds.
Also note that Forest City Ratner/Enterprises has apparently spent only $225 million on the project (presumably separate from the Nets), though they have more in escrow. That $225 million is less than the city and state have invested.
Could there be 7696 jobs? As stated, it's an enormous stretch.
What guarantees do the investors get?
The first collateral is the development rights to the 3,025,654 square-feet land the project will develop.As far as I can tell, that's the development rights to Phase 2 (or a large portion of Phase 2) of the project, consisting of the site east of Sixth Avenue and Site 5, now home to Modell's and P.C. Richard.
While that may be valued at $542,375,000 (and the estimate approved by the Chinese embassy), that value would take a lot to unlock, notably the ability of the owners to get new subsidies for residential construction.
In other words, should Forest City Ratner fail to pay back the investors but instead give them a piece (or most, or all) of the development rights, the investors likely would have to get a partner--like Forest City Ratner--to actually fulfill those rights. It's a good deal for the developer.
The web site offers information on the project as defined.
The description of the "stadium" known as the Barclays Center repeats common boilerplate.
The text next to the second graphic describes Infrastructure Construction:
The second part of the project includes the completion of various infrastructures. It is an important step required for the construction, opening and operation of the stadium. These include the demolition of buildings in the project site, replacing these facilities, leveling of the parking lot pavement, transferring of the Carlton Ave Bridge and other related work. Most of the infrastructure construction work has already begun.The text next to the third graphic describes a Brand New Modern Railroad:
The third part of the project is to build a new, modern railway tracks and to provide train services and facilities for the Long Island Railroad. The railroad will create new facilities for staff, provide a new information system and improve the overall function of the railway system. In the latter part of the project, a new station platform will be built. It will serve as the basis for the new constructions and will provide services for railway operations.Yes, the new railyard is key to Phase 2 of the project. Unmentioned is that this would be the main focus of the new investment.
Misleading Schumer quote
There's a quote above (and at right) from New York Senator Charles Schumer: "Brooklyn has already begun its renaissance, bringing a professional ball team into the district as well as 10,000 new jobs – all these are proofs of our achievements."
Schumer made that claim in 2004, when there was supposed to be space for 10,000 office jobs in four towers.
Now, only one office tower is planned, and it's indefinitely postponed. And the number of office jobs were overpromised from the start.
Moreover, the "project" as defined for Chinese investors does not include any of the towers.
Schumer's statement has no business in this promotion or any Atlantic Yards promotion.
The web site offers information on the developer.
Below are some Forest City projects.
Marty Markowitz, other city/state leaders, other investors, and some immigration lawyers are also involved. (Markowitz may join Ratner on tour in China.)
At top left is Hu Weihang. The text states:
Mr. Hu Weihang is a senior immigration expert. The Kunpeng International consultancy that he leads is one of the first U.S. investment immigration operation teams in China and is very experienced in the area (U.S. investment immigration). With the help of Kunpeng International, hundreds of Mainland Chinese applicants have successfully obtained their green cards.
The certificates below refer to various honors won by Kunpeng.