"Members shall not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflect adversely on the Member’s professional reputation or integrity."
--Best Ethics Practices for EB-5 Regional Centers, Association to Invest in the USA (IIUSA)
During a videotaped forum in China September 12 aimed at millionaires seeking green cards in exchange for an investment into the Atlantic Yards project, a representative of the New York City Regional Center (NYCRC), the private firm delegated to manage such investments, made some astounding claims.
Notably, Gregg D. Hayden on video (excerpts below) claimed that:
- "the Barclays Center is... the most significant project in the city and state of New York in the last 20 years"
- "it generates well in excess of 10,000 jobs for years to come"
- "because we involve government and government investment, we create a very significant 54% surplus in job creation"
And Brooklyn Borough President Marty Markowitz wants to let the NYCRC pay his way to China to promote the project.
Evading the central question
Also, when Hayden was faced with a simple but challenging question--why, if Russian billionaire Mikhail Prokhorov is involved in the project, is new investment needed?--he evaded the question with a non sequitur.
The candid answer would have been: Forest City Ratner and parent Forest City Enterprises want to lower the cost of capital.
(In the screenshot, Hayden is at center, a translator at left, and immigration consultant Hu Weihang at right.)
Flawed program in the first place
The federal EB-5 program, which allows for immigrant investors to get green cards for themselves and their families in exchange for a $500,000 investment that creates or retains direct or indirect jobs, is already questionable, given such a low bar.
Hayden, contrasting the U.S. program with those in Canada and Australia, bragged that, unlike EB-5, those in other countries have "certain meaningful requirements," such as English proficiency or permanent residency.
Flawed example in flawed program
Beyond that, the implementation of the EB-5 program in the case of Atlantic Yards is even more dubious, given the exaggerations and deceptions involved.
And, because the $249 million sought from 498 investors is the largest investment in the program's approximately 20-year history, it deserves a close look.
It's ridiculous to think that, without $249 million in low-cost financing from Chinese investors to build a new railyard, 7696 jobs would be created or retained, as the NYCRC officially claims, or more than 10,000 would be created or retained, as Hayden suggested.
Similarly, it's ridiculous to think that Forest City Ratner can't fulfill its obligation to build a new railyard without this money. It's simply a business proposition-a deceptive one that relies on the arena and team to raise money for another part of the project--to save money on financing.
Most significant "project"?
Despite Hayden's claim, the Barclays Center (plus infrastructure) does not stand as the most significant in the city and state in the last 20 years.
Yes, the full Atlantic Yards project would be the most significant in Brooklyn.
I suspect the reconstruction of Ground Zero would qualify, or perhaps Hudson Yards.
Use of Nets and NBA distorts project
Notably, the "project" as defined by the NYCRC (and confirmed to me by the Empire State Development Corporation) consists of an arena, associated infrastructure, and a new railyard.
However, the investment sought would go only (or mainly) into the latter, as Bruce Ratner told the Wall Street Journal it would be used for the railyard and possibly to pay off a land loan.
So, beyond the signage pictured above, the pitch for the "Barclays Center" and the Nets, which as at the heart of an advertisement for an October 12 investor event in Beijing (below), is deceptive.
Second, it's impossible for the "project"--the $1.448 billion "project" as defined by the NYCRC, with an arena, associated infrastructure, and a new railyard--create "in excess of 10,000 jobs for years to come."
After all, most of the permanent jobs associated with the $4.9 billion project would come from an unrelated office tower and associated building services and retail jobs associated with the residential towers, all of which are separate from the "project" and none of which are guarantee.
The EB-5 investment is supposed to last two years. Yes, construction jobs can be included, but even using the Empire State Development Corporation's generous analysis, there would be at best 3070 construction jobs over that period and fewer over ten years--and far fewer should the construction take much longer, which is likely.
And while it's permissible under federal regulations to claim that jobs are "retained" if not "created," in this case, it would be an enormous stretch to claim that jobs associated with arena construction depend on this investment.
FCR has its own very strong incentives to get the arena built, notably a $200 million-plus naming rights agreement with Barclays Capital. The money from Chinese investors would not be used for the arena, which would require the most amount of workers.
Yet the NYCRC is claiming 7696 jobs associated with this investment--far more than the 4980 required--as seen on this website promoting an October 12 event.
Keep in mind that the "project," at $1.448 billion, would represent 29.55% of the entire $4.9 billion project.
Extrapolated over the entire sum, that suggests 26,044 jobs would be created. That's ridiculous, given that the ESDC's own economic analysis suggested that “construction of the project will generate 12,568 new direct job years and 21,976 total job years (direct, indirect, and induced).”
That’s 22,000 job-years over ten years, or 2200 jobs a year, under a best-case scenario. (EB-5 investments are supposed to create jobs that last at least two years.) Also, according to the ESDC:
Operations at the Arena and mixed-use development will support an annual average of 4,538 new jobs in New York City (direct, indirect, and induced) and an annual average of 5,065 jobs (direct, indirect, and induced) in New York State, (inclusive of New York City).You can't get to 26,044 jobs from there.
The video is excerpted in several sections below.
It appeared on the blog (Google Translate version is currently disabled) of Hu Weihang, an immigration expert who heads the Kunpeng International consultancy working with the NYCRC. Hayden's comments, of course, are in English.
Most significant project, 10,000 jobs?
Hayden, in his opening statement, made two outlandish claims.
Thank you very much for having us, it's delightful to be here, and thank you very much to Kunpeng for putting this together. The New York City Regional Center was approved in 2008 and we have done in China two successful projects to date: The Brooklyn Navy Yard and Steiner Studios. And the Barclays Center is our third project and the most significant project in the city and state of New York in the last 20 years. It is very significant because it generates well in excess of 10,000 jobs for years to come, future job creation, with the support of government, on government-owned property, and the support of one of the largest real estate companies in the United States, Forest City Enterprises.Why is new money needed?
The moderator passed on a sensible question about the need for new money:
They see that the Russian oligarch is the owner of the team. And that he spent a lot of money and has a lot of money. And so, if he has so much money, why do we need Chinese investment on this project?
Hayden's response evaded the question, dropping the name of some irrelevant celebrities:
Very important. The Barclays Center is a significant project. It creates a redevelopment of the railyards, which is the third largest transportation hub in New York, as well as this arena. And in the arena, the New Jersey Nets, the NBA franchise team, which is owned by the Russian oligarch, Jay-Z, Beyoncé, and Forest City Enterprises, is the primary tenant. This is their home arena, at which they'll play in excess of 40 games per year.Note that the railyard at issue is not the transportation hub, but connected to the hub. It's needed for the storage and maintenance of trains.)
Comparing this project to others
Can you explain the safety of this project and the difference between other possible regional centers, safety-wise?
First of all, the New York City Regional Center has a philosophy and a project template, which we like to be very consistent with. And our philosophy is we put the EB-5 investor first, with specific assets as collateral and first mortgage security, as well as completion guarantee, and other good and valuable conditions that we put on the borrower.Nowhere did he or the NYCRC explain that the "project" they are defining is but a fraction of the entire project.
The project is $1.4 billion in total size, and all of the money for the project is available and on deposit in an escrow account. The only money that has not been raised is the $249 million that we're raising from the EB-5 market. That $249 million represents 17% of the total project cost; 17% EB-5 to total project costs is a very safe, a very secure position to be in, and because we involve government and government investment, we create a very significant 54% surplus in job creation.
Nor is there any necessary connection between "government and government investment" and "a very significant 54% surplus in job creation."
How EB-5 works
Can you explain the investment program for the EB-5 investors?Hayden responded:
The U.S. EB-5 program is an immigration program. EB stands for "employment-based." So, with the interest from China, an individual who would like to obtain an U.S. resident green card would make an investment of $500,000 and the requirement by the United States Citizens and Immigration Service would be that that money goes into a project that creates ten--a minimum of ten U.S. jobs. The other requirement of course is that the project itself has to be in an area called a Targeted Employment Area that is sort of yearning for additional employment, some sort of stimulus to create additional jobs. And in the four major commercial centers of New York City, three of them are TEAs: Bronx, Queens, and Brooklyn. So far our three projects have been in Brooklyn.Working with Kunpeng
Why have we chosen Kunpeng to work with, and what do we get out of the Chinese market?Hayden responded:
When we come to market, we organize ourselves and, an effort to keep our lives very simple, we select few firms as business partners, Kunpeng being one of them. We wish to only deal with experience, and people who have EB-5 experience and are very professional and, to that extent, we have chosen Kunpeng to work with us on this project.Immigrant investors get better deal here
The difference between Canada and America's immigration programs?
First of all, I'm not the most proficient person on Canada or Australia or other programs, but I do know those other programs have certain meaningful requirements that the U.S. program does not have. The U.S. program basically has a requirement of the investment and to create jobs. They don't have a language requirement, they don't have a permanent residency requirement, a job requirement or anything like that. So it has lower barriers of entry. I think the program and its approval process is much more efficient and shorter. Also, I think the investment level is much less expensive than it would be for Canada, or Australia, or some of the other programs.Note that he meant "meaningful" as a substitute for "significant" or even "burdensome."
Final words of reassurance
A final question:
What would you like to say to the Chinese investors?
What would I like to say to the Chinese investors? I believe that we have a very very attractive program for New York City. First of all, it's the most significant project, as I said, in the last 20 years. It's a very large project. So we have had to make it very safe and very secure, in order to succeed in the placement of this size of a project. I believe that this project is the safest, the most secure, the highest job-creating project on the market today. And so far, having just completed a 13-city tour, we are getting a favorable response to this project.If this is "the highest job-creating project on the market today," then they should show us the math.