The effort by the New York City Regional Center (NYCRC), the private investment pool federally authorized to accept immigrant investor funds, and developer Forest City Ratner (FCR) to raise $249 million from 498 Chinese millionaires under the EB-5 immigration program may be legal, but there is ample reason to question whether it will serve the public interest.
Part 1 of this series concerned the seven-year extension available on Phase 1 of the project should Forest City Ratner not repay the EB-5 loan. Part 2 estimated the developer could save at least $191 million. Part 3 examined the sales effort in China, with the arena front and center, even though it's already funded.
Part 4 reported on claims made in China, on video and in person, by public officials supporting the project. Part 5 concerned the value of the development rights, contrasted with those in last year's deal for the Vanderbilt Yard. Part 6 described reasons to think the development rights are overvalued.
Part 7 explained why China is such a popular target for those seeking EB-5 investors. Part 8 provided another reason why the Nets played exhibition games in China in October. Part 9 cited the curious avoidance of Mikhail Prokhorov during the pitch in China.
Part 10 noted NYCRC's belated announcement of the project in a newsletter. Part 11 described misleading promotion in the Chinese media and by Chinese firms working with the NYCRC. Part 12 covered the proclamations that are part of the pageantry in China.
Part 13 concerned the role of the NYCRC's preferred law firm. Part 14 linked the land loan to a previous one from Gramercy Capital. Part 15 analyzed the use of weasel words and ambiguous language. Part 16 took another look at a web video pitching the project.
The wrap-up and FAQ is here.
Doing business in China involves pageantry and ceremony, and Chinese immigration consultancies--responsible in no small part for exaggerations regarding the Brooklyn Arena and Infrastructure Project--nevertheless can proudly display proclamations from governmental agencies and law firms honoring them.
In China, there's "a love of ceremony and ostentation and obsession with brands," as Christina Larson wrote in the November/December 2010 issue of the Washington Monthly. That plays into the elaborate seminars presented to potential investors.
The proclamations (in English) in the certificates below are piffle, but the form may impress some unsophisticated potential clients.
The first two proclamations, as noted below, were likely drafted by the New York City Regional Center (NYCRC).
From the ESDC
Take, for example, a proclamation issued by the Empire State Development Corporation (ESDC), as promoted on the web site of the Kunpeng consultancy. It states:
The State of New York thanks Kunpeng International for their assistance in the raising of EB-5 investment capital to create jobs for New Yorkers.(Emphasis in the original)
The $249 million of EB-5 investment capital is vital to the initial stages of one of the most important public/private development initiatives in New York City today and one of the largest job-creating projects in over a decade. The Atlantic Yards Project is a dynamic economic catalyst for the borough of Brooklyn and all of New York City. The 7-block, 22-acre, 7.8 million square foot mixed-use project is the vision of the State of New York and City of New York, and Forest City Enterprises, one of the largest publicly traded real estate firms in the United States.
Not only will the Atlantic Yards Project provide a state-of-the-art, multi-purpose sports arena needed to bring a professional sports team back to Brooklyn. It will also provide critical infrastructure work necessary to allow the construction and operation of the arena and, over the course of the next decade, the construction of thousands of affordable and market-rate housing units.
This is a historic project that will continue to energize the borough of Brooklyn. While a new hometown team will give all of us something to cheer for, it's the jobs and housing that will have the greatest last impact on the borough and the people of Brooklyn. The Atlantic Yards development is not just about constructing buildings, it is about building a stronger future for this great City and State. This is why the State of New York has already spent $100 million of capital to prepare for this development.
Peter W. Davidson
Note how the proclamation elides the difference between the Brooklyn Arena and Infrastructure Project before the potential investors--purportedly the arena, infrastructure, and railyard--and the Atlantic Yards project as a whole, which would produce many more jobs and potential benefits.
As described in Part 4, that has been a feature of the overall pitch to potential investors, in statements by Davidson, Brooklyn Borough President Marty Markowitz, and New York Mayor Mike Bloomberg,
The Brooklyn Borough President's Proclamation
A similar proclamation was sent by the NYCRC to Brooklyn Borough President Marty Markowitz, who did not go China.
(I don't know if the proclamation was issued; I received a copy via a Freedom of Information Law request to Markowitz's office.)
Note that the brackets [ ] are a placeholder for the consultancy honored. The proclamation:
The Borough of Brooklyn thanks [ ] for their assistance in the raising of EB-5 investment capital to create jobs for the people of Brooklyn. The $249 million of EB-5 investment capital is vital to one of the most important public/private development initiatives in New York City today and one of the largest job-creating projects in over a decade.(Emphasis added)
There is no development more critical to the revitalization of downtown Brooklyn than the Atlantic Yards Project. This major mixed-use development will bring the innovative Barclays Center Arena, new transportation infrastructure, affordable housing, significant tax revenues, and thousands of new jobs to our nation’s fourth largest city – Brooklyn. Mayor Michael Bloomberg and the City of New York have already spent $131 million of funding for this important development.
The EB-5 investment capital is critical to the transformation of an area that is underutilized into a dynamic development zone that will be an engine for economic growth in the years to come. The Atlantic Yards Project and the resulting job creation are extremely important to the Borough of Brooklyn as well as to the City and people of New York.
Again, note the slippery definition of "project," in which Markowitz ends up praising not the project presented to investors but the larger Atlantic Yards project.
Moreover, it's highly doubtful that this investment would create jobs, much less "for the people of Brooklyn," beyond what was already predicted, as noted in Part 3.
A law firm's proclamation
The Kunpeng firm even received a proclamation from the Ithaca, NY-based law firm Miller Mayer, which works for the NYCRC, its lawyers filing papers with federal authorities and accompanying the NYCRC on tour, and is recommended by the NYCRC to potential investors.
(Graphic from blog of Kunpeng's Hu Weihang.)
Miller Mayer, LLP
Of Ithaca, New York, United States of America
As a First-Order Agency in Support of Our Mission To Provide Chinese Investors with First-Order Legal Service. In furtherance of our mutual goals and desires, we honor your participation in these efforts.
Honor and Recognition Conferred This Day,
October 11, 2010 by Miller Mayer, LLP
Attorneys at Law
[signed by firm name partners]