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.
"When I use a word," Humpty Dumpty said in rather a scornful tone, "it means just what I choose it to mean—neither more nor less."--Through the Looking-Glass, by Lewis Carroll
One signal feature of the Atlantic Yards project being marketed to green card-seeking immigrant investors is the strategic use deployment of language, including weasel words and ambiguous terms.
Such language is tough to decipher for a native English speaker. It must be doubly difficult for potential investors in China, relying on their second language or listening in translation.
After looking at publicity material and listening to pitches from the New York City Regional Center (NYCRC), the privately-owned, government-authorized investment pool soliciting investors, I can offer a preliminary lexicon for this curious promotional effort.
What's the project?
When representatives of the NYCRC address potential investors, they generally refer to the Brooklyn Arena and Infrastructure Project, referring to the arena, associated infrastructure, and a new railyard.
But New York City and State officials tend to refer to the Atlantic Yards project.
For example, the proclamation (left) issued by the Empire State Development Corporation (ESDC), as promoted on the web site of the Kunpeng consultancy, says the capital sought "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."
Why it matters: The larger Atlantic Yards project is the one approved by the state, and the one that would deliver a much larger quantity of jobs and tax revenues. No government agency approved the smaller project described in China.
What exactly is pre-approval?
Representatives from the NYCRC regularly claim that the project is pre-approved. In doing so, they suggest that a general bureaucratic decision from the United States Citizenship and Immigration Services (USCIS) means certainty for investors.
"This project has been completely pre-approved by USCIS for the benefit of you and your family," the NYCRC's Gregg D. Hayden told prospective investors at one session. That, he said, means that "immigration risk"--the chance that sufficient jobs would not be generated for each investor--would be eliminated.
The USCIS says it doesn't pre-approve benefits, as noted by a spokeswoman. "The only way to know if the USCIS has reviewed and approved the actual project you are considering investing in is to insure an investor has already had an approved I-526 petition on that exact project," says the another EB-5 firm, CMB Export.
Why it matters: The term pre-approval seems aimed at convincing investors they have nothing to worry about. While there's a presumption that approval of a regional center and its project means their methods have been endorsed, each individual investor's application--not simply the exemplar--must be examined.
After all, the USCIS will take another look in certain cases, such as when misrepresentation and fraud are alleged.
What is abundant job creation?
According to NYCRC's Hayden, in a webcast (at 2:48), there's "abundant job creation that we are producing with this project." That refers to the Brooklyn Arena and Infrastructure Project--the arena, infrastructure, and railyard--not the entire Atlantic Yards project.
Jobs are calculated via an economist's report. There's no reason to think that the jobs calculated--7696, far more than the 4980 needed, ten per investor--have anything to do with the number of people who might be seen at the Atlantic Yards site, or even the number for the project as a whole in official estimates by the Empire State Development Corporation.
Why it matters: The phrase is used to convince potential investors that they will meet the requirements of federal immigration law: ten jobs per investor.
But the calculation seems to make a mockery of the immigration program, which aims to generate investment that actually creates jobs. This investment, in significant part, likely would substitute lower-cost funding for higher-cost capital rather than serve as seed money or matching funds.
In conjunction with whom?
The cover of a project brochure presents logos from the city and state governments.
According to a NYCRC video, the the NYCRC is offering "EB-5 investors another secure, job-creating project in conjunction with the government of both the state of New York and the city of New York."
The term in conjunction with also appears in an NYCRC newsletter.
What's the relationship between the city and state governments and the NYCRC? Nothing beyond a finder's fee for the New York City Economic Development Corporation and the Recognition Agreement signed by the Empire State Development Corporation.
Why it matters: The term in conjunction with suggests a level of partnership or agreement, aimed to give confidence to investors.
By contrast, the EB-5 firm CMB Export states that the projects it offers are unique because government bodies are actually on the hook.
What does certified mean?
"The New York City Regional Center also has its entire document set certified by the Chinese embassy, for your benefit," Hayden told audience members at one session in Beijing.
"The report has been certified by the Chinese Embassy," the NYCRC said in a video.
Why it matters: Those sound impressive, almost like a guarantee. However, as best as I've been able to discover, certified merely means that the embassy agrees that the documents are genuine. It doesn't mean that the contents have been vetted.
A murky completion guarantee
"Forest City Enterprises has signed a completion guarantee with the State of New York," says the narrator of a project video. "This agreement with the government obligates Forest City to complete key aspects of the project, such as the Barclays Center arena and new subway entrance."
At one session for investors, the NYCRC's Hayden went further, suggesting that the completion guarantee provided "the safety and security to know that this project will be completed by the second quarter of 2012." In doing so, he implicitly tacked on the railyard, which need not be completed until 2016.
Why it matters: a completion guarantee sounds impressive. In this case, the completion guarantees were signed for two of the three project elements--and a large majority of the total cost--before the immigrant investors' funds were ever sought.
If such potential investors recognized that, they might ask if funding for those elements could truly be used to calculate job creation.
Moreover, they are not told that the one element of the project for which there is no 2012 completion guarantee is the element that would be funded, predominantly or exclusively, via immigrant investors' funds.