The agreement (bottom) between the ESDC and a Forest City Ratner affiliate was acquired via a Freedom of Information Law request. Though it offers much detail on how the money might be spent--Forest City has wide latitude--it says nothing about the ostensible purpose of the funding under the federal government's EB-5 immigration program: job creation.
The issue of job creation must be addressed in documents submitted to a federal agency, United States Citizenship and Immigration Services. The investors park their money for perhaps five years, and can get green cards for themselves and their families, assuming the claims of job creation pass muster.
More savings to FCR
The document indicates (right) that the Brooklyn Arena Infrastructure and Transportation Improvement Fund, an affiliate of the New York City Regional Center (NYCRC), an investment pool authorized to solicit immigrant investors, may provide an additional loan up to $40 million.
The NYCRC has mainly recruited investors in China, source of the largest number of potential investors, but also sought 40 investors from South Korea for the what they called the Brooklyn Arena and Infrastructure Project.
I estimated that the initial loan could save FCR $191 million in interest; given a similar ratio of savings, the $40 million loan could save the developer another $30 million.
Where the money could go
While the project was pitched (as in the video from which the above and below screenshots were taken) to immigrant investors as an opportunity to invest in the Barclays Center, they won't own a piece of the building.
As indicated in the graphic at left, the loan proceeds could be used to reimburse Forest City Ratner for its costs on the Arena, the Subway Entrance, the public plaza, the upgrade railyard, demolition of project structures, utility work, the construction of the Carlton Avenue Bridge, the creation of arena parking, and preparation of development sites.
Essentially it's a piggy bank for whatever Forest City Ratner wants, including the final category, which I highlighted: paying off any liens and encumbrances, such as the existing land loan from Gramercy Warehouse Funding.
Does any of this create or retain jobs? That's what they may say on paper, but it seems clear that the developer is substituting lower-cost capital for higher-cost capital.
Take for example the Carlton Avenue Bridge; the developer is obligated to reconstruct it, whatever the source of the capital. So the use of immigrant investor funds for the bridge doesn't add jobs.
The Times on EB-5
As I wrote March 18, the New York Times skated over the EB-5 controversy in a brief mention, reporting:
[Forest City] also lined 498 Asian investors who enrolled in an obscure federal program that grants green cards in exchange for a $500,000 investment in a job-producing American project.In his Noticing New York blog, Michael D. D. White takes off from the Times's mention of a statistic, that 585,000 Chinese have a net worth of at least $1.5 million:
MaryAnne Gilmartin, executive vice president of Forest City Ratner, said that when it received final approval from the federal government, the $249 million would be used to pay down a land loan for the project and additional work on the railyard.
The number, the subject and the calculation couldn’t help but remind us all of another number, “498" which is the number of Chinese that Forest City Ratner is soliciting to “invest” $538,000 in order get American government issued green cards that Forest City Ratner is being allowed to sell more or less exclusively for its own private benefit. After some time (five years), the Chinese are supposed to get back less money ($500,000) which, other than their green cards, constitutes the return on their investment provided the deal Forest City Ratner has structured for them doesn’t tank. This all has to do with something known as the federal EB5 program, a program Congress created supposedly to produce jobs in the U.S. but which Forest City Ratner is taking advantage of in a non-job producing way. Essentially, the Ratner firm is abusing the EB-5 program in a way that Congress is now letting it be abused: Ratner is selling United States green cards to rake in cheap capital without producing jobs.The document, and some gaps
...Fact is though, the Times has been passing up (virtually ignoring) the EB-5 abuse story and all its ramifications that among other things would necessarily lead them to reporting some unflattering things about Forest City Ratner, their business partner when it came to building the New York Times headquarters for which, like Ratner’s Atlantic Yards mega-monopoly, eminent domain was used.
As pointed out in an earlier Noticing New York post, the Times mangled its last report about the non-job-creating EB-5 programs use in connection with Atlantic Yards:Perhaps what mightily facilitates the ease with which the EB-5 program is abused is that it is not known by any formal title, like the American Jobs Creation Act, leaving the New York Times to struggle as it refers to Ratner’s `enrollment’ of “498 Asian investors” in “an obscure federal program that grants [“sells” is a better word] green cards in exchange for a $500,000 investment in a job-producing American project,” thereby stumbling compliantly into having referred to `job-production’ which is, as discussed, actually nonexistent.In other words, this Times story made it sound as if Ratner is using the program to create American jobs, which isn't a fair report of what is actually happening.
Note that some areas of the document are blacked out. Under the Freedom of Information Law, documents may be redacted for several reasons, including trade secrets.
So some interesting information in the document may not see the light of day.
BAITIF Eb-5 Loan