Skip to main content

Bait-and-switch on EB-5: FCR may use immigrant investor funds for housing, not arena, but says "we don't know" where money would go (Is this legit?)

The saga of Forest City Ratner's attempt to raise $249 million from green card-seeking Chinese (and Korean) millionaires under the EB-5 program has reached a new level of absurdity, in which the developer and its allies have offered three separate explanations of how the money might be spent on Atlantic Yards.

This casts further doubt on the logic that each $500,000 investment would create ten jobs, as required under the federal immigration program.

And it suggests a bait-and-switch presented to the potential investors and possibly to the federal government.

Where would it go?

The destination for the funding keeps changing.

Remember, potential investors in the "Brooklyn Arena and Infrastructure Project" were promised glitz: they were told they were investing in an arena, infrastructure, and a railyard, even though the New York City Regional Center admitted to Reuters that the pitch was misleading.

FCR executive MaryAnne Gilmartin told the Wall Street Journal that the money would be used for the railyard, and maybe to pay off a land loan. I pointed to evidence that suggests the $153 million land loan would take precedence.

For housing?

At the Atlantic Yards District Service Cabinet meeting last Thursday, another explanation surfaced.

City Council Member Letitia James asked if the proceeds from the EB-5 program would be used for the financing of Building 2, the first planned (but stalled) tower, or for something else.

"We don’t know where those proceeds are going to go," Forest City executive Bruce Bender responded. "It’s a big project.”

James followed up, asking if it was their objective to use such funds for Building 2.

"I don’t know, but I assure you we are thinking not just of Building 2, but we are thinking of the second phase of the project," responded FCR executive Jane Marshall.

More contradictions

The required transit entrance is covered by bond financing for the arena, she noted. (That's not what potential EB-5 investors were told, since that was lumped in among the "infrastructure" they were said to be financing, as depicted in the screenshot at right.)

Before re-opening the Carlton Avenue Bridge, FCR must complete Stage 2-A of the Vanderbilt Yard reconstruction, "another advancement toward the permanent yard," Marshall said. "That'll be a significant investment by Forest City, about $57 million of work. But that’s only Stage 2... When you get to Stage 3 and 4, it’s a substantial amount of money."

"So I think that, for the purposes of this cabinet," she said, "the $200-plus million [in EB-5 funds] that we raised--we haven't decided how to use it.... and we are looking at Phase 2 of the project as well as the arena block."

Note that the money has apparently been committed by potential investors but has not been delivered, as the investors must be vetted by the United States Citizenship and Immigration Services (USCIS), which also could take a closer look at the "project" in which they are purportedly investing.

The public policy issue: job creation

It's plausible that the developer would like to use money however it chooses, treating such as significant sum as fungible.

But that money was or will be presented to the USCIS as creating jobs.

To a layperson, it's patently ridiculous that the EB-5 investment would create jobs. After all, the Empire State Development Corporation acknowledges the investment "will not create any new jobs beyond those already forecast."

In other words, it's cheap financing.

Even under the USCIS's loose guidelines, which allow jobs to be calculated via an economist's report--with a "multiplier" applied to a base investment figure--this pushes the envelope of logic and legitimacy.

Remember, the multiplier won't be calculated based on the $249 million. Rather, as presented to investors, it would be applied to the entire $1.448 billion "project," consisting of the arena, the infrastructure, and the railyard.

Questions of legitimacy

I've already argued that such logic is dubious, given that the arena and infrastructure are already funded, and would go ahead with or without the EB-5 funds.

Therefore the investors shouldn't get credit for job creation based on money committed long before the EB-5 investment was proposed. After all, if that flies, what's to stop any developer from refinancing with cheap capital?

Now that Forest City Ratner suggests it could use the new money anywhere, that casts further doubt on applying the multiplier to that $1.448 billion.

Something's fishy

It's clear that potential investors have been presented with a bait-and-switch; the New York City Regional Center (NYCRC) admitted as such, though they misleadingly blamed their foreign affiliates.

It's quite possible--though not clear--that the USCIS has been presented with a bait-and-switch. The USCIS approved a business plan, employment creation methodology, and other documents related to the NYCRC's marketing of Atlantic Yards.

None of that has been publicly released. But if it promoted the "Brooklyn Arena and Infrastructure Project," it would be misleading potential investors.

If it did not, it would represent a discrepancy between what was presented to investors and what was presented to the government.

Either way, something's fishy (see p. 40 for graphic above).

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

No, security guards can't ban photos. Questions remain about visibility of ID/sticker system.

The bi-monthly Atlantic Yards/Pacific Park Community Update meeting June 14, held at 55 Hanson Place, addressed multiple issues, including delays in the project, a new detente with project neighbors,concerns about traffic congestion, upcoming sewer work and demolitions, and an explanation of how high winds caused debris to fly off the under-construction 38 Sixth Avenue building. I'll have more coverage.
Security issues came up several times at the meeting.
Wayne Bailey, a resident who regularly takes photos and videos (that I often use) of construction/operations issues that impact residents, asked representatives of Tishman Construction if the security guard at the sites they're building works for them.
After Tishman Senior VP Eric Reid said yes, Bailey asked why a guard told him not to shoot video of the site, even though he was on a public street.

"I will address it with principals for that security firm," Reid said.
Forest City Ratner executive Ashley Cotton, the …

Atlantic Yards/Pacific Park graphic: what's built/what might be coming + FAQ (post-dated pinned post)

This graphic, posted in February 2018, is post-dated to stay at the top of the blog. It will be updated as announced configurations change and buildings launch. Note the unbuilt B1 and the proposed--but not yet approved--shift in bulk to the unbuilt Site 5.

The August 2014 tentative configurations proposed by developer Greenland Forest City Partners will change. The project is already well behind that tentative timetable.

How many people are expected?

Atlantic Yards/Pacific Park has a projected 6,430 apartments housing 2.1 persons per unit (as per Chapter 4 of the 2006 Final Environmental Impact Statement), which would mean 13,503 new residents, with 1,890 among them in low-income affordable rentals, and 2,835 in moderate- and middle-income affordable rentals.

That leaves 8,778 people in market-rate rentals and condos, though let's call it 8,358 after subtracting 420 who may live in 200 promised below-market condos. So that's 5,145 in below-market units, though many of them won…

The passing of David Sheets, Dean Street renter, former Freddy's bartender, eminent domain plaintiff, and singular personality

David Sheets, longtime Dean Street renter, Freddy's bartender, eminent domain plaintiff, and singular personality, died 1/17/18 in HCA Greenview Hospital in Bowling Green, KY. He was 56.

There are obituary notices in the Bowling Green Daily News and the Wichita Eagle, which state:
He was born in Wichita, KS where he attended public Schools and Wichita State University. He lived for many years in Brooklyn, NY, and was employed as a legal assistant. David's hobby was cartography and had an avid interest in Mass Transit Systems of the world. David was predeceased by his father, Kenneth E. Sheets. He is survived by his mother, Wilma Smith, step-brother, Billy Ray Smith and his wife, Jane all of Bowling Green; step-sister, Ellen Smith Alexander and her husband, Jerry of Bella Vista, AR; several cousins and step-nieces and step-nephews also survive. Memorial Services will be on Monday, January 22, 2018 at 1:00 pm with visitation from 10:00 am to 1:00 pm Monday at Johnson-Vaughn-Phe…

Some skepticism on Belmont hockey deal: lease value seems far below Aqueduct racino; unclear (but large?) cost for LIRR service

As I wrote for The Bridge 12/20/1, The Islanders Say Bye to Brooklyn, But Where Next?, the press conference announcing a new arena at Belmont Park for the New York Islanders was "long on pomp... but short on specifics."

Notably, a lease valued at $40 million "upfront to lease up to 43 acres over 49 years... seems like a good deal on rent for the state-controlled property." Also, the Long Island Rail Road will expand service to Belmont.

That indicates public support for an arena widely described as "privately financed," but how much? We don't know yet, but some more details--or at least questions--have emerged.

An Aqueduct comparable?

Well, we don't know what the other bid was, and there aren't exactly parcels that large offering direct comparables.

But consider: Genting New York LLC in September 2010 was granted a franchise to operate a video lottery terminal under a 30 year lease on 67 acres at Aqueduct Park (as noted by Gov. Andrew Cuomo).

As…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…