Skip to main content

Margin for the developer: Forest City says EB-5 funds used for infrastructure; evidence suggests $228M used to retire high-interest loan

Also see coverage today regarding Forest City Ratner's new plans to raise EB-5 funds and two federal reports critical of EB-5.

In a new video, Forest City Ratner CEO MaryAnne Gilmartin tells potential new immigrant investors, who'd offer a low-interest loan in exchange for green cards for themselves and their families, "Several years back, we utilized EB-5 funds to execute other infrastructure improvements in and around the Barclays Center."

It is, at best, a partial truth, for Gilmartin to claim that the $228 million Forest City raised beginning in 2010--likely saving more than $100 million over conventional financing--was used for infrastructure.

Claimed value of collateral
Documentary evidence from the New York City Department of Finance, as well as Forest City's own statements, suggests the money was used, in large portion, to replace a high-interest land loan from Gramercy Capital.

That subverts the intent, if not the letter of the law, which justifies the green cards because each $500,000 investment is supposed to create ten jobs.

After all, as EB-5 analyst Michael Gibson told Business Week, when a project “substitutes EB-5 capital for more expensive bank financing or bond funding or even equity, that isn’t really creating new economic activity. It’s margin for the developer.”

Shifting claims

According to a document published here earlier this week, Forest City told the Empire State Development Corporation (ESDC, or ESD, the state agency overseeing the project) the immigrant investors' money--initially, $249 million--would go to critical infrastructure, given that the arena was already funded.

To the press, however, Forest City was more coy. Officials told the Wall Street Journal and the New York Times that the funds would go for infrastructure (the new railyard) and also to replace that high-interest land loan.

Representatives of the New York City Regional Center (NYCRC), the private firm engaged to market the investment, told potential investors at public events and on webcasts in China that the money would go to an arena.

Just look at one promotional poster (right) for an event aimed to recruit investors.

However, as I reported, the arena was already funded, and the marketing effort raised questions about fraud.

Forest City in March 2012 told Business Week the new money would fund the project's new subway entrance, parking facilities, water and sewer line upgrades and other work.

However, evidence suggests, as I reported, that the money is also going to substitute for an existing high-interest land loan.

For four of the five mortgages within the $228 million, city records indicate that an existing mortgage from Gramercy Capital--which specializes in high-interest financing--was "satisfied" around the time a new mortgage was signed with the "Brooklyn Arena Infrastructure and Transportation Improvement Fund," representing the immigrant investors.

Looking more closely

Let's look more closely at each of the development sites used as collateral for the loan given by the "Brooklyn Arena Infrastructure and Transportation Improvement Fund," the entity set up by the NYCRC.

Six of the seven development sites listed in the graphic at right, which was part of marketing materials in China, were used as collateral.

In other words, if the immigrant investors don't get their money back, they would then own development rights at those sites.

(They couldn't use any of the sites they didn't yet control, including the six parcels that would be built over the railyard north of Pacific Street.)

On Block 1129, the southeast block currently used as interim surface parking, there are four development sites. (Here's the block and lot map.)

Parcel B-11

The site for the B-11 tower, as indicated on the screenshot below, has a $26.9 million mortgage. The document was created 2/28/12. Four days before, on 2/24/12, the Gramercy mortgage was satisfied. This, like the other Gramercy mortgages, links to a mortgage pool once valued at $117 million.

But Forest City owed Gramercy $153.9 million in December 2009. It's not clear how much Forest City owed Gramercy when it got the $228 million. But it does seem clear the money helped clear the Gramercy debt.
$26.9M for Parcel B-11, Block 1129
Parcel B-12

The site for the B-12 tower, as indicated on the screenshot below, has a $24.7 million mortgage. That document was created 7/27/11. On 2/24/12, the Gramercy mortgage was declared satisfied. Note the sequence, linking back to the previously mentioned mortgage pool.

$24.7M, for Parcel B-12 on Block 1129
Parcels B-13/14

The site for the B-13 and B-14 towers, as indicated on the screenshot below, has a $48 million mortgage. That document was created 2/28/12. Again, on 2/24/12, the Gramercy mortgage was declared satisfied. This also links back to the previously mentioned mortgage pool.
$47.995M, for Parcels B-13/14 on Block 1129
Parcel B-1

The site for the B-1 office tower, over the arena plaza,, as indicated on the screenshot below, has a $68 million mortgage. That document was created 2/28/12. Again, on 2/24/12, the Gramercy mortgage was declared satisfied. This also links back to the previously mentioned mortgage pool.
$68M, for Parcel B-1 on Blocks 1118/1119
Parcel B-4

The site for the B-4 residential tower, at the northeast corner of the arena block, as indicated on the screenshot below, has a $60.3 million mortgage. That document was created 4/23/12. 

This does not link to the satisfaction of a Gramercy mortgage, though it links back to the previously mentioned mortgage pool. So perhaps this sum of money was indeed used for infrastructure.
$60.3M, for Parcel B44 on Block 1119

Adding up a mystery

The rounded-off sums--$26.9M+$24.7M+$48M+$68M+$60.3M--add up to just about $228 million.

It's not clear why Forest City did not raise the $249 million originally sought. But since they raised less money, the didn't have to use the B-3 site as collateral.


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).


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 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…