Skip to main content

The Greenland Group, Forest City's new partner, plans $10B investment abroad, comes from culture of growth, "murky business"

What's the Greenland Group, Forest City Ratner's expected new partner and the ultimate decider regarding Atlantic Yards going forward, all about? (Remember, Greenland will own 70%.)

Forget the airy sentiments, such as in this 10/11/13 press release, where Zhang Yuliang, Chairman and President of Greenland Group, talked about being part of the Brooklyn brand and I Fei Chang, President and CEO of Greenland US, said Greenland wanted to be "building quality projects, undertaking social responsibility, and fostering economic growth in local communities."

Gensler, via LA Times
And forget the 12/16/13 press release, in which Zhang looked forward to "a project that will speak to the world about the importance of affordable housing and world-class design" and Chang claimed Atlantic Yards "represents values that we strongly believe in, affordable housing and sustainability."

Remember, the Greenland Group is owned by the government of China. It has more than $35 billion in annual revenues and is aiming for $40 billion this year.

It's a huge, growing, grasping enterprise, looking aggressively inside and lately outside of China for new partners, new projects, and more predictable returns.

Big in China

As noted by Crain's New York Business last November:
Greenland Holdings, for instance, has built several sprawling mixed-use real estate developments in China and is in the process of raising that country's second-tallest tower—a skyscraper in the city of Wuhan that will rise to a height of more than 2,000 feet.
"Founded 22 years ago, Greenland Group has expanded to more than 80 cities across China and is known as a leading developer of high-quality, high-rise residential buildings and urban complexes," Zhang told the Los Angeles Times earlier this month. "International expansion, in particular in the U.S. market, is a strategic priority for us."

Beyond Brooklyn

And it's not just Brooklyn. Last December, China Daily reported that Greenland planned to invest $10 billion abroad in 2014, thus doubling its existing overseas investment.

China pouring billions into London real estate, China Daily reported 1/14/14. China’s Greenland Group plans billion dollar investment in Australia, the Australian Trade Commission reported 2/5/14. The firm has big projects in South Korea, too.

On 2/14/14, in Chinese developer unveils plans for Metropolis project in L.A., the Los Angeles Times reported on Greenland's plans for a hotel and residential building, "the first phase of its $1-billion Metropolis Los Angeles project that is expected to redefine the downtown skyline." 

Ultimately, they're building "1.65 million square feet of hotel, condominium, office and retail development on a block that links the financial district with LA Live and Staples Center.:

The $2.7 billion-plus Greenland will invest in Atlantic Yards (70% of the approximately $4 billion remaining cost) is but a fraction of its portfolio.

Greenland's goals

“We have development funds, development expertise and experience and an enormous customer base,” and Forest City has the local execution capability," Zhang said in November, claiming an eight-year potential buildout.

An attorney for Greenland, Kit Kwok, told Crain's New York Business in November, "What you're seeing now is a top-down policy driven by the Chinese government that is allowing and sanctioning these types of transactions."

"They are one of the leading builders in China," Kwok said of Greenland, "and I think both they and Forest City see value in the fact that they will bring their point of view to this project. Greenland wants to do ambitious projects, and they want to be a player internationally. Atlantic Yards fit the bill."

In this case, they'll be gaining a partner that knows how to execute in New York. The partnership is still subject to regulatory approval, but that's likely a formality.

Chinese business culture

Surely Greenland has to get its projects done successfully, but it comes out of a business culture that is highly questionable. (I don't have documentation on complaints about Greenland, though this Chinese language article--which is mangled by Google Translate--suggests that one project began without proper permits.)

Consider, as I wrote in December 2010 (in the context of EB-5 marketing), some lessons from James McGregor's 2005 book One Billion Customers: Lessons from the Front Lines of Doing Business in China:
  • "The sad fact is that the Chinese system today is almost incompatible with honesty."
  • "As a result, the Chinese can feel pretty good about doing almost anything as long as they don't get caught."
  • "China is not the legalistic society that typifies the West. If the Chinese want to do something, they find a way to skirt rules or laws."
  • "A country that was until recently poor but safe has become one that is unsettled and insecure. There is nothing to believe in but making money."
Chinese investment, for Chinese tenants?

In Brooklyn, the apartments--at least the initial rental units--will be occupied by locals and Atlantic Yards investment, stunningly, will be used to leverage low-interest loans from foreign millionaires (many of them Chinese) seeking green cards.

But new construction in London by Greenland is expected to be purchased by Chinese nationals. (And that might apply to later condo units built in Brooklyn, though presumably there will be high local demand too.)

Chris Blackhurst, a columnist for London's Independent, wondered if that was a dangerous policy:
Colliers International, the property consultancy, reckon that mainland Chinese account for 20 to 40 per cent of all foreign investors in London, Toronto, Vancouver and Singapore.
On average, says Global Financial Integrity, 52.4 per cent of investments that flowed into tax havens involved capital acquired illegally via bribery and kickbacks. But the non-payment of taxes and the breaking of controls on the transfer of money overseas means that all the wealth is illicit.
We should not kid ourselves. Foreign cash is pouring into the UK, especially London. But are these all people we would like to do business with?
Chinese political culture

Consider, as noted by Leon Wieseltier in the New Republic, the words of Chinese dissident and human rights activist Xu Zhiyong, who was convicted in a show trial, with a judge cutting off his closing statement.

“China’s biggest problem is falsehood, and the biggest falsehood is the country’s political system and its political ideology,” Xu stated, as cited by Wieseltier. “No one is safe under an unjust system.”

Architecture and building in China

The international projects, with attendant partnerships, suggest a step beyond the scene in China, as described in a 3/16/12 New York Times Magazine article, Building the American Dream in China, about how"foreign architects and designers have poured into China," where 50,000 skyscrapers were expected to be built in the next two decades,

Brook Larmer wrote:
In a top-down system that favors political will and connections over regulatory oversight and public debate, large-scale projects in China can be designed, built and put to use in the space of just a few years.
Here's how it works:
“The top-down system can make things very simple,” [American architect Daniel] Gillen says. “The leader says, ‘I want it; you make it,’ and it’s done.”
...But in China, the primary concerns are prestige and development for its own sake, and the leaders would move heaven — and lots of earth — to get the museum built. “These projects are the Louis Vuitton bags of architecture,” says one foreign architect, who has worked on several marquee buildings in China. “Every city in China wants one now.”
Larmer described a relentless pace for the architects and designers:
“In terms of pure production, the local staff could work faster and more efficiently than anything I’ve ever seen in the U.S.,” [American architect Adam] Mayer says, even if in some instances they saw no shame in “literally copying designs right out of a book.”
And a desire for acclaim:
Still, the mantra was always “Bigger, bolder, flashier.” During one meeting at the urban-planning bureau, Mayer recalls an official who implored them, “Make us a landmark that will stand out and make people notice!”
Yet there are reasons for doubt:
But many foreign architects in China sense that they are operating in the dark, toiling in a system they dimly understand. Real estate development in China is a murky business. There is little transparency — and lots of horse trading — in everything from the acquisition of land to the awarding of bids and competitions. In all but the highest-profile projects, foreigners are largely sidelined during the building process itself, which by law and tradition is controlled by local design institutes.
What's next?

Larmer's article described an internationalization process:
As foreign architects continue to arrive, there is also increasing competition for jobs and business... Chinese and foreign firms alike are moving to localize their staffs — both to cut costs and to cultivate a new generation of Chinese architects, many of whom have trained abroad.
The next step, presumably, involves partnerships overseas, including Greenland, and Atlantic Yards.

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…

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…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…