Skip to main content

Revealed: despite deceptive pitch, $249M in immigrant investor funds will help pay for railyard, deck, and tower construction ($87M savings?)

Forest City Ratner, I've learned, has found a second bailout regarding to the 2005 pledge to pay $100 million cash for Vanderbilt Yard development rights and spend well more than $100 million on a replacement railyard.

After all, Forest City in 2009 renegotiated a delayed payment schedule with gentle terms, and got the Metropolitan Transportation Authority to agree to a smaller railyard than promised.

First Atlantic Yards EB-5
And now I've learned that Forest City will use below-market financing achieved by marketing public assets--green cards, under the federal EB-5 program--to pay the MTA and to build the railyard.

It's a brilliant tactic to save money, since the EB-5 program rewards developers for "job creation," though no new jobs actually need be created. The immigrant investors park $500,000 and accept little interest because their main goal is green cards.

Deceptive pitches

And it's another example of how, when it comes to selling Atlantic Yards to immigrant investors, Forest City Ratner and its associates always mislead.

Remember how the 2010 pitch for the first round (of three) of EB-5 funding deceptively suggested (above right) that Chinese investors were putting their money into a basketball arena?

Instead, as I explained, much of the $228 million was used to retire a higher-interest land loan, essentially providing margin for the developer. (The savings could be some $80 million compared to conventional financing.)

Second Atlantic Yards EB-5
Remember how the 2013-14 fundraising for "Atlantic Yards II"--$249 million in immigrant investor funds--emphasized the already-constructed Barclays Center (left) and used a logo featuring the pebbled grain of a basketball?

And remember how those promoting that effort--including the U.S. Immigration Fund, an outfit run by a guy sketchy enough to inspire a Fortune investigation--somehow claimed (see below) that the Phase II investment would support the entire project, including office space, retail, a new railyard, parking, 8 acres of "park" (not exactly), and all 6,430 residential units?
Both were misleading.

Such funding, which can save 5 percentage points a year compared to conventional financing (or $87 million over seven years, based on $249 million), won't be used for the arena, or the whole project.

Where the money will go

Instead, it will be used to pay the Metropolitan Transportation Authority for the already discounted railyard development rights, the new railyard to store and service Long Island Rail Road trains, the deck needed for vertical development over the railyard, and hard and soft construction costs for seven towers.

A September 2014 letter (bottom) from Empire State Development, the state agency overseeing/shepherding Atlantic Yards/Pacific Park, makes it clear:

I recently received the document via a Freedom of Information Law request.

The low-interest loan from 498 investors would go to some very specific targets: not just the railyard development parcels and deck, but also construction on the private property attached to the railyard parcel as well as the private property needed to build B15, the tower just east of Sixth Avenue between Sixth and Carlton Avenues.

In other words, all the development on Blocks 1120 and 1121--the two railyard blocks between Sixth and Vanderbilt Avenues--plus the B15 site on Block 1128, between Dean and Pacific streets just east of Sixth Avenue.

From the document

According to the 9/9/14 letter (below) titled "Atlantic Yards Land Use Improvement and Civic Project (the “Project”) and new EB-5 Loan," Forest City  on 6/6/14 executed a mezzanine loan agreement, with pieces of the second phase serving as collateral.

The  “Mezzanine Encumbered Properties” include three of the five private properties on Blocks 1120 and 1121 already purchased by Forest City at the time of letter, as well as four lots already purchased on Block 1128.

They also include the railyard site (Lot 1 on Block 1120, Lot 1 on Block 1121) and the remaining two private properties on Block 1120, as well as the remaining four private properties on Block 1128, which have been conveyed via eminent domain. As the map below indicates, those cover six tower sites on the railyard, and the B15 site below the railyard.

The public pays, but only indirectly

From the perspective of the developers--Forest City and new joint venture partner/overseer Greenland Holdings--it's a huge win.

From the perspective of the state and city, it must also be a win, since it costs them nothing--the burden is on the country as a whole, which could get much more for the public interest when selling visas.

Instead, the public pays, indirectly, by letting Forest City and Greenland market public property--immigrant investor visas--which surely would produce a more significant public benefit were the program reformed. (For example, visas could be auctioned off and/or the funds could go directly to the treasury.)

It recalls a warning by then-Daily News columnist Errol Louis, an Atlantic Yards booster still hostile to project critics/opponents yet somewhat chastened by the process, wrote 3/10/10 presaging the arena groundbreaking:
State agencies and the Ratner company haven't been blameless. We still don't know who will pay to create an expensive deck over the Vanderbilt railyards, the section of the project area where thousands of units of housing are supposed to be built.
The expected cost - as much as $200 million to $300 million by some estimates - may get picked up by Ratner, or the bill may get handed to the city or state a decade from now, long after human and institutional memories of the original deal have faded.
Third Atlantic Yards EB-5 pitch
The bill, as of now, has not been handed to the city or state. But Forest City has found a bargain thanks to public assets.

And there's more: we don't yet know exactly how the third round of EB-5 funding, $100 million, will be used.

When they can sell

According to the document, neither the Borrower (an entity associated with the joint venture Greenland Forest City Partners) nor the Owner (again, the joint venture developer) can sell or transfer ownership of the seven development sites at issue if the balance of the loan or any other loans secured by the properties at issue is greater than 80% of the fair market value of their remaining interest in those properties.

To put it another way, they can sell the properties once they pay off more than 20% of the total represented by the EB-5 loan and other loans.

That may not be a huge lift.


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…