So, is Greenland losing $700 million on Atlantic Yards/Pacific Park? Despite the headlines, there's no evidence.
The web site Mingtiandi, "the independent source for Asia real estate intelligence," on 11/8/16 published TRAIL OF FAILS: $1 BIL WRITE-DOWN ON BROOKLYN PROJECT LATEST OF GREENLAND’S OVERSEAS GAFFES. Now, there is evidence that the Greenland Group's out-of-China investments are not going as planned, but that headline isn't justified.
From the article:
However, neither Forest City nor Greenland have made such an admission, nor does the evidence support it.
Greenland's investment
Greenland, unlike Forest City, did not make a nonperforming investment of hundreds of millions of dollars--with continued interest costs--more than a decade ago. Greenland in 2014 invested $200 million cash, as stated in a Forest City Enterprises press release:
Meanwhile, the joint venture Greenland Forest City Partners has determinedly not gone ahead with new buildings, and is seeking new investors. That preserves Greenland's capital.
So, even if, arguably, that $200 million investment is not going as expected, that doesn't translate to a $700 million loss.
Compounding the problem
Still, like a game of telephone, on 11/16, Nikkei Asian Review published How sustainable is China's overseas shopping spree?, which included this passage:
Just last Thursday the Shanghai-based firm’s US partner revealed a potential $1 billion loss on its Pacific Park joint venture with Greenland in New York.(Emphases added)
...Among the highest profile of Greenland’s overseas projects is its joint venture with American real estate developer Bruce Ratner’s Forest City on the $5 billion Pacific Park complex. Formerly known as Atlantic Yards, Greenland chairman Zhang Yuliang grabbed a 70 percent stake in the development as the company’s second foray into the US market in 2014, but things have slid steadily downhill since then.
On Thursday, Forest City Realty Trust’s CEO David LaRue revealed construction of the remaining Pacific Park buildings would be delayed due to a weakening residential market and high construction costs, among other issues. In announcing Forest City’s financials for the most recent quarter, LaRue said that the REIT was declaring an impairment of non-depreciable real estate of $307.6 million primarily related to Pacific Park. With Forest City holding a 30 percent stake, if applied to the total project, the impairment suffered by the joint venture would translate to more than $1 billion, with Greenland potentially needing to write off $700 million on its New York trophy.
However, neither Forest City nor Greenland have made such an admission, nor does the evidence support it.
Greenland's investment
Greenland, unlike Forest City, did not make a nonperforming investment of hundreds of millions of dollars--with continued interest costs--more than a decade ago. Greenland in 2014 invested $200 million cash, as stated in a Forest City Enterprises press release:
Under the terms of the definitive agreement, Greenland Group will make a capital contribution at closing of approximately $200 million to acquire a 70 percent equity interest in the project, excluding Barclays Center and B2, the first residential building. Going forward, both companies will invest and share development risk in proportion to their respective ownership stakes on the entire remaining project, including infrastructure costs and vertical construction for both Phase 1 and Phase 2.Yes, Greenland has since invested in three buildings under construction, which presumably will deliver investment returns (the condo building more slowly than anticipated), and in ongoing infrastructure, a good portion of which is funded by a low-interest loan from immigrant investors under the EB-5 program.
Meanwhile, the joint venture Greenland Forest City Partners has determinedly not gone ahead with new buildings, and is seeking new investors. That preserves Greenland's capital.
So, even if, arguably, that $200 million investment is not going as expected, that doesn't translate to a $700 million loss.
Compounding the problem
Still, like a game of telephone, on 11/16, Nikkei Asian Review published How sustainable is China's overseas shopping spree?, which included this passage:
One such example is state-backed Greenland Holdings, whose investment in a $5 billion urban project in New York led to a hefty $1 billion potential loss, thanks to construction delays amid a weakening residential market and rising building costs.That's a vague attribution, since the only "analysts," as far as I can tell, are on Mingtiandi, which, by the way, wouldn't publish my comment,
The fallout was revealed last week by Greenland's partner in the U.S., Forest City Realty Trust, which declared an impairment loss of $307 million for its 30% stake in the joint venture project called Pacific Park Brooklyn. Greenland, owner of the remaining stake, is estimated by analysts to have suffered a $700 million loss.
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