Skip to main content

Featured Post

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

The shift to Shanghai: global capital, "Brooklyn-washing," and Greenland Forest City Partners

At an Atlantic Yards/Pacific Park Quality of Life meeting in January, Prospect Heights resident Robert Puca, a longtime project opponent, commented that the seemingly rigged outcome for the upcoming (but yet unscheduled) Site 5 project "makes a mockery of the process."

Puca wasn’t done. “What else puts a bad taste in my mouth: New York State, New York City put up a combination of $300 million in public subsidies, now it turns out 15 years later, it first went to Russian oligarch [Mikhail Prokhorov] and now it’s going to a company that’s basically owned by the government of Shanghai,” he said. “If people had known 15 years later, that government of Shanghai was going to own basically the building in my backyard, it would be a different taste in everybody’s mouth.”

Indeed, could any imagine that Greenland USA, an arm of Greenland Holding Co., which has as its largest shareholder the government of Shanghai, proposing Atlantic Yards in 2003 and getting it approved in 2006 and then re-approved in 2009?

Instead, the firm in 2014 bought 70% of the project going forward, and has since bought (for an unspecified sum) all but 5% of Forest City's remaining stake going forward. And Forest City is about to be acquired by Brookfield Asset Management.

That's not to say that anyone else was clamoring to invest in this project as of now. Or that Forest City Ratner (now Forest City New York) has been purely seen as a local company. Though an early investor in the 1980s and 1990s, it was an arm of publicly traded Cleveland-based Forest City Enterprises (now Forest City Realty Trust, or FCRT), and decisions have been driven significantly by corporate interests. (Hedge fund managers targeting FCRT might say that such decisions were the result of the company listening too much to executives in Brooklyn.)

Forest City in New York

But Forest City had considerable experience in New York. Consider the summary (excerpted at right, from p. 4 of this PDF) from the July 2005 bid for Vanderbilt Yard development rights, saying its projects have "changed the skyline of New York and added hundreds of millions of dollars to its tax base."

Even if Greenland had arrived trumpeting the assistance of veteran local developers like Forest City Ratner (now Forest City New York) or the new firm L&L MAG (started by Forest City New York's former CEO), it would've been a lot harder to argue for such governmental cooperation.

It had no track record in New York, much less a track record in Brooklyn. It would not have a deep bench of supportive elected officials (who may have gotten campaign contributions) or civic leaders (who may have gotten charitable contributions or contracts).

Is keeping Forest City in the name "Brooklyn-washing"?

Does the name Greenland Forest City Partners make sense any more? Might it not be, with the type size more accurately reflecting ownership, Greenland Forest City Partners, at least for the project going forward? (The joint venture did build three towers together, at a 70/30 share, and Forest City built 461 Dean on its own, before selling it.)

Is this the equivalent of what might be called "Brooklyn-washing," putting a Brooklyn (and American) facade on an Chinese company? (The Real Deal reported last August that there may be a clause in Atlantic Yards government contracts that require the original developer to keep a stake. That's plausible, but not yet confirmed.)

Maybe, maybe not. Obviously, that appellation would be little easier to make if Forest City had remained standing. Now, it's Brookfield, which is based in Toronto. So, maybe, "Brooklyn/Brookfield"?

Do note that Greenland USA project manager Scott Solish, when queried at a public meeting, professed to not know any details about the parent company's ownership.

As I wrote, it's fair to call it a publicly-traded, state-owned (or government-owned) enterprise, even if that state ownership is no longer a majority. However, even if Greenland may no longer be fully state-controlled, the current ownership structure seems to favor state control.

Interestingly enough, Forest City Enterprises, in its very first press release mentioning Greenland, on 10/11/13, did not even use the term state-owned.

A different business culture, with lingering questions

I've also pointed out that, while I don't have any specific suspicions regarding Greenland's business ethics, and the company has successfully completed many major projects worldwide, China has a business and government culture not known for transparency.

Even a generally pro-investment Asia Society report in 2015 recommended that China adopt "[e]nhanced transparency in capital ownership... While China is not the only country that raises concerns, Chinese businesses historically have been less open regarding origination of capital and ties to government or military officials."

"China definitely has a different way of working," then-Forest City executive Susi Yu said in September 2016, "so I think there’s definitely a little bit of an educational process in learning that in New York you can’t just do everything because you say so."

"It’s an awakening, how we do business here," McKissack & McKissack CEO Cheryl McKissack Daniel recently said regarding working with Greenland. "But we don’t have a problem with them.”

The Los Angeles Times reported in August 2016 regarding Chinese real estate companies coming to that city:
"Chinese developers are not into buying land, letting it sit there for years and waiting for better times," said Thomas Feng, Oceanwide Plaza's chief executive and president. "We buy it at the right time and we build right away."

Part of that disconnect is over safety and planning, which is more stringent in the U.S. But it also underscores the different role real estate plays in the world's second-largest economy. In China, there's no real property tax, so local governments rely on land sales for more than a quarter of their revenue. That gives them every incentive to expedite real estate development.
That, actually, has not been the experience in Brooklyn so far, but we await a new schedule for the project as well as plans for the giant B4 tower at the northern corner of the arena block. They haven't built "right away." The economics don't work. But perhaps they will, one of these days.