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

A question from "Atlantic Yards II" EB-5 investors: is construction suspended? Answer: not quite (but no buildings have started for a while)

EB-5 investors from China have questions.
That was a reference to "Atlantic Yards II," which was the second round (of three) in financing Atlantic Yards/Pacific Park under the EB-5 immigrant investor program.

However, there is no discernible separate, discrete project called Atlantic Yards II.

It was just a way to raise EB-5 funds for the overall project, once known as Atlantic Yards, now called Pacific Park. In other words, there was no "second phase" of the project, related to a defined scope of work, such as two announced buildings. There was just a second round of fundraising to keep the project going.

In 2014, I wrote about the deceptive marketing behind the project, by the U.S. Immigration Fund (USIF), the country's leading regional center, or investment middleman. (Fortune wrote a devastating piece about the founder.)

I then reported that the developer, Forest City Ratner (with Greenland USA nearly onboard), had raised $249 million from 498 investors.

Vague "project"

The contours of "Atlantic Yards II" were never clear. The marketing promoted basketball, the already-built Barclays Center, and booming Brooklyn while remaining vague about how the investors' money might actually be used--though there are hints it would be used for the new railyard  required within the project.

The marketing included stale, irrelevant quotes from former elected officials about the entire $5 billion Atlantic Yards development, leaving the impression that investors' money would go to the overall project, rather than some vague subset said to be worth $1.235 billion. The latter figure thus allowed the promoters to frame the $249 million sought as a neat 20% of the "project."

Some construction continues

The short answer to the question posed is that construction at Atlantic Yards/Pacific Park has always proceeded in part, because there has always been work on infrastructure, including the new railyard and the supports for the platform over the railyard. (Six towers will be built over that platform.)

But no new revenue-producing elements of the project have started in a while. No new residential tower has begun since June 2015. Two other towers  (B15, B12) were announced later in 2015, but never moved forward. Forest City Ratner/Forest City New York, the junior partner in the Greenland Forest City Partners joint venture, in November 2016 announced a decision to pause construction.

After more than a year of negotiations, Greenland USA bought out all but 5% of Forest City's stake in January 2018, and has announced plans to start a new tower, 18 Sixth (aka B4) this year.

Greenland also sold leases to three development sites to two other developers, TF Cornerstone and The Brodsky Organization, with at least one of those three buildings expected to start in 2019.

But they won't start delivering revenue for a couple of years, and surely won't fill up and see stabilized revenue for a year or more after that.

Exit strategy?

With no new revenue-producing construction for a while,  EB-5 investors might be concerned about getting their money back, whether the term of the loan is five years, seven years (a five-year loan with a two-year extension, as with the first round of Atlantic Yards EB-5 funding), or some longer span.

In other words, there's no evidence that those in the first round of EB-5 investors have been paid back, either.

After all, as shown in the screenshot at right from the Atlantic Yards II brochure, Forest City--as of 2014-- "anticipates that upon completion and stabilization of the project, the residential components will generate substantial cash flow... which will allow them to successfully refinance and repay the senior and EB-5 loan."

As far as I know, the loans have not been refinanced. Nor has there been "substantial cash flow."

Instead, the project has struggled, with revenues at the 550 Vanderbilt condo building behind schedule, and the last group of units offered at a flash-sale 20% discount. It's been tough to find takers for certain more expensive "affordable" rental apartments.

Nor was there any mention, at least in the publicly released documents, of what would serve as collateral to repay investors if the project didn't deliver.

Issues of delay

As the Real Deal reported in June 2018, there's a new twist challenging some EB-5 investors: a backlog for Chinese investors waiting for green cards, which has grown enormously since 2014.

Because of federal requirements that investment be at risk until all visas are approved,  some EB-5 investors see their money redeployed to another project, further lengthening the time and adding risks. Reported the Real Deal:
USIF’s founder Nicholas Mastroianni said in an interview that investors can drop out of the green card process and take their money back once the original loan they invested in is paid off. Those financings usually carry five-year terms.
“Once the investors invest they are committed for the initial loan term,” Mastroianni said. “Once that’s over or if we’re paid back earlier, we can then return their capital contribution.”
It's unclear how those scenarios apply to investors in "Atlantic Yards II." The best-case timetable would seem a 2019 repayment. But there's no evidence that that is coming. Stay tuned.