In 2014, immigrant investors in "Atlantic Yards III" were given misleading, outdated map estimating project completion by 2022 (!)
New evidence I've seen suggests that immigrant investors in "Atlantic Yards III," the third round of fundraising under the EB-5 program, were provided misleading information by the U.S. Immigration Fund (USIF), which packaged the $100 million loan, and perhaps by the developer, Greenland Forest City Partners.
It has to do with a misleading and already out-of-date map.
That map of the potential project buildout, dated June 30, 2014 and shared with investors in October of that year, estimated that the final tower would open by February 2022.
That would have been an astonishingly fast pace, with 14 towers rising to completion in less than eight years, including six rising from an expensive, elaborate platform covering the Vanderbilt Yard.
While that was likely aimed to reinforce the reliability of the plan to investors, it wasn't just overly optimistic. An updated and significantly less optimistic map, dated August 13, 2014, had already been prepared to be shared with locals in Brooklyn.
But the earlier map--not the later one--was included in the Private Placement Memorandum (PPM), that the USIF--a middleman known as a "regional center"--supposed to be shared with potential investors, dated October 3, 2014.
2025, not 2022
That newer, already available map more cautiously estimated that the last building over the railyard would open by February 2025, which of course now seems very unlikely. Several other estimates in the updated map were less optimistic than the previous one--though now it's clear many should have been even more cautious.
In other words, though both graphics contain a boilerplate disclaimer--"In no way should this be viewed as the only possible option"--investors by October deserved the updated, less optimistic version.
Yes, there was conflicting information: investors were told three separate times in the 190-page PPM that "The Project is being constructed in phases through 2025."
Still, they were provided a misleading graphic.
And this raises a question as to whether the more recent schedule of the expected buildout shown to immigrant investors was overoptimistic, as well.
Background on controversial USIF
The U.S. Immigration Fund, the country's leading regional center, worked on the second and third Atlantic Yards EB-5 fundraising rounds. The USIF's head was the subject of a tough 2014 profile in Fortune.
The firm has been tangled in litigation with some EB-5 investors, including one lawsuit from "Atlantic Yards II," the second fundraising round, which raised $249 million from 498 investors. I critiqued the misleading marketing for "Atlantic Yards III, the first round, and the U.S. State Department got promoters to omit mention of a diplomat. "Atlantic Yards III" involved 200 investors.
The map released in Brooklyn, dated Aug. 13, 2014
The map below, titled "Pacific Park Brooklyn" and dated 8/13/14, is well-known to some Atlantic Yards watchers. It surfaced publicly, and has been reprinted on this blog multiple times. It describes a mix of buildings, including condos, 100% market-rate rentals, 100% affordable rentals, and mixed 50/30/20 (market/affordable) rentals. As of then, all towers were to start by 2023 and be completed by 2025.
The buildings expected to start in 2014 and 2015 were outlined with green highlighting. A note at the bottom indicates: "Building start and finish dates are subject to change." (Note: neither map mentioned any plans for Site 5, catercorner to the Barclays Center.)
The map shown to investors, dated June 30, 2014
Now let's look at the similar "Atlantic Yards Site Plan" below, dated 6/30/14, some six weeks earlier. That was one day before original developer Forest City Enterprises/Forest City Ratner closed a deal--announced more than six months earlier--with Greenland USA to buy 70% of the project going forward.
Five weeks later, the new majority owner of the project, changed the name of the project to Pacific Park. Given the similarities, it's not unreasonable to assume the map below was prepared by the developer/joint venture, though its provenance is not made clear.
It's essentially the same map, albeit with some more intense colors--darker blues, darker orange--and without the prominent note in the bottom right corner reinforcing that the timetable was "subject to change." That was prudent, because the dates were very different. All were to start by 2020 and open by 2022.
The chart below, which I created, compares the construction starts estimated in both the June 2014 and August 2014 maps, with boldface in the second column indicating where the timetable was pushed to a later date. (Note: for B2, the comparison is the date the building would open, not start.)
Big differences between the maps
Despite only six weeks between the maps, the differences are significant. In seven cases, the August 13, 2014 map estimated a later construction start--or, in one case, opening--than was projected just six weeks earlier in the June 30, 2014 map. (Remember, the PPM was dated October 2014, so there would've been ample time to include the updated map.)
Moreover, as indicated in the column at far right of the chart, the project buildout has been mostly delayed. Other than the two buildings that started as predicted in 2014, everything else has been delayed, or likely will be delayed.
Example: B3
One seemingly minor example: in the earlier map, the B3 tower, at the southeast corner of the arena block, was to start construction in March 2015; in the later map, it was to start construction in June 2015.
Why would a three-month delay be meaningful? Because the developer and regional center should have known better; a 6/25/14 agreement signed by Empire State Development, the state authority that oversees/shepherds the project, required the developer to start B3 by 6/30/15. That agreement was five days before the first map.
Yes, that did not preclude the creation of a map that projected a B3 start in March 2015. It just made that prediction much less credible.
Example: B1
Both maps claimed the office tower at the site of the arena plaza, Frank Gehry's "Miss Brooklyn" (aka B1), would start in November 2016, though that was surely not the developer's plan.
Consider: as of 2012, SHoP architects had produced a rendering of the arena and three towers around it, not four, leaving out B1 but portraying the broad arena plaza. No new rendering of B1 has ever surfaced since Gehry left the project in 2009.
By June 2014, after nearly two years of arena operation, it was increasingly clear that it would be impossible to build a tower at the arena plaza without causing huge disruption to Barclays Center operations.
No wonder Greenland Forest City by 2016 was floating a plan to move the bulk from the unbuilt B1 to Site 5, home to Modell's and P.C. Richard, and enlarge an already significant building slated for that site.
In other words, neither map, had the developer been truly candid, should've included a start date for B1. (As to Site 5's missing start date, perhaps that anticipated the lengthy, yet-to-launch process to revise the project plan to accommodate a much larger project at that site.)
Example: B2
The 6/30/14 map somehow claimed that B2, the ill-fated tower built via modular construction at the southwest corner of the arena block, would open six months later, by December 2014.
That was preposterous. More than two months earlier, following delays and other snags, original developer Forest City Enterprises (parent of Forest City Ratner) had disclosed, in a 4/18/14 report to the U.S. Securities and Exchange Commission, that B2 was projected to open a year later, by December 2015.
Moreover, by the time the potential investors received project documents in October 2014, they could have been told that a bitter dispute between Forest City Ratner and its partner Skanska USA, had stalled construction as of August 2014, and dueling lawsuits were filed in September 2014.
In fact, by 10/1/14, before the PPM was issued, Forest City disclosed to bondholders what had surfaced earlier in legal papers: the lender of some $45 million for the building had suspended disbursement of the tax-exempt financing, because construction had been on hold for 21 days.
Candor toward investors would've meant acknowledging that. Indeed, the August 2014 map more cautiously estimated 2016. Instead, a video shown to project investors included several dramatic shots of that modular tower, seemingly rising boldly in the sky.
However true that might have been at the time filming took place, when the roadshow in China began in October 2014, construction had been stalled and the subject of lawsuits. That was exactly the opposite of the message the EB-5 investment packagers wanted to send. So they ignored it.
It has to do with a misleading and already out-of-date map.
 |
| June 30, 2014 site plan, released to investors, not the public |
That would have been an astonishingly fast pace, with 14 towers rising to completion in less than eight years, including six rising from an expensive, elaborate platform covering the Vanderbilt Yard.
While that was likely aimed to reinforce the reliability of the plan to investors, it wasn't just overly optimistic. An updated and significantly less optimistic map, dated August 13, 2014, had already been prepared to be shared with locals in Brooklyn.
But the earlier map--not the later one--was included in the Private Placement Memorandum (PPM), that the USIF--a middleman known as a "regional center"--supposed to be shared with potential investors, dated October 3, 2014.
2025, not 2022
That newer, already available map more cautiously estimated that the last building over the railyard would open by February 2025, which of course now seems very unlikely. Several other estimates in the updated map were less optimistic than the previous one--though now it's clear many should have been even more cautious.
 |
| "Grand Opening Seminar of Atlantic Yards III," marketed to investors Oct. 10, 2014 in Shanghai. |
Yes, there was conflicting information: investors were told three separate times in the 190-page PPM that "The Project is being constructed in phases through 2025."
Still, they were provided a misleading graphic.
And this raises a question as to whether the more recent schedule of the expected buildout shown to immigrant investors was overoptimistic, as well.
Background on controversial USIF
The U.S. Immigration Fund, the country's leading regional center, worked on the second and third Atlantic Yards EB-5 fundraising rounds. The USIF's head was the subject of a tough 2014 profile in Fortune.
The firm has been tangled in litigation with some EB-5 investors, including one lawsuit from "Atlantic Yards II," the second fundraising round, which raised $249 million from 498 investors. I critiqued the misleading marketing for "Atlantic Yards III, the first round, and the U.S. State Department got promoters to omit mention of a diplomat. "Atlantic Yards III" involved 200 investors.
The map released in Brooklyn, dated Aug. 13, 2014
The map below, titled "Pacific Park Brooklyn" and dated 8/13/14, is well-known to some Atlantic Yards watchers. It surfaced publicly, and has been reprinted on this blog multiple times. It describes a mix of buildings, including condos, 100% market-rate rentals, 100% affordable rentals, and mixed 50/30/20 (market/affordable) rentals. As of then, all towers were to start by 2023 and be completed by 2025.
The buildings expected to start in 2014 and 2015 were outlined with green highlighting. A note at the bottom indicates: "Building start and finish dates are subject to change." (Note: neither map mentioned any plans for Site 5, catercorner to the Barclays Center.)
Now let's look at the similar "Atlantic Yards Site Plan" below, dated 6/30/14, some six weeks earlier. That was one day before original developer Forest City Enterprises/Forest City Ratner closed a deal--announced more than six months earlier--with Greenland USA to buy 70% of the project going forward.
Five weeks later, the new majority owner of the project, changed the name of the project to Pacific Park. Given the similarities, it's not unreasonable to assume the map below was prepared by the developer/joint venture, though its provenance is not made clear.
It's essentially the same map, albeit with some more intense colors--darker blues, darker orange--and without the prominent note in the bottom right corner reinforcing that the timetable was "subject to change." That was prudent, because the dates were very different. All were to start by 2020 and open by 2022.
The chart below, which I created, compares the construction starts estimated in both the June 2014 and August 2014 maps, with boldface in the second column indicating where the timetable was pushed to a later date. (Note: for B2, the comparison is the date the building would open, not start.)
Big differences between the maps
Despite only six weeks between the maps, the differences are significant. In seven cases, the August 13, 2014 map estimated a later construction start--or, in one case, opening--than was projected just six weeks earlier in the June 30, 2014 map. (Remember, the PPM was dated October 2014, so there would've been ample time to include the updated map.)
Moreover, as indicated in the column at far right of the chart, the project buildout has been mostly delayed. Other than the two buildings that started as predicted in 2014, everything else has been delayed, or likely will be delayed.
 |
| "No start" = the building hasn't started yet. A blank column = the start date hasn't been reached. Chart by Norman Oder. |
One seemingly minor example: in the earlier map, the B3 tower, at the southeast corner of the arena block, was to start construction in March 2015; in the later map, it was to start construction in June 2015.
Why would a three-month delay be meaningful? Because the developer and regional center should have known better; a 6/25/14 agreement signed by Empire State Development, the state authority that oversees/shepherds the project, required the developer to start B3 by 6/30/15. That agreement was five days before the first map.
Yes, that did not preclude the creation of a map that projected a B3 start in March 2015. It just made that prediction much less credible.
Example: B1
 |
| Barclays Center & three towers, but not B1, via SHoP. |
Consider: as of 2012, SHoP architects had produced a rendering of the arena and three towers around it, not four, leaving out B1 but portraying the broad arena plaza. No new rendering of B1 has ever surfaced since Gehry left the project in 2009.
By June 2014, after nearly two years of arena operation, it was increasingly clear that it would be impossible to build a tower at the arena plaza without causing huge disruption to Barclays Center operations.
No wonder Greenland Forest City by 2016 was floating a plan to move the bulk from the unbuilt B1 to Site 5, home to Modell's and P.C. Richard, and enlarge an already significant building slated for that site.
In other words, neither map, had the developer been truly candid, should've included a start date for B1. (As to Site 5's missing start date, perhaps that anticipated the lengthy, yet-to-launch process to revise the project plan to accommodate a much larger project at that site.)
Example: B2
The 6/30/14 map somehow claimed that B2, the ill-fated tower built via modular construction at the southwest corner of the arena block, would open six months later, by December 2014.
That was preposterous. More than two months earlier, following delays and other snags, original developer Forest City Enterprises (parent of Forest City Ratner) had disclosed, in a 4/18/14 report to the U.S. Securities and Exchange Commission, that B2 was projected to open a year later, by December 2015.
Moreover, by the time the potential investors received project documents in October 2014, they could have been told that a bitter dispute between Forest City Ratner and its partner Skanska USA, had stalled construction as of August 2014, and dueling lawsuits were filed in September 2014.
 |
| B2, from "Atlantic Yards III" video |
Candor toward investors would've meant acknowledging that. Indeed, the August 2014 map more cautiously estimated 2016. Instead, a video shown to project investors included several dramatic shots of that modular tower, seemingly rising boldly in the sky.
However true that might have been at the time filming took place, when the roadshow in China began in October 2014, construction had been stalled and the subject of lawsuits. That was exactly the opposite of the message the EB-5 investment packagers wanted to send. So they ignored it.
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