So, the first group of EB-5 investors in Atlantic Yards has been repaid. But it didn't create the jobs claimed nor build the arena and other components touted.
I must say, I had my doubts.
But the first of three rounds of EB-5 investors into Atlantic Yards/Pacific Park--and the only round led by the New York City Regional Center (NYCRC) as middleman--have apparently been paid back, some eight-and-a-half years after the loan closed, according to a 1/6/20 press release from the NYCRC.
That stretched the original plan for a five-year maturity date and a two-year forbearance period, but perhaps the documents were amended.
Or perhaps the investors--mainly Chinese nationals seeking green cards for themselves and their families--didn't have a choice.
Greenland in charge
The loan, originally made to a subsidiary of original developer Forest City Ratner, was originally said to be $249 million in funding from 498 investors, which later became $228 million from 456 investors, for reasons never publicly explained.
That saved more than $100 million versus conventional financing, by my calculation.
(There are two other EB-5 loans, of $249 million and $100 million respectively, organized by another middleman regional center, the U.S. Immigration Fund.)
The first loan was apparently paid off by Greenland Forest City Partners, which now controls the project and is owned (going forward) 95% by Greenland USA, given that the NYCRC--a privately-run fund given federal approval to recruit investors--thanked "Greenland USA for their professionalism as well as the respect they’ve shown the EB-5 investors" in its press release.
Where did Greenland get the money? Surely not from project revenues. Perhaps it came from selling Atlantic Yards/Pacific Park leases to other developers, and/or the parent company's own reserves and bond issuances.
Spinning the notion of job creation
From the press release:
According to EB-5 regulations, each investor is supposed to create 10 jobs, so at least 4,560 jobs were required. Nowhere near that number of people have worked at the project, but the loose regulations allow direct, indirect, and even induced (from project spending) to count, and for the number to be certified by an economist paid by the project sponsor.
Moreover, the job calculation can be based not simply on the money from immigrant investors. So, only by lumping that $249 million with existing funding could a "project" be conjured up that would deliver 7696 jobs based on the $1.448 billion invested.
The press release makes extravagant, not-so-credible claims about where the money went:
As I wrote in January 2014, Forest City told the Empire State Development Corporation (now Empire State Development), the state agency overseeing the project, that the money would go to critical infrastructure, given that the arena was already funded.
To the press, however, Forest City claimed the funds would go for infrastructure (the new railyard) and also to replace a higher-interest loan used to purchase land. It told BusinessWeek the money was funding the new subway entrance, parking facilities, municipal water and sewer line upgrades and other work.
However, evidence suggests, as I reported, that the money actually substituted for an existing high-interest land loan. The $228 million was divided into mortgages associated with multiple project site lots as collateral.
After all, as EB-5 analyst Michael Gibson told Business Week, when a project “substitutes EB-5 capital for more expensive bank financing or bond funding or even equity, that isn’t really creating new economic activity. It’s margin for the developer.”
But the first of three rounds of EB-5 investors into Atlantic Yards/Pacific Park--and the only round led by the New York City Regional Center (NYCRC) as middleman--have apparently been paid back, some eight-and-a-half years after the loan closed, according to a 1/6/20 press release from the NYCRC.
That stretched the original plan for a five-year maturity date and a two-year forbearance period, but perhaps the documents were amended.Or perhaps the investors--mainly Chinese nationals seeking green cards for themselves and their families--didn't have a choice.
Greenland in charge
The loan, originally made to a subsidiary of original developer Forest City Ratner, was originally said to be $249 million in funding from 498 investors, which later became $228 million from 456 investors, for reasons never publicly explained.
That saved more than $100 million versus conventional financing, by my calculation.
(There are two other EB-5 loans, of $249 million and $100 million respectively, organized by another middleman regional center, the U.S. Immigration Fund.)
The first loan was apparently paid off by Greenland Forest City Partners, which now controls the project and is owned (going forward) 95% by Greenland USA, given that the NYCRC--a privately-run fund given federal approval to recruit investors--thanked "Greenland USA for their professionalism as well as the respect they’ve shown the EB-5 investors" in its press release.
Where did Greenland get the money? Surely not from project revenues. Perhaps it came from selling Atlantic Yards/Pacific Park leases to other developers, and/or the parent company's own reserves and bond issuances.
Spinning the notion of job creation
From the press release:
The New York City Regional Center (NYCRC) is pleased to announce the full repayment of $228 million to EB-5 investors in its Brooklyn Arena and Transportation Infrastructure Project offering (Atlantic Yards). The resulting job creation from this offering enabled 1,331 individuals (EB-5 investors and family members) to receive permanent residency in the United States under the EB-5 Immigrant Investor Program. The individuals in this offering are among the 4,869 individuals worldwide (1,671 I-829 petition approvals) who have received permanent green cards through NYCRC offerings to date.That's 2.92 people per investment, or an average of nearly two family members.
According to EB-5 regulations, each investor is supposed to create 10 jobs, so at least 4,560 jobs were required. Nowhere near that number of people have worked at the project, but the loose regulations allow direct, indirect, and even induced (from project spending) to count, and for the number to be certified by an economist paid by the project sponsor.
Moreover, the job calculation can be based not simply on the money from immigrant investors. So, only by lumping that $249 million with existing funding could a "project" be conjured up that would deliver 7696 jobs based on the $1.448 billion invested.
Of course, that's hogwash, because the EB-5 loan was hardly seed money for, say, the tax-exempt bonds used to build the arena, which was secured earlier.
In fact, as I wrote in 2010, no new jobs beyond those long forecast would be created the NYCRC, according to New York State officials.
Spinning what was built
In fact, as I wrote in 2010, no new jobs beyond those long forecast would be created the NYCRC, according to New York State officials.
Spinning what was built
The press release makes extravagant, not-so-credible claims about where the money went:
A NYCRC-managed fund provided a $228 million loan to assist with the construction of specific components of the Atlantic Yards development, examples of which included: the Barclays Center Arena, the first new sports and entertainment arena to be built in New York City in over 40 years; a new subway station entrance within 100 feet of the arena to serve as the main entrance to the arena from the Atlantic Terminal transportation complex; a 30,000 square foot outdoor public plaza outside the arena; the demolition and reconstruction of the Carlton Avenue Bridge; an on-grade parking facility; and the excavation, removal, rerouting, and upgrading of water and sewer lines. The project provided a state-of-the-art, multi-purpose sports arena needed to bring a professional sports team back to Brooklyn and also provided critical surrounding infrastructure work.That's similar, but a little more specific (regarding the size of the public plaza), to the 7/15/11 press release, which said:
Is that what really happened? After all, the investors were told their money would go to the arena. Representatives of the NYCRC told potential investors at public events and on webcasts in China that the money would go to an arena.The loan will assist with the construction of specific components of the overall development, examples of which include: the Barclays Center Arena; a new subway station entrance within 100 feet of the arena; an outdoor public plaza outside the arena; the demolition and reconstruction of the Carlton Avenue Bridge; an on-grade parking facility; and the excavation, removal, rerouting, and upgrading of water and sewer lines.
Hence the emphasis on basketball, as shown in the screenshot of an event aiming to recruit investors.
Looking more closely
Still, it's likely that contractual documents signed by the investors were more fuzzy. After all, they were buying into something vaguely titled "Brooklyn Arena Infrastructure and Transportation Improvement Fund." Those first two words, however they suggest an entity, also could be a modifier.
Still, it's likely that contractual documents signed by the investors were more fuzzy. After all, they were buying into something vaguely titled "Brooklyn Arena Infrastructure and Transportation Improvement Fund." Those first two words, however they suggest an entity, also could be a modifier.
As I wrote in January 2014, Forest City told the Empire State Development Corporation (now Empire State Development), the state agency overseeing the project, that the money would go to critical infrastructure, given that the arena was already funded.
To the press, however, Forest City claimed the funds would go for infrastructure (the new railyard) and also to replace a higher-interest loan used to purchase land. It told BusinessWeek the money was funding the new subway entrance, parking facilities, municipal water and sewer line upgrades and other work.
However, evidence suggests, as I reported, that the money actually substituted for an existing high-interest land loan. The $228 million was divided into mortgages associated with multiple project site lots as collateral.
After all, as EB-5 analyst Michael Gibson told Business Week, when a project “substitutes EB-5 capital for more expensive bank financing or bond funding or even equity, that isn’t really creating new economic activity. It’s margin for the developer.”
Comments
Post a Comment