Agenda for Atlantic Yards CDC vague: updates & follow-ups. Is the meeting Tuesday mainly to approve the annual budget? (It's questionable.)
With three business days' notice, Empire State Development (ESD) yesterday issued an Agenda and Board Materials (bottom) for next Tuesday's meeting of the (purportedly) advisory Atlantic Yards Community Development Corporation (AY CDC).
That means those wishing to comment on Agenda items--writing to AYCDCBdMtg@esd.ny.gov by 3 pm on Monday, March 25--don't have much to go on. (Those attending in person, who must RSVP, can comment in real time. The meeting also will be webcast.)
The Agenda doesn't offer much of a clue, however, as to what's at issue, since the item "3. Updates and Follow-Ups (Oral Reports)" could cover a lot of ground.
That means those wishing to comment on Agenda items--writing to AYCDCBdMtg@esd.ny.gov by 3 pm on Monday, March 25--don't have much to go on. (Those attending in person, who must RSVP, can comment in real time. The meeting also will be webcast.)
Mainly budget issues?
Also present was attorney Eric Orenstein, who works with the USIF.
First, when Greenland Forest City Partners (GFCP), via the USIF, went back to Chinese EB-5 investors for $100 million and diluted the collateral previously put up for a $249 million loan, ESD should have gotten proof the same collateral could now support $349 million in borrowing.
Second, when Greenland in 2018 was paid $55.83 million for one parcel used as collateral but indicated that the appraised value was $63.16 million, ESD should’ve noticed that the overall loan was insufficiently collateralized.
Third, when GFCP failed to deliver required annual reports on whether the loan funds were spent for Permitted Uses, ESD should’ve required those reports, then looked more closely.
Instead, it belatedly accepted a report with assertions, rather than evidence, 4.5 years late. Moreover, the production of that document was surely triggered by my Freedom of Information (FOIL) request.
“Is it possible that the proceeds of the loan were used for something that was not a Permitted Use?” Veconi asked at the meeting. “Do you know that that's not the case?”
“During the period after the loan proceeds were dispersed, there was a massive amount of construction in the railyard,” ESD attorney Richard Dorado responded. “That railyard construction seems to be complete.”
“But just for the sake of compliance with the loan agreements, do we have any backup that shows what the proceeds of the loan were used for? Has that ever been received?”
“We don't have it,” said Joel Kolkmann, ESD’s Senior VP, Real Estate and Planning. “Currently, I can't say that we have it in our possession. But we should be—we saw the inquiry and we would have to look into that.”
He didn’t reference the Expenditure Certificate, which merely asserted—rather than provided evidence—that the loan proceeds had been spent for permitted uses. And I'm not sure what he meant by "the inquiry."
Given such loose EB-5 rules--and, I'd say, some dodgy characters seeking advantage--it's no surprise that EB-5 became the "legalized crack cocaine" of real-estate finance, as a finance broker reported after talking with the USIF's Nicholas Mastroianni II.
AY CDC budget questions
Prior to the new fiscal year starting April 1, the Directors of the AY CDC are required to adopt an annual operating budget.
Note that the minutes state that Debbie Royce is AY CDC staff as Corporate Secretary. But she's been at ESD for a long time, and serves that role for ESD and other affiliates.
The simplest explanation for the meeting may be that no new revelations are expected, but the Directors are simply being asked to review and approve the proposed AY CDC operating budget for the fiscal year beginning April 1.
I have some questions about that budget, as noted below, given that the spending on personnel has remained static but the highest-paid employee left last year, without replacement.
Clues from Board Materials: Brodsky role?
There's an interesting clue in the Board Materials, notably the minutes of the Jan. 23, 2024 meeting. I watched it on a webcast, so I couldn't see who was in the room, but attendees included Scott Solish of The Brodsky Organization.
Solish, formerly the point man for Greenland USA on Atlantic Yards/Pacific Park, collaborated with Brodsky on 18 Sixth Ave. (aka B4 or Brooklyn Crossing), before moving to Brodsky.
It's possible that Brodsky contemplates taking over--or partnering with Greenland on?--the six development parcels over the Vanderbilt Yard scheduled for a foreclosure sale on April 30.
But that would depend on negotiations with ESD, which has so far indicated little willingness to enforce the $2,000 penalty for each unit of affordable housing--876 or 877--not delivered by May 2025.
What else?
As I speculated regarding this meeting, perhaps parent ESD is looking for feedback on, or a rubber stamp for, any project proposals, such as a revised state posture toward the liquidated damages for the unbuilt affordable units.
Or, perhaps, a new project-specific synthetic substitute for the 421-a tax break that has, for example, re-enabled construction in Gowanus.
Or--total speculation--whether master developer Greenland USA has completely walked away from the project. (Not if they're funding the AY CDC again.)
Another clue: also present were Ashley Flucas and Mark Giresi, General Counsel and Chief Operating Officer of the U.S. Immigration Fund (USIF), the EB-5 "regional center," or middleman loan packager, that apparently controls the $285.84 million in unpaid EB-5 debt in foreclosure.
As I speculated regarding this meeting, perhaps parent ESD is looking for feedback on, or a rubber stamp for, any project proposals, such as a revised state posture toward the liquidated damages for the unbuilt affordable units.
Or, perhaps, a new project-specific synthetic substitute for the 421-a tax break that has, for example, re-enabled construction in Gowanus.
Or--total speculation--whether master developer Greenland USA has completely walked away from the project. (Not if they're funding the AY CDC again.)
The EB-5 deal
Another clue: also present were Ashley Flucas and Mark Giresi, General Counsel and Chief Operating Officer of the U.S. Immigration Fund (USIF), the EB-5 "regional center," or middleman loan packager, that apparently controls the $285.84 million in unpaid EB-5 debt in foreclosure.
(The amount borrowed was $349 million, but the sale of the B15 development lease triggered a $63.16 million repayment.)
It might be worth asking them, should they re-appear, why the USIF, rather than an independent fiduciary representative of the EB-5 investors who put up $500,000 in exchange for green cards--accepting no interest but expecting their money back--is speaking for them. What does USIF gain from any deal?
Also present was attorney Eric Orenstein, who works with the USIF.
EB-5 oversight questions
As shown in the minutes. and in my coverage of the previous meeting, Director Gib Veconi in January brought up my recent reporting on ESD's EB-5 oversight. My three conclusions are below.
First, when Greenland Forest City Partners (GFCP), via the USIF, went back to Chinese EB-5 investors for $100 million and diluted the collateral previously put up for a $249 million loan, ESD should have gotten proof the same collateral could now support $349 million in borrowing.
Second, when Greenland in 2018 was paid $55.83 million for one parcel used as collateral but indicated that the appraised value was $63.16 million, ESD should’ve noticed that the overall loan was insufficiently collateralized.
Third, when GFCP failed to deliver required annual reports on whether the loan funds were spent for Permitted Uses, ESD should’ve required those reports, then looked more closely.
Instead, it belatedly accepted a report with assertions, rather than evidence, 4.5 years late. Moreover, the production of that document was surely triggered by my Freedom of Information (FOIL) request.
The exchange in January
“Is it possible that the proceeds of the loan were used for something that was not a Permitted Use?” Veconi asked at the meeting. “Do you know that that's not the case?”
“During the period after the loan proceeds were dispersed, there was a massive amount of construction in the railyard,” ESD attorney Richard Dorado responded. “That railyard construction seems to be complete.”
“But just for the sake of compliance with the loan agreements, do we have any backup that shows what the proceeds of the loan were used for? Has that ever been received?”
“We don't have it,” said Joel Kolkmann, ESD’s Senior VP, Real Estate and Planning. “Currently, I can't say that we have it in our possession. But we should be—we saw the inquiry and we would have to look into that.”
He didn’t reference the Expenditure Certificate, which merely asserted—rather than provided evidence—that the loan proceeds had been spent for permitted uses. And I'm not sure what he meant by "the inquiry."
New reports on spending?
This isn't just a private transaction. “This savings to the developer,” NYU Stern School of Business’s Jeanne Calderon said in February 2106 testimony to the House of Representatives, “is the equivalent of a government subsidy that is available because the government is willing to issue an EB-5 visa to the immigrant as the incentive for his investment.”
AY CDC Chair Daniel Kummer then moved that the board request that ESD get such documentation related to how the loan proceeds were used.
The motion passed, with a request for delivery before the next AY CDC board meeting.
The motion passed, with a request for delivery before the next AY CDC board meeting.
Let's see what might be delivered.
See Developer Certified that EB-5 Spending was Compliant, but Evidence Shows Otherwise, regarding the first round raised by USIF, known as Atlantic Yards II, and No Surprise: "Atlantic Yards III" Also Involved Construction of Ineligible Tower(s), regarding the second round, known as Atlantic Yards III.
After all, I later reported that the evidence was clear--from the USIF's own promotional documents!--that the money was not spent on permitted uses. Instead of being used for new towers, furthering the project, it was attributed to previously funded towers.
That might have gotten the investors job-creation credit under loose federal rules. Each investor is supposed to "create" at least ten jobs, though their funding can be combined with public monies and the total is based on a hired economist's calculation, not a head count. But it didn't comply with state restrictions.
See Developer Certified that EB-5 Spending was Compliant, but Evidence Shows Otherwise, regarding the first round raised by USIF, known as Atlantic Yards II, and No Surprise: "Atlantic Yards III" Also Involved Construction of Ineligible Tower(s), regarding the second round, known as Atlantic Yards III.
This isn't just a private transaction. “This savings to the developer,” NYU Stern School of Business’s Jeanne Calderon said in February 2106 testimony to the House of Representatives, “is the equivalent of a government subsidy that is available because the government is willing to issue an EB-5 visa to the immigrant as the incentive for his investment.”
Meanwhile, the regional center, attorneys, immigration brokers all earn fees.
Given such loose EB-5 rules--and, I'd say, some dodgy characters seeking advantage--it's no surprise that EB-5 became the "legalized crack cocaine" of real-estate finance, as a finance broker reported after talking with the USIF's Nicholas Mastroianni II.
AY CDC budget questions
The Operating Budget proposes a total of $220,011 in personal services (salaries and fringe benefits) and a total of $29,989 in non-personal services (primarily insurance and occupancy expenses). The total is $250,000.
The budget will be funded in its entirety from an imprest account funded by project developers and maintained at and by ESD.
The first question: is Greenland really paying this?
The second: who's getting $220,011 in compensation? Tobi Jaiyesimi, the AY CDC executive director, left by the middle of last year.
Is the money being divided among other ESD employees? Has it been? Is someone new being hired?
The only other employee is Greg Lynch, listed in the minutes as "Senior Inspector, Atlantic Yards." But if there's no construction, it's hard to see if he's inspecting anything. What's he being paid for?
Note that the minutes state that Debbie Royce is AY CDC staff as Corporate Secretary. But she's been at ESD for a long time, and serves that role for ESD and other affiliates.
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