While business deal for new Atlantic Yards joint venture proceeds, Empire State Development says it awaits developer info. (Will terms be renegotiated?)

We know, thanks to reporting first by The Real Deal and more recently by the Wall Street Journal (my coverage), that a business deal is proceeding for a new developer, Related Companies, to partner with the entities controlling the six future tower sites over the MTA's Vanderbilt Yard, to develop them.

That's according to a representative of one of those entities, the U.S. Immigration Fund (USIF), the "regional center" or loan packager for two loans to immigrant investors under the EB-5 investor visa program, which totaled $349 million, of which about $286 million remains. 

(The other entity is Fortress Investment Group. Whether and how much the EB-5 investors, recruited in China, have any say is unclear.)

The inability of the current master developer, Greenland USA, to repay those loans means that its collateral, the sites for towers B5-B10, have faced foreclosure. Those towers have been approved for nearly 3.5 million square feet.

Does that mean that construction might restart by late 2025, as an unnamed source told the Wall Street Journal? Unclear.

Notably, that article had no comment from Empire State Development (ESD), the gubernatorially controlled state authority that oversees/shepherds the project.

ESD awaiting info

So I queried ESD, which told me it's taken no action yet: "ESD is awaiting detailed information regarding the joint venture to evaluate as part of the permitted developer review process."

What role does ESD have? "ESD’s approval rights extend only to making a determination of whether the entity partaking in a foreclosure of the collateral qualifies as a 'permitted developer' pursuant to the project development agreement." 

That's an interesting question, on two levels. First, while Related obviously has the experience necessary to qualify as a permitted developer, arguably the USIF, headed by a guy with a criminal record, is a disqualified "prohibited person."

Of course, if ESD makes the latter determination, that raises questions about how USIF and Nicholas Mastroianni II were allowed to enter the project in 2014 in the first place.

Does ESD know the percentage stake to be held by Related, the only company that could qualify as a permitted developer? They're not at that stage.

Timing and obligations

Second, it's tough to believe that the discussions only involve whether Related is a permitted developer. 

Surely the firm wouldn't enter the project without some clarity on the May 2025 deadline to complete 876 more below-market "affordable" units, which come with $2,000/month penalties for each missing unit.

Similarly, the pending joint venture might want to extend the May 2035 "outside date" to complete the project.

Given not just the affordable housing obligation but also the cost of a platform, the developers might seek economic advantage, expanding the amount of available square footage. Last year, Greenland sought to add 1 million square feet to those tower sites.

Project changes?

Asked if the joint venture would develop the project as currently approved or if there's a new proposal, I was told, "No information has been submitted to ESD by the joint venture. The extent of conversations have been limited to the permitted developer review."

The project can't be reconfigured without a new public process. But Related presumably wouldn't enter the project without a commitment from ESD to make changes.

If so, doesn't that make any public review process moot?

What about Site 5?

Another question regarding the future of the project involves Site 5, the parcel catercorner to the Barclays Center, currently occupied by P.C. Richard and the now-closed Modell's.

It was approved for a substantial 250-foot, 439,050 square foot tower in 2006. But Greenland in 2016 and later in 2023 sought to expand that site into a giant two-tower project, mainly by transferring bulk from the unbuilt flagship tower, B1, once slated to loom over the arena.

That would require a separate approval process. It's not part of the EB-5 collateral. So Greenland, for now, still controls the site.

However, Greenland surely would seek a joint venture partner and/or a new developer to take over the site. It's a good bet Related has the inside track. After all, ESD has said it wants to move forward on both the railyard sites and Site 5.

In the graphic above, the top panel was created by Ben Keel for comparison with the bottom panel, provided by Greenland USA, which has been adapted to better portray Site 5 and to add annotation at left. (Original Greenland panel is here.)