As foreclosure auction adjourned yet again, Greenland USA remains (zombie) developer for railyard sites

It's the foreclosure auction that never happened--apparently because it won't happen until there's a new deal in place.

Wall Street Journal, Feb. 26, 2025

However, given all the moving parts on a potential deal, it won't be easy.

A foreclosure auction of developer Greenland USA's rights to develop six towers (B5-B10, see below) over the Vanderbilt Yard--specifically, "membership interests in" AY Phase II Development Company--was announced Nov. 15, 2023, and then illuminated 12 days later in a bombshell Real Deal article.

At that point, the foreclosure auction was announced for Jan. 11, 2024. 

It's been postponed again and again. Most recently, as shown in the screenshot at right, it was postponed to March 24, 2025.

Delays possible likely

As I wrote Jan. 11, 2024, the notice states the Secured Party "reserves the right to cancel the sale in its entirety, or to adjourn the sale to a future date."

That's what's happened, even as a May 31 deadline looms for $2,000/month penalties for 876 unbuilt affordable housing units. 

Many moving parts

The collateral is being sold by DBD AYB Funding and DBD AYB Funding II, affiliates of the U.S. Immigration Fund (USIF), the "regional center" that recruited immigrant investors to loan $349 million to the project under the EB-5 investor visa program. About $286 million remains unpaid.

Those loans have below-market interest rates, advantageous to developers, and the regional center keeps most if not all of the interest. That's because investors, mostly from China, focus more on green cards than investment return, but they do expect their money back.

One challenge in this case: the USIF, as manager, controls the loans, thanks to advantageous contract language, but it didn't put up the money. So delays in activating the collateral, even penalties for unbuilt affordable housing, may not be too painful for the decisionmaker.

Another challenge: no developer would bid until it knows the contours of a future Atlantic Yards deal, including whether Empire State Development (ESD), the state authority that oversees/shepherds the project, would enforce those penalties--and on whom. (We may learn more at a meeting of the Atlantic Yards Community Development Corporation on March 19.)

The USIF may control the debt, of which Fortress Investment Group has a piece, but they can't activate the collateral until they have a "permitted developer," with more than a decade of experience in large projects, on their team. 

Related Companies, which built Hudson Yards, was lobbying on the project last year, but earlier this year pulled out, for undisclosed reasons.

Greenland the (partial) zombie

Greenland, which sold Atlantic Yards/Pacific Park development leases for three of the four most recent towers (B15, B12/B13) to be constructed, and which developed the other (B4) as a joint venture, lost its Atlantic Yards point man and has otherwise receded from development activities both in Brooklyn and in Los Angeles.

So, while Greenland's still nominally the project's master developer, since November 2023 it's faced the likelihood of losing most of the remaining buildable parcels.

Complicating the picture is that a USIF affiliate last year paid, despite the unconsummated foreclosure, the $11 million annual installment to the Metropolitan Transportation Authority for development rights over the railyard.

About Site 5

Despite its zombie status regarding the railyard sites, Greenland still does seek to reap value from its remaining holdings: the rights to build the B1 tower, once slated to loom over the arena, and a tower at Site 5, catercorner to the arena, the longtime home of the big-box stores P.C. Richard and the now-closed Modell's.

In 2021, it gained support from ESD for a giant, two-tower project at Site 5, moving the bulk of the B1 tower.

It's likely Greenland would take on a partner for Site 5 or sell the rights once it has formal approval from ESD, which could take at least a year and involve public hearings.

So even if Greenland faced significant losses regarding the railyard parcels, it presumably retains assets  that could be deployed, even if indirectly, to pay the penalties--at least if ESD will impose them.