Audit from Greenland USA's parent company says developer is "actively taking measures" to address risks from losing project collateral. Which means?

The latest Chinese-language annual audit (link) from Shanghai-based Greenland Holdings Group, the parent of troubled Atlantic Yards/Pacific Park developer Greenland USA, offers little clarity on the future of the project.

Surprisingly, though, it suggests that Greenland might have some chance to retain the six railyard development sites (B5-B10) facing foreclosure since November 2023.

The passage at right states, in machine translation:

 2. Among the current long-term loans of American Commercial Holdings (Pacific Park Project in New York), the EB-5 loans to AYB Funding 100, LLC and AYB Funding 200, LLC will expire on June 30, 2023 (a total of US$285 million, worth RMB 2 billion), and the loan collateral is the platform land and B5-B10 development rights. The lender officially launched the asset disposal procedure in January 2024. After continuous negotiations between the Group and the lender, the lender has continuously postponed the auction process, with the latest postponement being postponed to April 29, 2025. As of the reporting date, the Group is still actively taking measures to deal with the risks brought about by the possible disposal of the asset. 

Has "continuous negotiation" between Greenland and the lender led to regular postponements since the foreclosure was announced in November 2023, with a January 2024 auction date? 

Or was it the lack of a successor developer to take over the project, surely aiming for a renegotiation of terms? 

I suspect the latter. Indeed, a new joint venture involving Cirrus Workforce Housing Partners may be in the wings, though details are scarce.

What risks?

As to the risks "brought about by the possible disposal of the asset," well, if Greenland hasn't paid back the loans, how could it expect to control those six development sites?

Perhaps that refers to a larger risk: maintaining cordial relations with Empire State Development (ESD), the state authority that oversees/shepherds the project.

Greenland still aims to monetize the bulk of the unbuilt B1 tower, once slated to loom over the arena, and move it across Flatbush Avenue to Site 5, longtime home of P.C. Richard and the now-closed Modell's, to create a giant, two-tower project.

That means Greenland would be part of a joint venture or would sell the development rights. It's highly unlikely Greenland would have the capacity to develop Site 5 on its own.

Spending slows

Another section of the audit addresses Development Costs for various projects. 

Atlantic Yards/Pacific Park is in the bottom row of both the 2024 audit, directly below, and the 2023 audit, further below, which I wrote about last year.

2024 audit

2023 audit

Both documents posit a start date of 2014 and a completion date of 2035, though the latter is no longer plausible, and an estimated total investment of ¥44,396,800,000.00, or more than $6.14 billion.

The beginning balance in 2024 was ¥7,069,316,109.77 and the ending balance ¥7,164,424,245.54, suggesting an expenditure during the year of ¥95,108,135.77, or less than $13.2 million, far less than the $84 million in the previous year.

The latter, I suspected, included debt, planning, and professional services. 

In 2024, unlike in 2023, Greenland did not make an $11 million annual payment to the Metropolitan Transportation Authority for development rights over the Vanderbilt Yard. Rather, that was somehow paid for by an entity associated with the EB-5 middleman.

Losses slow, too

The end of period impairment provision was ¥2,882,036,892.88, or $398.9 million (as of today's conversion), up a relative fraction from ¥2,839,658,714.21, which last year was worth about $390.4 million (and today is worth about $393 million).

That's a difference of ¥42,378,178.67, or about $5.9 million.

An impairment refers to a loss in value, which, according to this source, can mean a significant decrease in the asset's price, a significant adverse change in business climate, costs higher than expected, operating losses, and a significant adverse change in the way an asset is being used.

So it's not a formal loss based on a transaction, but a recognition that the property is not worth what it should be. After all, Greenland, rather than being able to build, has been stalled, so costs mount, and interest rates rise.