Journalist Norman Oder has studied and analyzed Forest City Ratner’s planned $4.9 billion Atlantic Yards project in Brooklyn, New York, a project that three years ago, he reports, raised $228 million through the EB-5 immigrant visa program. Project sponsors, who have already built the Barclays Center Arena and have started one residential tower, are now working towards raising another $249 million, the project’s construction schedule has been extended from 10 years to 25 years and majority interest of the project sold to a Chinese government-owned company, among other issues. Oder is known as a critic of the project, but his close investigation raises ethical and legal concerns.
According to the Empire State Development Corporation (ESDC, the state agency overseeing the project) website, the Atlantic Yards Project is a $4.9 billion project that includes 16 buildings for residential, office, retail, community facilities, parking, and possibly hotel uses. These buildings will provide approximately 5,325 to 6,430 housing units, 2,250 of which will be affordable. The project also contains 8 acres of publicly accessible open space, and the arena, which opened in September 2012, a venue for the Nets professional basketball team, as well as one for the city’s colleges and local academic institutions. The project is expected to create thousands of construction and permanent jobs.
Empire State Development, in conjunction with the Metropolitan Transportation Authority (MTA), the City of New York, and affiliates of the Forest City Ratner Companies, proposes to implement the Atlantic Yards Project in two phases. Phase I includes the arena, four residential and commercial towers, along with an updated MTA rail yard and a brand new subway entrance.
The New York Regional Center/U.S. Immigration Fund, a privately-owned investment pool, is thecoordinating entity for the fundraising. The U.S. Immigration Fund has put together materials in English, including a brochure and a video with Chinese subtitles, obviously aiming at a broader market. The project is also being marketed through an immigration consultancy in London.
Taking A Close Look
Here’s Oder’s reports:
- Wednesday, January 22, 2014 – Document reveals Greenland, Chinese investor, will control Atlantic Yards; Forest City Ratner said otherwise or left ambiguity
- Tuesday, January 28, 2014 – Revealed: how New York State helped Forest City Ratner get low-interest loan from Chinese investors, asked for nothing in return
- Thursday, January 30, 2014 – Margin for the developer: Forest City says EB-5 funds used for infrastructure; evidence suggests $228M used to retire high-interest loan
- Thursday, January 30, 2014 – Exclusive: Forest City seeking $249M in cheap financing from immigrant investors (again); Chinese government would profit by selling U.S. green cards to Chinese!
And here are some highlights of these reports, in which Oder finds many discrepancies in the developers claims and what’s actually occurring:
• In a new video, Forest City Ratner CEO MaryAnne Gilmartin tells potential new immigrant investors, who'd offer a low-interest loan in exchange for green cards for themselves and their families, "Several years back, we utilized EB-5 funds to execute other infrastructure improvements in and around the Barclays Center."
Oder: Documentary evidence from the New York City Department of Finance, as well as Forest City's own statements, suggests the money was used, in large portion, to replace a high-interest land loan from Gramercy Capital. That subverts the intent, if not the letter of the law, which justifies the green cards because each $500,000 investment is supposed to create 10 jobs. (See this article for the evidence Oder has on the mortgages.)
• Representatives of the New York City Regional Center (NYCRC), the private firm engaged to market the earlier EB-5 investment, told potential investors at public events and on webcasts in China that the money would go to an arena.
Oder: Just look at one promotional poster for an event aimed to recruit investors. However, as I reported, the arena was already funded, and the marketing effort raised questions about fraud.
• “Atlantic Yards II," as promoted on the project website, is essentially the full project as announced and approved: 6,430 residential units, 627,000 square feet of office space, 8 acres of "park" (actually, privately-owned public space), a new Long Island Railroad yard, and more.
Oder: But investors would not be putting their money into that whole project but rather some vaguely defined $1.235B "project" subset. As seen in the screenshot below, 41% of the $1.235B "project" would be a senior loan – I'd guess that could include tax-exempt bonds – while 37% would be the developer's capital.
- It offers stale quotes from former elected officials about the entire $5 billion Atlantic Yards project, leaving the impression that investors' money would go to the overall project, rather than some vague subset said to be worth $1.235 billion, thus incorporating the $249 million sought as a neat 20%.
- It claims that Atlantic Yards would create 9,739 jobs, far more than the 10 jobs per investor (there would be 498) required by the law.
- The remaining 15 towers of the Atlantic Yards project are to be developed by a (pending) joint venture between Brooklyn developer Forest City Ratner and the Chinese government-owned Greenland Group. (Evidence suggests the marketing of this project began last fall, not long after the preliminary Greenland deal was signed 10/2/13.)
- The Greenland Group, which will contribute 70% of the funds going forward, will control the joint venture. So, though Forest City executives Bruce Ratner and MaryAnne Gilmartin appear in the promotional video, and surely offer more local knowledge and marketing expertise, they will ultimately answer to Greenland – even if the EB-5 project, for legal reasons, is controlled by the American partner.
- Of the current round of funding for the additional $249 million, Oder summarizes, “While they may have used some EB-5 funds for infrastructure, evidence suggests the money was used significantly to retire a high-interest land loan. But I'd bet a good share of this new $249 million will be going to help build the new railyard Forest City is obligated to start by next June and finish by 2016.”
Taking Issue With the Project
According to a report on BrooklynSpeaks,
“The Atlantic Yards project has been sharply criticized by local elected officials for failing to deliver thousands of units of affordable housing on the schedule promised at the time of the project’s original 2006 approval. In 2009, the project’s construction schedule was extended from 10 to 25 years — a change that a New York State Supreme Court has ruled was approved illegally. 2,069 of Atlantic Yards’ promised 2,250 affordable apartments would remain to be built following the proposed sale. The ESDC memo states that Greenland’s approval will be required prior to the start of any new building at the Atlantic Yards site.”
“The revelation that Greenland Holdings, a developer owned by the government of China, will control the joint venture responsible for completing Atlantic Yards contradicts previous statements made by FCRC executives. In August, FCRC CEO MaryAnne Gilmartin told the New York Times in an article announcing a prospective sale, “We’ll retain our position as the managing member.””
“It’s outrageous that a project receiving hundreds of millions of taxpayer dollars in exchange for badly-needed affordable housing for working people from Brooklyn could soon be controlled by a foreign government. ESDC has repeatedly abdicated its responsibility to the people of the State of New York with the Atlantic Yards project and is poised to do so again.” said Michelle de la Uz, executive director of The Fifth Avenue Committee.
Oder’s investigations go into much further detail on the Atlantic Yards Project, so we encourage you to take a look.