September 21, 2010
Forest City Ratner seeks Chinese millionaires for capital bailout, with green cards as bait; job-creation math is dubious, but nobody's talking
Atlantic Yards Report
"Scooped" by The Wall Street Journal last night (more about that above), Norman Oder publishes an absolute must-read exposé of Forest City Ratner's efforts to raise nearly a quarter of a billion dollars in China through a federal program that essentially trades green cards for investments in U.S. real estate projects. Want proof that it's fishy? Just about no one will respond to Oder's inquiries.
“I have no debt. The only expense I have is the operation of it and the utilities to run it. I’m going to be successful. I’ve been able to defer and, in large part, eliminate the biggest cost of development, which is capital.”--Bill Stenger, developer of the Jay Peak resort in Vermont, Burlington Press, Turning green cards into gold, 11/23/08
“At the end of the day, it’s all about the cost of the capital. And if we can do it at a reasonable, affordable cost, we’ll do so. I think the opportunity exists to bring partners into some of our development projects."--Forest City Enterprises Executive VP Bob O’Brien, 9/13/10 conference call with investment analysts
Though some think the Atlantic Yards saga is over, it's simply hit a new phase. The most audacious quest for government assistance--after direct subsidies, tax breaks, eminent domain, and the giveaway of arena naming rights--awaits.
Just as Forest City Ratner found a sports-loving Russian billionaire to buy 80% of the Nets and 45% of the arena as part of his plan to make a splash in America, now the developer has targeted another group of foreigners whose motives go beyond economics.
Thanks to a little-known provision in immigration law known as EB-5, the developer--with green cards as the carrot--seeks 498 Chinese millionaires, to supply $249 million in low-cost financing for the project.
(For what exactly? While the graphic below cites the arena, or "Nets stadium," the Wall Street Journal last night reported that it could finance the rail yard, or pay off part of a land loan.)
In exchange for creating ten direct or indirect jobs or retaining ten direct ones--a formulation that offers enormous wiggle room--the investors would get permanent residency for themselves and their families, a chance to live anywhere in America, and an opportunity to get kids educated in the American system.
Thus the New York City Regional Center (NYCRC), a government-authorized private investment vehicle, is planning an eight-city roadshow through China, beginning October 11, as noted on this blog (graphic at right) that tracks EB-5 news. And, according to the Journal, Bruce Ratner will be on the trip.
(NYCRC is the source of graphics above and below left.)
Can they get away with it?
It looks like they might get away with it, thanks to the EB-5 visa program, which, beyond its philosophical flaws--more on that below--allows regional centers to demonstrate job-creation via economic models.
Thus, the NYCRC would have to:
1) suggest the project in the next few years could generate or save at least 4980 direct or indirect jobs
2) argue that, without this new investment of $249 million, those 4980 jobs would be lost.
It's likely the NYCRC, with the help of Forest City Ratner, will submit documents backing both claims.
Both, however, are ridiculous, as I'll detail below.
NoLandGrab: When it comes to dubious subsidies, turn over a rock, and it's almost certain Bruce Ratner will slither out. But it's all about Brooklyn, right?
Posted by eric at September 21, 2010 10:55 AM