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December 6, 2010

Arena block could take 19 years, as ESDC grants seven-year extension, enabling FCR's plan to recruit Chinese investors under EB-5 program

Part 1 of a series

Atlantic Yards Report

The effort by the New York City Regional Center (NYCRC), the private investment pool federally authorized to accept immigrant investor funds, and developer Forest City Ratner (FCR) to raise $249 million from 498 Chinese millionaires under the EB-5 immigration program may be legal, but there is ample reason to question whether it will serve the public interest. I called it "the most audacious quest for government assistance" in the Atlantic Yards saga.

Here's brief and extensive background on the "Brooklyn Arena and Infrastructure Project," an ad hoc name for the project as presented to immigrant investors. FCR likely would save at least $191 million with a no-interest loan, while the NYCRC, along with immigration attorneys, would reap substantial fees. Additional coverage will include the marketing effort in China, the role of public officials, and the collateral at issue.

The Empire State Development Corporation (ESDC), the state agency with oversight over Atlantic Yards, has again extended the deadlines to get the project built, allowing seven additional years for Phase 1.

Why? Because Forest City Ratner wants a valuable, no-interest loan from immigrant investors looking for green cards.

The beneficiaries? The developer, and the Chinese investors who might end up owning nearly half of the non-arena project site, development rights to seven of 16 towers, as shown in the screenshot below right.

The losers? The public, since expected project benefits such as affordable housing and new tax revenues could be delayed, while burdens like an interim surface parking lot could be extended.

Under the scenario--in a Recognition Agreement for the loan approved by ESDC staff, with no need for board action--the 12-year timetable for Phase 1 would be suspended for seven years.

Thus, the minimum square footage required for Phase 1 could take 19 years, nearly twice as long as the entire project was supposed to take.

Is such a delay likely? We can't be sure, but considering the extensive provisions documented in case Forest City Ratner defaults on the loan, the state and the developer seem to take a default scenario seriously.

Indeed, the scenario casts huge doubts on FCR's public rhetoric, via executive MaryAnne Gilmartin (video below) that it is "100 percent committed to delivering the Atlantic Yards project and all of its benefits to the borough of Brooklyn."

And it suggests that the ESDC, rather than protecting the public interest, is more concerned with saving the developer money.

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Posted by eric at December 6, 2010 9:04 AM