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December 9, 2010

Claimed value of collateral for immigrant investors lowered by lack of timetable for office tower; no announced publicly announced plan for revenue

Part 6 of a series

Atlantic Yards Report

Exactly how valuable is the collateral offered to 249 prospective Chinese investors seeking green cards in exchange for each parking $500,000 in an investment pool that would support the Brooklyn Arena and Infrastructure Project under the EB-5 program?

There are several reasons to think that a new appraisal that calculates $542,375,000 for 3,025,654 square feet--seven towers on both the arena block and Block 1129, the southeast block--may have overvalued the development rights.

First, as noted, the MTA in 2005 appraised development rights over the Vanderbilt Yard at $75 a square foot and said in 2009 that it would be dangerous to get a new appraisal because of the bad economy. The new appraisal, which includes some land over the railyard, values development rights at more than $179 a square foot.

Also, as noted, even if the actual value is closer to $179 a square foot, it would be tough for the creditors to unlock the stated value of the collateral without a series of transactions that likely would reduce the value.

Unknown timetable for office tower

Third, included in the collateral is the value of development rights for the tower known as B-1, currently slated to be an office building--for which no market is expected soon.

The new appraisal, by the real estate firm Massey Knakal, has not been made public, but the conclusions have been outlined in both a promotional brochure (excerpt at right) and public presentations by the New York City Regional Center (NYCRC), which is working with Forest City Ratner to raise $249 million from Chinese investors.

There's no demand for office space in Brooklyn. Manhattan already has an over-capacity of office space, plus an additional projected surplus, should the current office space now on the drawing board come to fruition.

B-1 requires both a boost in the economy and an anchor tenant. In November 2009, Forest City Ratner CEO Bruce Ratner asked Crain's rhetorically, “Can you tell me when we are going to need a new office tower?”

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Posted by eric at December 9, 2010 5:21 PM