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December 6, 2010
The savings on the $249 million no-interest loan sought by Forest City Ratner? Likely $191 million (at least) to $314 million over seven years
Part 2 of a series
Atlantic Yards Report
On October 11, I did some very imprecise math, trying to estimate the savings on a $249 million no-interest loan that Forest City Ratner seeks from immigrant investors under the EB-5 program, which trades green cards for supposedly job-creating investments.
I estimated the developer would save nearly $100 million over five years. Actually, the savings would likely be double that, at least, so it's no wonder the developer is pushing very hard to get this deal done.
My estimate needs an update because the loan could last seven years, not five, according to a Recognition Agreement signed by the state; the impact of compounding was not calculated; and a wider range of interest rates should be considered.
Savings: likely $191 million (at least)
A reader more versed in finance has produced the charts below. (Click to enlarge.) The bottom line: over seven years, at a conservative 8.3% interest rate, Forest City Ratner could save nearly $191 million.
At a somewhat more likely 10% interest rate, FCR could save $244 million--nearly the value of the loan.
At the plausible interest rate of 12%, the developer could save $314 million.
NoLandGrab: Did we mention that this series is a must-read?
Posted by eric at December 6, 2010 9:12 AM