« Roman Abramovich just a ‘poor’ relation to compatriot rolling into town | Main | Roofus: Atlantic Yards remains a circus, Ringling or not »

December 17, 2010

What investing in the "Brooklyn Arena and Infrastructure Project" likely means: "Extend, pretend, and find some Chinese friends"

Part 14 of a series

Atlantic Yards Report

Where would the $249 million in EB-5 funding go?

In an unskeptical 9/21/10 article, Ratner Mulls Visa Financing, the Wall Street Journal nonetheless provided this important detail, one that seems contradicted by the project's promotion in China:

[Forest City Ratner executive MaryAnne] Gilmartin said she expects much of the money raised through the program would go toward financing the construction of a new rail yard for the Long Island Rail Road to replace the one that occupied a large portion of the site. Some may also be used to help pay off land loans on the project, she said.

(Emphasis added)

That last sentence is key. As I wrote in Part 3, Forest City Ratner need not begin to build the railyard until June 2012. The EB-5 loan would arrive next year.

Rather, new evidence suggests that a primary goal would be paying off land loans, thus arresting a cycle known in the real estate industry as "extend and pretend" (or sometimes "pretend and extend"), in which borrowers are simply given more time under the hope that the situation will improve.

"Extend and pretend" at Atlantic Yards

The developer's land loan from Gramercy Capital was reported 3/31/10 to be $161.9 million, and was refinanced earlier this year.

Earlier that month, Bruce Ratner suggested at the arena groundbreaking, Gramercy progressed from "our land lender" to "our partner." Apparently Gramercy, having already extended the loan, was given a piece of the Atlantic Yards project.

Yesterday, as I reported, an ESDC response to the State Supreme Court's 11/9/10 order regarding the failure to study a 25-year buildout confirmed that suggestion.

Read on to find out who all the winners are in this shell game — but before you do, see if you can guess who the big loser is.

article

Posted by eric at December 17, 2010 11:17 AM