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February 2, 2011

More details on the curious valuation of future AY development sites for potential immigrant investors

Atlantic Yards Report

Thanks to the website of a South Korean migration consulting firm working with the New York City Regional Center, we now have a few more details on the surprising valuation of the collateral offered to immigrant investors for the Brooklyn Arena and Infrastructure Project.

As I wrote in December, the $542.4 million valuation for the seven development sites, which averages about $179 per buildable square foot, seems overvalued, at least when compared to what Forest City Ratner paid the Metropolitan Transportation Authority for similar (and partly overlapping) development rights over the Vanderbilt Yard.

It may be that Forest City Ratner got a good deal, and that the estimates presented to the potential immigrant investors, given the cost of actually turning that value into cash, were overblown. I queried the real estate firm Massey Knakal, which produced the official estimate of value, but got no response.

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Related coverage...

Atlantic Yards Report, How Bloomberg went to bat for Ratner's effort to gain $249 million in immigrant investor funding

Thanks to the website of an immigration broker in South Korea, we now have some of the documents used to promote the legitimacy of the effort to raise $249 million in EB-5 funds, mainly from Chinese investors, but partly from Korean ones, for Forest City Ratner's Atlantic Yards project.

Most of the documents are boilerplate recitations of money committed, though presumably presented as impressive signs of government and corporate commitment to so-called Brooklyn Arena and Infrastructure Project, a curious subset of Atlantic Yards as presented via the EB-5 program for immigrant investors.

Notably, however, one letter, from Mayor Mike Bloomberg, shows how much the city has gone to bat for such a questionable effort.
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Bloomberg calls the $249 million sought "vital to the initial stages" of Atlantic Yards. However, as state officials admit, the project would go forward with or without the new funding.

Atlantic Yards Report, In South Korea, unlike China, NYCRC promises a dollop of interest to sweeten the Brooklyn Arena and Infrastructure Project

Maybe potential immigrant investors from China really are seen to be dumber, or more desperate.

Remember, the New York City Regional Center (NYCRC) promises them zero interest on the $500,000 they would park in the Brooklyn Arena and Infrastructure Project, which is supposed to get them and their families green cards.
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In South Korea, however, the web site of the Kookmin migration consulting firm shows that investors would earn an annual .25% dividend rate, less than the 1% and 2.5% on two other projects represented by the firm, but at least something.

That would cut slightly into Forest City Ratner's savings on the $249 million loan, which I've estimated at $191 million.

While the NYCRC's efforts have been concentrated in China--a promotional video has Borough President Marty Markowitz claiming "there's nothing better than China and Brooklyn together"--the chart indicates that the firm is seeking 40 of 498 investors from Korea.

Posted by eric at February 2, 2011 10:54 AM