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March 18, 2011

With Federal Case and Modular Building Plan, New Attention for Atlantic Yards Project

The New York Times
by Charles V. Bagli

The Atlantic Yards project began with much fanfare in December 2003, when the developer Bruce C. Ratner unveiled his plans at a pep rally at Brooklyn Borough Hall: an exotic basketball arena and a sprawling residential development that would provide affordable housing, jobs and community development.

The $4.9 billion project took a battering during the ensuing seven years of public review, controversy and delay. Today, the 18,000-seat basketball arena, which will be home to the Nets, is taking shape at Atlantic and Flatbush Avenues. But revelations in the past few days have brought renewed attention to the rest of the 22-acre project.

Last week, a federal bribery case against State Senator Carl Kruger turned up a recording of an executive at Mr. Ratner’s company, Forest City Ratner, pressing Mr. Kruger for $9 million to rebuild the Carlton Avenue Bridge at Atlantic Yards. Forest City Ratner did not get the money, and the executive was not accused of any wrongdoing, but the recording did bring unwanted attention to the company’s desperate search for financing.

And this week, Forest City Ratner confirmed that it was considering erecting a 34-story prefabricated, or modular, tower, as a way of cutting its construction costs and fulfilling its obligation to start building housing.

The construction unions that Mr. Ratner had lauded last year for sticking with him were stunned by the suggestion that much of the work might take place in a factory, where wages are much lower than on-site. Forest City has put off the start date for the tower, the first of 16, until the end of the year.

Develop Don’t Destroy Brooklyn, the organization whose lawsuits delayed the project for years, said the plan for a modular building was the latest in a long line of broken promises.

article

NoLandGrab: What really delayed the project for years was a) a degree of outlandishness and unrealistic ambition that, b) made the project impossible to finance, compounded by c) an absolute disregard for public process that forced opponents to pursue legal action.

Related coverage...

Norman Oder is moved to publish two blog posts on The Times article.

Atlantic Yards Report, Times can't help but notice bad news about Atlantic Yards, gets supportive quote from Markowitz, soft-pedals EB-5 story, railyard deal

The New York Times today follows up on the skein of bad news and broken promises afflicting the Atlantic Yards project, but doesn't go nearly far enough.

The article downplays the bargain Forest City Ratner got on the renegotiated railyard and finally mentions--but completely soft-pedals--the astounding effort to trade green cards for purportedly job-creating investments.

The headline, With Federal Case and Modular Building Plan, New Attention for Atlantic Yards Project, inherently indicates the Times's own role in calling attention to the project.

Yes, the taped conversation between scandal-plagued state Senator Carl Kruger and Forest City Ratner executive Bruce Bender is in the public record, but the modular building plan was a Times scoop.

The missing scoop(s)

And the Times could've had a scoop of sorts on Forest City Ratner's effort to exploit the EB-5 investment program; after all, I laid out a road map in a comment yesterday on the Times's web site.

Instead, just as with two other pieces of damning Atlantic Yards news--Forest City Ratner's bailout of ACORN, and the major cut in the value of arena naming rights--the Times covered it belatedly, parenthetically, and weakly.

Atlantic Yards Report, How does refinancing a land loan and helping build a new railyard create Atlantic Yards jobs, under EB-5? It defies common sense

Bagli writes:

[Forest City] also lined 498 Asian investors who enrolled in an obscure federal program that grants green cards in exchange for a $500,000 investment in a job-producing American project.

MaryAnne Gilmartin, executive vice president of Forest City Ratner, said that when it received final approval from the federal government, the $249 million would be used to pay down a land loan for the project and additional work on the railyard.

How would that create jobs? It wouldn't--at least not in great quantity, not close to the 4980 minimum jobs required (ten per investor) or the 7696 jobs claimed.

If no EB5 funds, then what?

What happens if Forest City does not pay down the land loan? The collateral development rights would have gone to their lender, Gramercy Warehouse Funding, if Forest City didn't pay. Now they'd go to the Asian investors.

What about the railyard? They're obligated to build the railyard by 2016; if they can't come up with financing they'd lose development rights.

Their whole 2005 bid to the Metropolitan Transportation Authority--and the renegotiation of the bid in 2009--was based on the premise that the cash component was only a small percentage of the overall value.

How jobs are calculated

In either case, note that under federal guidelines, actual jobs need not be counted; rather, an economist's report suffices. It applies a "multiplier" to the total sum invested.

However, for the "Brooklyn Arena and Infrastructure Project," Forest City Ratner and its partner, the New York City Regional Center, have been claiming that the $249 million sought is part of a $1.448 billion package, and that the "multiplier" be applied to the entire sum.

That of course would increase the number of jobs.

That may pass muster under lax federal review, but it's bogus.

It's bogus because refinancing the loan wouldn't create jobs.

And it's bogus because the arena--nearly a billion dollars, and the main component of the EB-5 project as pitched to investors--is already funded and would go ahead with or without the immigrant investor funds.

Posted by eric at March 18, 2011 1:11 PM