Wednesday, April 30, 2014

Atlantic Yards and the Culture of Cheating (links)

I offer a framework to analyze and evaluate Atlantic Yards and the Barclays Center: Atlantic Yards and the Culture of Cheating.

Note: this post is post-dated to remain at the top of the page. Please send tips to the email address above, rather than posting a comment here.

Friday, April 18, 2014

EB-5 for everyone: as program spreads, could "selling" green cards help finance platform for Vanderbilt Yard and new Brooklyn Nets practice facility?

Why wouldn't any developer try to lower the cost of capital by getting below-market loans from green card-seeking immigrant investors under the federal government's EB-5 program?

Answer: more and more are doing it. As Crain's reported 4/15/14, in Kingsbridge Armory may skate on foreign ice:
A new slate of huge development projects in the city is tapping into a source of financing that provides their builders not only with cheap capital but with foreign investors eager to pour money into the projects with a path to U.S. citizenship.
Those include the conversion of Kingsbridge Armory in the Bronx into the Kingsbridge National Ice Center, as well as an outlet mall on the Staten Island waterfront in St. George. 

And guess what? "Related Cos. also plans to use EB-5 funds to cover a portion of the tab for a $750 million platform it is building as the foundation for its Hudson Yards development."


The Atlantic Yards connection

I wouldn't be surprised if Forest City Ratner and its expected partner, the Chinese government-owned Greenland Group, will use EB-5 funds to build the platform needed to get vertical development started over the Vanderbilt Yard in Brooklyn.

After all, they've already (reportedly) raised $228 million thanks to some misleading marketing. That sets up the bizarre situation of the Chinese government profiting from marketing green cards to Chinese millionaires seeking to jump the U.S. immigration line.

And I wouldn't be surprised to see Brooklyn Nets, 80% owned by Mikhail Prokhorov's Onexim group, take their cue from Atlantic Yards and use EB-5 to turn industrial space in Sunset Park into a new Nets practice court and training facility.

After all, Jamestown Properties, owner of the Industry City complex in Sunset Park, hired Andrew Kimball, who used to oversee the Brooklyn Navy Yard, the first local recipient of EB-5 funds.

“At first, we were sort of scratching our heads, thinking, is this real?” Kimball told Crain's in 2012, seemingly incredulous at the opportunity to leverage public assets for private gain. “The next thing we knew, we were falling out of our chairs.”

How it works

Note the description by Crain's: "a source of financing that provides their builders not only with cheap capital but with foreign investors eager to pour money into the projects with a path to U.S. citizenship."

The unanswered, glaringly obvious question: why should developers get a chance to profit from hawking a public asset, green cards.

Well, under EB-5, immigrant investors get green cards for themselves and their families if they park $500,000 in an investment that purportedly--thanks to an economist's report--creates ten jobs.

The investors accept zero or low interest, because they want the green cards and the return of their cash more than any return. (Yes, they're putting their money at risk, as some projects fail, but for most investors the biggest sacrifice is the foregone return.)

In return, the developers get a loan at below-market interest rates.

Everyone else makes bank, too.

The middleman--the private entity known as a regional center--gets the spread. The regional center, which may pay bounties to other middlemen, also takes a fee from the EB-5 investor. Others making profits include reps in China and attorneys.

The purported benefit to Brooklyn and the USA is the creation of jobs, but in many cases no new jobs are actually created--in this case, it would just be cheaper capital.

Because developers and entrepreneurs are so eager to be "falling out of their chairs," they manipulate an already sketchy program, using deceptive marketing and gerrymandering their location to fall into a zone of high unemployment, which qualifies the project to investments of $500,000 rather than $1 million.

The loser? The American people, who should benefit from a more coherent and ethical program for immigrant investors, such as a direct investment into government bonds rather than the current Rube Goldberg process.

The current program, billed as a win-win-win for investors, entrepreneurs/developers, and the public, ignores the notion of opportunity costs--an alternative program could benefit the public far more.

Some thoughtful criticism

Consider Dartmouth business professor John Vogel's U.S. News February 2013 column, Why Is the U.S. Government Selling Green Cards?, where he raises several questions, the responses to which I've excerpted:
Question No. 1: Is the United States actually selling green cards?In its original form, one could argue that the primary purpose of EB-5 was to encourage individuals and companies to create jobs in the United States. In its current form, we are selling green cards and the opportunity to become a U.S. citizen. What is surprising is that such a controversial idea has not sparked significant debate.
Question No. 2: Is it in the best interest of the United States to give priority to wealthy foreigners?
From the perspective of creating jobs over the long term, one might question whether it is better to bet on the person from a wealthy family or the MBA. With respect to the 18-year-old college hopeful, we all know that there are advantages to being wealthy, but are we comfortable creating laws that explicitly favor those born to wealthy families over those born to poor families?
Question No. 3: Are these prudent investments?
Into this highly competitive, oversupplied market, we are asking a group of amateurs, the EB-5 investors, to compete against sophisticated professionals with extensive deal sourcing networks and years of experience.
Question No. 4: Are there good alternative uses for the EB-5 money?One of the oddities about the EB-5 program is that the U.S. government is giving out the green cards, but the entrepreneur who puts together the investment gets the money. This scheme seems inefficient and open to corruption. If our government really believes that it is a good idea to sell green cards, maybe we should drop the pretense that this is a job creation program. It might be more efficient to have the money go directly to the U.S. Treasury and reduce the deficit by billions of dollars a year. In fact, the U.S. government could auction off these green cards and perhaps raise even more money.
(Emphasis added)

And Voegel didn't even address deceptive marketing and gerrymandering.

Thursday, April 17, 2014

Latest report: Atlantic Yards would be a 20-year buildout (actually, 22 years), rather than "comparable" to 2006 plan

There are a couple of very interesting tidbits in the 4/16/2014 Forbes article about B2, Building The World's Tallest Modular Apartment Tower.

First, the article says the building is slated to be finished by December, with no mention that it seems to be behind schedule. Given that the process to create a module takes 20 days, it's certainly possible to be built quickly, be we don't know how long it will take to build and deliver the remaining 819 modules.

Second, the project buildout is said to last 20 years.

It's not specified when that 20-year period ends, but if we count the December 2012 groundbreaking for B2, that means Atlantic Yards would be finished in December 2032. 

That's less than the 25-year outside date (end of 2035) in the Development Agreement signed at the end of 2009, which triggered the project start in 2010, but that would mean a 22-year overall buildout, including the arena, not a 20-year one.

Other timetable claims

That 22-year buildout doesn't comport with the statement, in the pending Draft Supplementary Environmental Impact Statement, which was charged to study the impacts of a worst-case scenario, a 25-year buildout:
The joint venture documentation includes a target development schedule for Phase II construction that is substantially shorter than the one being analyzed in this SEIS. The schedule is comparable in duration to the schedule studied in the 2006 FEIS. 
The uninformed caption suggests the arena block makes up
all that needs to be built in 20 years
The 2006 Final Environmental Impact Statement analyzed a ten-year schedule, but consider that "target development schedules" have a tendency to be wrong." Remember Bruce Ratner claiming in 2008, "We anticipate finishing all of Atlantic Yards by 2018.

Also, I wonder if that "documentation" involves a misinterpretation of the statement last November from Chairman Zhang Yuliang of the Greenland Group, Forest City's expected joint venture partner in Atlantic Yards, that (in the Wall Street Journal's paraphrase) "he expected the development would take about eight years to complete."

After all, Skanska has said the plan is to build eight towers in eight years.

James's criticism

That means Public Advocate Letitia James's criticism needs to become a more nuanced. The Daily News reported yesterday on a meeting James had with reporters yesterday:
She also blasted construction at the taxpayer-subsidized Atlantic Yards arena, saying the project needs to be revisited since it's going to take too long to build. Developer Bruce Ratner agreed to build 2,250 units of affordable housing along with an arena and luxury condos. He's received roughly $760 million in tax breaks in return.
"This cannot be a construction site for 25 years," she said, adding that an environmental impact statement needs to be done.
Well, the project is being revisited, but there is no attempt by the state to seek other developers because it would be too complicated to unravel deals signed to Ratner's advantage.

An Supplemental Environmental Impact Statement is in process, but it reinforces the status quo.

The overarching issue, James should know, involves power and oversight: will the state allow any new structure for citizen input and oversight over the project, or will the developer--no longer Forest City but the upcoming Chinese government-dominated joint venture--remain in the driver's seat.

Potted history

The Forbes article includes a couple of examples of Atlantic Yards down the memory hole.

Note the caption at right, that says trucks bringing the mods make half their trips at night to avoid traffic. Actually, the initial plan was to deliver one at night.

While that will cut down the number of daytime deliveries and potential traffic disruption on Flatbush, it also sets up a scenario of potential disruption during the night for residents on Dean Street and nearby Sixth Avenue.

And neither scenario was studied in any official oversight document.

Also, the article states:
FCS Modular, a joint venture between New York City real estate developer Forest City Ratner (which was forced to build the affordable housing as part of its Barclays Center deal)...
Forest City Ratner wasn't forced to do anything. It proposed the 50/30/20 plan for the rental units in an effort to sway public opinion and gain control of a coveted site.

Saving money

The article suggests that the industry is watching, given that modular may help lower costs and increase supply around the city:
A 1,000-square-foot apartment in New York costs an estimated $330,000 to build; FCS estimates it will knock 15% to 20% off that this go-round–and as much as 30% off with more experience.
Note that they're not building any 1000-square-foot subsidized apartments, at least not in the first tower.

The article says cross-trained workers can speed up the factory work, "a big departure from New York City union construction practices, which mandate ridiculousness like framers finishing all their work before an electrician can even tackle the same area." Unmentioned is the savings by eliminating certain skilled trades, the subject of a lawsuit.

Forbes also reveals savings in building materials, because FC Modular buys directly, in volume:
The company directly purchases some 1,400 components. By controlling the process, FCS has found some great suppliers, including a company in China that produces smooth sheets of engineered quartz scored to look like tile, eliminating the need for grout in the bathroom “pods.” 

Wednesday, April 16, 2014

Behind the Downtown Brooklyn Partnership's curious maps: a city contract defining "Downtown Brooklyn" as extending to Dean Street and Vanderbilt Avenue

The debate about whether Community Board 2 should include the Atlantic Yards site raises questions about whether Atlantic Yards is more identified with Prospect Heights--which its clearly in--or an expanded notion of Downtown Brooklyn.

The Downtown Brooklyn Partnership, the city-funded local development corporation that has promoted Forest City Ratner's interests, has seemed confused, as I wrote in May 2013.

Its maps long suggested that Downtown Brooklyn stops near the border of Atlantic and Flatbush avenues. At right, for example, the map cannot fit Atlantic Yards.

That's consistent was many other reports, such as the June 2001 report Group of 35 report on office space in Downtown Brooklyn.

But the maps have evolved.

After the proposal for a new Barclays Center-area BID surfaced in January 2013, a new map indicating current development projects (left) found space for the Atlantic Yards site, albeit with the assistance of an inset.

(That effort ultimately was abandoned.)

Then, as shown below, the DBP prepared a new two-page map that manages to transcend the graphical limits of the earlier maps.

First, there's a map focusing on the more traditional boundaries of Downtown Brooklyn, with Tillary Street at the north and Fulton Street at south, and Flatbush Avenue at the east and Clinton Street (one block into Brooklyn Heights from Court Street) at the west.

The second page, however, posits a sort of Greater Downtown Brooklyn, encompassing DUMBO, Brooklyn Heights, the Brooklyn Navy Yard, and Fort Greene, which are all marked.

There's no notation for Prospect Heights, but the map indicates the Barclays Center and extends to the eastern boundary of the Atlantic Yards site, to Vanderbilt Avenue.

City mandate: to Vanderbilt

Well, the notion of "Downtown Brooklyn" is a curious thing, as I recently discovered, thanks to a Freedom of Information Law request that revealed the 7/1/06 contract between the City of New York and the Downtown Brooklyn Partnership for "consulting services" to stimulate economic development, promote growth, coordinate services, and to assist in any area the Deputy Mayor and consultant "mutually agree on."

The contract defines the "Downtown Brooklyn Area" as extending south to Dean Street, east to Vanderbilt Avenue, and north to DeKalb Avenue, as shown in the screenshot below.

That has nothing to do with any definition of Downtown Brooklyn and seems clearly gerrymandered to encompass the emerging Atlantic Yards project. (And also, perhaps, extend the boundaries of Community Board 2, where presumably Forest City Ratner has more clout.) After all, the Downtown Brooklyn Partnership, even in its expanded map, doesn't try to show the corner of Vanderbilt and DeKalb avenues.

Community Board 8 sends letter rejecting CB 2's Atlantic Yards map change; advocate Veconi suggests CB 8 expand to Atlantic/Flatbush boundary

Following up its vocal rejection of Community Board 2's plan to expand its borders to include the full Atlantic Yards footprint, Community Board 8 has sent a forceful letter (below) to Mayor Bill de Blasio, Borough President Eric Adams, and Council Member Laurie Cumbo reiterating its stance.

Given the need for consensus, it's unlikely that Community Board 2 can get its way. The question then becomes how this will be resolved.

One advocate suggests Community Board 8 should expand its borders to encompass the rest of the Atlantic Yards site between Flatbush and Atlantic avenues, leaving only one plot west of Flatbush, Site 5 (currently occupied by P.C. Richard and Modell's), for Community Board 6.

In a post on Patch, Prospect Heights Gib Veconi makes a strong argument for including Atlantic Yards in Community Board 8:
Given the challenges of integrating Atlantic Yards into a much less dense existing neighborhood, it would seem obvious that the residents of the Atlantic Yards high-rises should be in the same community board as their low-rise neighbors. The need to integrate also will be especially acute for those towers planned to be built along Vanderbilt Avenue, the “main street” of Prospect Heights. For these reasons, the CB2/CB8 border should be moved not further south to residential Dean Street, but north to Atlantic Avenue, an arterial road that is the natural division between Prospect Heights and Fort Greene.
While extending the CB 6 border east to Vanderbilt Avenue would restore coterminality with the 78th Precinct (expanded to enmpass the project) and "might represent a minor bureaucratic convenience," Veconi suggests it "would be a major disadvantage to consistent neighborhood policy" regarding plans for landmarking, liquor licenses, and traffic calming.

He concludes:
The current carve-outs on the north and west sides of district 8 can no longer be justified as being consistent with the intent of the Charter. And moving them further into Prospect Heights would lead to disenfranchisement of neighborhood residents and business owners. Economic, demographic and land use changes are coming too quickly in Prospect Heights to let that happen. Let’s hope that when the dust settles on this debate, our one community will finally get one Community Board.
Community Board 8 Letter on Atlantic Yards Boundaries, April 11, 2014

Tuesday, April 15, 2014

From Skanska, some curious (and questionable) Atlantic Yards plans: 8 buildings in 8 years, 4000 apartments, an 80-story tower (!); also, only 30 workers on site

Some rather astounding--and not necessarily accurate--information about plans for Atlantic Yards modular construction has been published by Forest City Ratner's construction partner Skanska in the 2014-15 Build Offsite Review produced by an industry organization in the United Kingdom that promotes modular construction.

For example, it says "the development plan is to construct eight buildings over a number of years to provide 4,000 apartments for mixed tenure occupation," as shown in the screenshot at right.

That's not the approved and promoted Atlantic Yards development program, however, which would involve 16 towers and 6,430 units, including 2,250 subsidized, affordable rentals.

Rather, 4000 apartments in eight buildings--500 units/building--would be a dramatically skewed conception of the project, front-loading a majority of units in the initial buildings, and leaving the final 2430 units to be built in the remaining eight buildings.

It doesn't quite make sense. The first tower, 32 stories, will hold 363 units, which implies that future towers would have to be much larger.

Then again, perhaps it's simply their conception of Phase 1, which involves buildings on the arena block, and buildings on the southeast block, Block 1129, ignoring the expensive deck over the Vanderbilt Yard. The development over the latter is supposed to cure the blight that was the justification for eminent domain.

It might reflect that fact that Forest City and its expected new partner, the Chinese government-owned Greenland Group, are not required to build the entire project. (I'll get to the requirements below.) Or maybe it's just an error.

Eight buildings in eight years?

How long will eight buildings take? We don't know, since modular construction is still being worked out and the first tower is behind schedule.

However, Robert Francis, Director, Innovation and Business Improvement at Skanska UK, suggested the eight buildings would take eight years, as a 2/3/14 presentation (excerpt below). 

This might put into perspective the statement last November from Chairman Zhang Yuliang of the Greenland Group, Forest City's expected joint venture partner in Atlantic Yards, that (in the Wall Street Journal's paraphrase) "he expected the development would take about eight years to complete." 

If so, maybe Zhang was talking about eight buildings--either the first phase of residential, or a significantly truncated project.

How many apartments required?

The joint venture by Forest City and Greenland, which the latter will control, is not required to build all the units, just the subsidized ones.

According to the Development Agreement (excerpt at left), they need only build a minimum of 4.47 million square feet, which sounds like significantly more than 4,000 apartments, given limited area for retail. Unless they build office space and/or a hotel.

They do need to build 2,250 affordable units. 

But it doesn't make sense that 4000 units would be the entire project, including 2250 affordable ones.

Even if every building were a 50/30/20 rental--and that's highly unlikely--they still couldn't build 2250 subsidized units in a total of only 4,000 apartments.

So maybe 4000 units is only the first phase, thus involving a smaller number of subsidy units.

Maybe there will be new subsidies, or revised agreements.

Or maybe Skanska was being very sloppy.

An 80-story tower?

B2 will be 322 feet, or about 32 stories. Other towers will be both taller and shorter.

But Skanska has made an astounding statement.

As noted in the second page of the excerpt from the Build Offsite Review, "Future phases of the development will rise 80 storeys with the innovative modular system capable of achieving 100 storeys."


That suggests a tower rising 800 feet--unless somehow the stories are Lilliputian.

That's not permitted, at least as of now.

Each Project building would also remain subject to the individual building height and individual building maximum floor area limits specified in Exhibit C to the 2009 Modified General Project Plan (the 2009 MGPP).
That document, at left, oddly sets 620 feet as the maximum building height for the tallest tower, B1, which would rise over the officially temporary plaza outside the arena.

However, Forest City Ratner agreed, upon project approval in December 2006, to lower that height to 511 feet, symbolically one foot shorter than the then-tallest building in Brooklyn, the Williamsburgh Savings Bank, now One Hanson Place.

That symbolic reduction would not keep the new tower from blocking the bank's iconic clock, however.

Perhaps that height limit is less meaningful now that there are even taller buildings in Downtown Brooklyn.

But the Final Scope does say:
As described in the 2009 Technical Memorandum, it is assumed that the height of Building 1 would be reduced from 620 feet (as analyzed in the 2006 FEIS) to 511 feet, so that this structure would be less than the height of the nearby Williamsburgh Savings Bank building. 
So maybe Skanska was talking smack. Or maybe everything can be revised. Could there be some plan, backed by the political establishment, to deliver an extra-tall tower in order to provide "affordable housing" faster?

Statistics: speed, cost savings, offsite work, onsite workers

The document claims that construction is 30 per cent faster than traditional construction, which may ultimately be the case, though it doesn't look like the first building will reach that goal.

It claims cost savings of only 10%, though the Draft SEIS suggests a 22% reduction.

It states that 80% of the building is completed offsite. Forest City has said 60% offsite.

And it states that only 30 people would be working on site at any one time. That's a very interesting number.

Consider that Forest City previously estimated 190 workers, including 150 workers at the factory. If the Skanska figure is correct, that's a total 180 workers. We already know compensation and hours are lower.

A "flying factory" could move

The document also notes:
The manufacturing facility was itself constructed in six months with the capability to be dismantled in 10 days and relocated to serve the next project. This is the ‘flying factory’ concept that Skanska has been developing.
There's obviously a value to having the factory in the Brooklyn Navy Yard.

Should Forest City and its partners decide that future projects would require having the factory closer to the development site--or, perhaps, simply in a cheaper location--that factory could fly away.

But it also suggests that Greenland, which is an ambitious, aggressive developer with cash to burn, may have some plans for that factory, using it in other projects.

Module total at B2 reaches 111, but tower still seems behind schedule for December opening

According to the most recent statistic from developer Forest City Ratner, in the latest two-week Construction Alert (below) approximately 111 modules had been delivered by the end of last week, an increase of 30 over the total after the previous two-week period.

That means they're still behind schedule, though the gap is recoverable.

The pace, 3 modules per day, represents a step up from the pace over the previous two weeks (2.2/day) and the two weeks before that (1.4/day). Still, they're well below full capacity, which is 80 (8 modules/day) over ten working days.

To finish the tower, which has approximately 930 modules, Forest City Ratner must deliver and install some 819 additional mods. At 8 modules/day, that could be accomplished in a little over 103 working days, or fewer than 21 five-day weeks. That would get the building finished by mid-September, well before the December 2014 target date.

At the most recent pace of 3 modules/day, however, it would take 273 working days, or nearly 55 weeks--more than a year--to finish the tower.

Need for more speed

To open the building by the end of 2014, let's assume they need all the modules by the first week in December (though that may give them too much slack).

That gives Forest City 170 working days, from yesterday, to deliver and install 819 additional modules. That suggests of 4.8 modules a day.

The pace has picked up in the last month, so the situation is clearly fluid. It would be premature to definitively say the building will be late.

But it's clearly behind, and that's part of a pattern. Last September, they nudged back the date to finish the building from the second to the fourth quarter of 2014.

The Summer 2014 completion date also appears in a 2/3/14 presentation by Robert Francis, Director, Innovation and Business Improvement at Skanska UK. (Skanska is Forest City Ratner's partner on FCS Modular.)

Also see some questionable statistics from Skanska regarding the project.

Monday, April 14, 2014

Look beyond that green arena roof. A bigger issue for Atlantic Yards is the cost of capital.

Keep your eye on the ball, people.

Sure, that green roof on the Barclays Center sounds interesting, though most news outlets downplayed the effort to limit noise escaping from the arena, disregarded the history of promises regarding the roof (it was once supposed to be park-like space open to the public), and ignored how the plans for construction evade any environmental review.

The much bigger story involves saving money.

As Forest City Enterprises CFO Bob O’Brien told investment analysts in September 2010, “At the end of the day, it’s all about the cost of the capital. And if we can do it at a reasonable, affordable cost, we’ll do so."

Similarly, in an October 2007, then Forest City Ratner president Joanne Minieri told the Wall Street Journal, "Value creation is impacted tremendously when you have to pay more for financing proceeds."

Lowering the cost of capital

So Forest City, like other developers, has figured out a way to lower the cost of capital.

They're about to raise $249 million in cheap capital thanks to the federal government's loosely regulated EB-5 program, in which developers and entrepreneurs get to trade green cards in exchange for low-cost capital and purportedly job-creating investments.

New York-based attorney Yi Song reported 4/7/14 on the LexisNexis Venture Capital blog that the pending deal with the Greenland Group helped "the 498-investor EB-5 project, Atlantic Yards II in New York City [become] fully subscribed in under three months." Apparently the deceptive promotion worked well.

In other words, even though the deal with the Chinese government-owned holding company to buy 70% of the project going forward has not been fully approved, the big Chinese investor apparently helped give individual millionaires the confidence to park their money in "Atlantic Yards II" in exchange for green cards.

How much will the partners save? We don't know the fees, or the interest rates, but it's safe to say the number is in the tens of millions of dollars, or more than $100 million.

So the question arises: what's next? In what other ways are they figuring to save?

Why does Forest City (with partners) continue misleading EB-5 promotion? Well, they got away with it the first time

Forest City Ratner and its anticipated Chinese partner stand to save tens of millions of dollars--maybe more--from $249 million in cheap capital raised through immigrant investors, but only if their clearly deceptive pitch to those investors gets a pass from federal regulators.

That was obviously a calculated risk, because, in 2010, even more clearly deceptive tactics got a pass. Forest City Ratner raised $228 million (the original goal was $249 million) from investors who prized getting green cards over a significant return on their investment, which they'd park for five to seven years.

(The justification for the federal EB-5 program is that the investments create jobs, but indirect/induced jobs can be counted and, in the case of Atlantic Yards, the project would go ahead without that investment. It merely lowered Forest City's cost of capital and, astoundingly, is considered kosher.)

Proof on video

"Can you tell us about the advantage of this problems, and what difference from other projects?" Gregg Hayden, a representative of the New York City Regional Center (NYCRC), representing the deal, was asked on a webcast in 2010.

"The first major advantage is that the approval process, from USCIS [United States Citizenship and Immigration Services], having already been accomplished, takes all of the immigration risk out of the process for the EB-5 investor," Hayden responded, as shown below. (Emphasis added)

I asked the USCIS if acceptance of the regional center's application meant a specific project "has been completely pre-approved by USCIS" or that the immigration risk had been eliminated.

The answer was no.

USCIS spokeswoman Luz Irazabal told me at the time: “When we approve a regional center, or we approve an amendment to it, if it’s specific to that regional center, it does not mean that the petitions that are going to be filed have been pre-approved."

Can a project be “completely pre-approved by USCIS?" I asked, quoting Hayden's language.

Irazabal cautioned that she could not comment on specific projects, but responded, “USCIS either approves or denies a benefit. You’re either a U.S. citizen or you’re not. We don’t pre-adjudicate benefits.

As it happened, the first round of EB-5 investors have sailed through. So it was a calculated risk.

Boilerplate warning

The following passage appeared in the confidential offering memoranda for two previous NYCRC projects, regarding the Brooklyn Navy Yard and Steiner Studios:

Presumably, such boilerplate also appeared in the memorandum for the Brooklyn Arena and Infrastructure Project, so, despite Hayden's language, the project promoters had an out.

Misleading promotion

Most of the promotion took place in China, but Reuters reported that an agent for the Kookmin Migration Consulting Co., working on behalf of the NYCRC in Korea, "told would-be investors if they invested in the company's latest project their permanent green cards were 'guaranteed' and implied investors would be financing a new arena."

George Olsen, NYCRC managing principal, acknowledged to Reuters that the claims were "not accurate," but blamed his affiliate. 

Actually, as shown in the video, the NYCRC's own man in China made such claims.

Documentation, as shown in the brochure at right, suggested that not only was the arena the centerpiece, the city, state, and National Basketball Association were involved.

They got away with it.

The EB-5 program is already dubious, because it essentially gives permission for developers and entrepreneurs valuable public property (a limited amount of green cards) to market in exchange for investments that benefit them predominantly.

It's unsurprising that such a lucrative opportunity tempts project promoters into stretching the truth to make their projects stand out in a very competitive overseas market.

But that's where regulation--and some skeptical reporting--should come in. 

Sunday, April 13, 2014

Photo: B2 rises at Flatbush and Dean, while Bergen Tile building across the street is demolished

I took the below photo of the intersection of Flatbush Avenue and Dean Street on April 3. Note the demolition in the foreground of the Bergen Tile building, which will be replaced by a mid-rise residential building.

(Some of the dump trucks and other disruption on the street are a result of this demolition, not anything to do with Atlantic Yards.)

Then see the gradual  rising of B2, the first Atlantic Yards residential tower, flush against the Barclays Center. Once the 322-foot building starts poking above the height of the arena, which is about 140 feet, it will become a lot more noticeable. For now, though, it's been going slowly.