On August 21, Forest City Ratner — the developer behind Brooklyn’s most controversial megaproject, Atlantic Yards — announced that it was seeking an investor to buy the majority stake in the project.
Less than two months later, it looks like Bruce Ratner has found a suitor. The Wall Street Journal‘s Eliot Brown reports:
State-owned property developer Greenland Holdings Group of China agreed to buy a majority stake in a 15-tower apartment project in Brooklyn, N.Y., that would rank as the largest commercial-real-estate development in the U.S. ever to get major backing directly from a Chinese company.
Located in the Atlantic Yards site that includes the Barclays Center arena, the project is expected to cost nearly $4 billion, including debt. The deal could be announced as soon as Friday.
Terms of the tentative deal call for Greenland to buy a 70% stake from Forest City Ratner Cos., which began the project and would continue to manage the development. The purchase price isn’t being disclosed, but Forest City has invested $500 million in the 22-acre project so far—and it has committed to additional spending on land and infrastructure set to total hundreds of millions of dollars.
Despite the major concessions that Ratner won for the project — cheap land, the right to take private property by eminent domain, a huge density boost, cash subsidies and tax breaks — Atlantic Yards has struggled since the recession.
The project carries significant risk at this point. Ratner’s on the hook for a large amount of money-losing affordable housing, a very expensive deck over the rail yards, and a relatively untested modular building technique. The fact that the company sought an investor midway through construction suggested that he was in dire straits.
Ratner seems to have found a willing partner in Greenland (no relationship to the island off the North American mainland), which appears to be a relatively naïve investor, new to the American market and part of a wave of Chinese investors looking for returns, sometimes in unlikely places. Greenland bought into its first U.S. project just three months ago, a $1 billion hotel and apartment high-rise in downtown Los Angeles.
The company’s other investments in the West, including a site slated to hold Sydney’s tallest tower, suggest that it is more interested in prestige than careful due diligence. Rather than work its way up in the market through smaller, more manageable projects, the company has immediately jumped at the hairiest, most high-profile buildings it can.
It wouldn’t be the first time Ratner found investors who were interested in his projects for more than just the money. He brought foreign investors, mostly Chinese, into the project earlier through a program that trades so-called EB-5 visas for foreign direct investment in American projects.
And earlier Ratner sold a controlling interest in the Brooklyn Nets, which he lured from New Jersey to the Barclays Center, to billionaire Russian oligarch Mikhael Prokhorov. He told the New York Times that his investment has increased in value fivefold, but the billionaire seems to be more interested in the team for its prestige than for the money.
“Frankly speaking,” Prokhorov said, “I’ll do whatever I can do in order to reach championship here in Brooklyn.”
Stephen J. Smith is a reporter based in New York. He has written about transportation, infrastructure and real estate for a variety of publications including New York Yimby, where he is currently an editor, Next City, City Lab and the New York Observer.