Posts Tagged Forest City Enterprises
Ratners Deal with Russian Oligarch
Posted by Roldo Bartimole in Economic Development, People on September 23, 2009
Bruce Ratner and Forest City Enterprises made a deal with Russia’s richest man for the New Jersey Nets and a major Brooklyn project called Atlantic Yards.
The project was facing financial difficulties.
A Brooklyn community organization, headed by Daniel Goldstein, which has been fighting the development, sent out an email denouncing the deal. The project includes a proposed arena for the Jets team, owned by Bruce Ratner.
Goldstein in a blistering analysis labeled the Atlantic Yards now as “Oligarch Field.”
The organization is named Develop Don’t Destroy Brooklyn and its reaction to the deal follows:
NEW YORK, BROOKLYN, MOSCOW — Enter the oligarch. Start the vetting.
Just when you thought the Atlantic Yards project couldn’t get more corrupt, developer Bruce Ratner has announced a partnership with Russia’s richest oligarch, Mikhail Prokhorov, in an attempt to rescue the floundering Atlantic Yards project. The precise terms of the deal, in a signed letter of intent, are not clear, but the oligarch’s Onexim Group would invest $200 million and make certain contingent funding commitments to acquire 45% of the arena project and 80% of the NBA team, and the right to purchase up to 20% of the Atlantic Yards Development Company, which would develop the non-arena real estate (16 proposed skyscrapers).
The project faces a major legal obstacle in an eminent domain challenge to be heard in New York State’s high court—the Court of Appeals—on October 14. If the property owners fighting to keep New York State from seizing their homes for Ratner and Prokhorov’s enrichment, Atlantic Yards, arena and all, will be dead.
Other litigation is pending and more lawsuits against the project are expected from the community’s opposition to the project.
For years, and as recently as last week, Ratner said publicly that his money-hemorrhaging team was not for sale. That appears to be yet one more deception from the untrustworthy developer.
“This has got to be a huge wake-up call for Ratner’s political supporters. The only reason Ratner would make this deal is because he is in dire financial trouble. If Ratner has to go overseas to get major funding for the arena, how on earth is he going to finance the rest of the project,” said Develop Don’t’ Destroy Brooklyn spokesman Daniel Goldstein. “Eminent domain abuse and massive taxpayer subsidies to enrich a Russian oligarch and modernize the Russian basketball system—is that what Bloomberg, Paterson, Schumer and Markowitz are all about? They’ve got to be kidding. And now that Prokohorov has a big foot in the door, who will really be running the beleaguered Atlantic Yards project show?”
There are many unanswered questions about Mr. Prokhorov’s—a former nickel baron, now the chairman of Polyus Gold, Russia’s largest gold producer, and head of the Onexim investment group—wealth, his liquidity claims and where the money is coming from for his proposed investment in the Nets and Ratner’s arena.
Russian oligarchs are under sway of the Kremlin—they are not who they are without the backing of the Kremlin. Any Prokhorov investment in the Nets and the Brooklyn arena will be influenced by the Kremlin. According to Irina Y. Yasina, a researcher at Russia’s Institute for the Economy in Transition, quoted in The New York Times, “In Russia today, no serious deal can be made without approval from the Kremlin.”
“Russians and Kremlin leadership should understand very clearly that with this deal Mr. Prokhorov is entering into one of the biggest real estate boondoggles in New York City’s history, and New York’s most controversial real estate deal this decade “ Goldstein said.
Prokhorov has been accused of asset stripping, abuse of corporate governance and violations of minority shareholder rights. He was arrested in France in 2007 on suspicion of involvement in a prostitution ring.
More ominous for Forest City Ratner is Prokhorov’s recent reneging on his deal to purchase the $643 million Villa Leopold, the most expensive mansion on the French Riviera.. This doesn’t bode well for the strength of the oligarch’s commitment to Ratner’s project and the Nets.
Amongst other disturbing aspects of the multi-billionaire potential Ratner partner and NBA owner—the National Basketball Association would have to vet Prokhorov and 75% of the 30 team owners would have to approve the deal with Ratner, as would the US Treasury Department’s Committee On Foreign Investment In The United States (CFIUS)—is the reported link of the Russian aluminum giant, UC Rusal, with organized crime.
The Wall Street Journal reported in December 2008:
“Suspected ties to organized crime — which [UC Rusal head] Mr. [Oleg] Deripaska denies — led U.S. officials to revoke Mr. Deripaska’s entry visa in 2006. Mr. Putin and other top Russian officials have repeatedly raised the issue on his behalf with their U.S. counterparts, so far to no avail, according to people familiar with the situation.”
Mr. Prokhorov owns 18.5% of UC Rusal and there is evidence, according to the Asia Times, that he might replace Deripaska at the helm of UC Rusal. Deripaska is the only oligarch whose business ventures in the US have been vetoed by the US government.
Mr. Prokhorov wrote on his blog on September 22 (see the full translation of his blog post below or here):
“For our group, participation in such a complex project undoubtedly is interesting only in the event that NBA technology can be used for the systematic development of basketball in Russia.
…
For our group ‘ONEKSIM’, the realization of this very profitable [Atlantic Yards and Nets] business project, to which we were invited thanks to the world financial crisis (there has never been a foreign owner of an NBA club), will be yet another path for developing our sports interests alongside the biathlon, support for children’s sports and sports of high achievements.”
“Bruce Ratner has really done it this time. He’s desperate to stop the bleeding on his New Jersey Nets so he has turned to a Russian oligarch whose finances and business practices are questionable and require scrutiny and vetting not just by the NBA and David Stern, but by the federal government including the Treasury Department,” Goldstein said. “We never thought the fight against the crooked Atlantic Yards deal could get more crooked or that it would require a degree in Kremlinology, but clearly Mr. Prokhorov is eyeing the Nets and this key piece of Brooklyn to build some Russian-NBA pipeline, and sow his wild playboy oats—so much for Ratner’s mantra that this project is ‘about Brooklyn.’ We don’t need to be Kremlinologists to know that Mr. Prokhorov doesn’t care one nickel about Brooklyn or know squat about Brooklyn.”
Tax Reform Should Go Beyond Corruption Issue
Posted by Roldo Bartimole in Economic Development on September 23, 2009
If there’s going to be an investigation of the integrity of commercial property appraisals here, we ought to also probe tax reductions awarded to downtown property owners by official County and State of Ohio agents.
County Treasurer Jim Rokakis, concerned about the validity of commercial property appraisals because of the corruption charges involving County Auditor Frank Russo, has requested a probe by state officials. Rokakis apparently doesn’t trust the values on commercial properties. Who would?
The values given properties, of course, provide the measure of the taxes property owner’s pay. The lower the value the lesser taxes are due to be paid.
Commercial property owners are expected to seek large reductions in property values next year. They have lawyers and ability – far greater than ordinary homeowners – to pursue reductions. This could have a serious impact on Cleveland schools and the city. Cleveland schools get the majority share of property tax revenue.
It will be most important for the news media, particularly the Plain Dealer, to closely follow and report request by the big property owners for reductions. The slow economy suggests that many commercial entities will seek reductions by claiming tough economic circumstances.
A watchful eye provides needed oversight of both public agencies and private interests.
In recent writings, I’ve been pointing out that owners at the Tower City complex and the Ritz-Carlton hotel – both controlled by Forest City Enterprises businesses – have been requesting value reductions this year as they have in past years.
Other downtown property owners have also made appeals. Amtrust (Ohio Savings) has requested a $2.6 million reduction in its property tax valuation for 1801 East 9th Street. National City Bank’s new owners are seeking reductions of $2.97 million on its building at the corner of E. 9th & Euclid. Cleveland Catholic Diocese is even seeking a $557,940 reduction in the property value for a parking lot on Rockwell Avenue.
I requested information from the Board of Revision only for a portion of downtown for these reports.
MORE TOWER CITY TAX REDUCTIONS SOUGHT
Here’s another batch to add to the previous listing of requests by Tower City for reductions that I previously posted. They were all made to the Board of Revision in March. None have been acted upon to this date. The property numbers and request for reduction follow:
- 101-23-085C: $9,832.
- 101-23-108F: $71,952.
- 101-23-103F: $63,752.
- 101-23-101F: $105,736.
- 101-23-085D: $20,151.
- 101-23-085B: $365,889.
- 101-23-085A: $1,297,634.
- 101-23-072F: $19,925.
- 101-23-072B: $160,296.
The reductions total to $2,115,117 for Tower City properties. I previously reported $850,529 in tax reduction on other Tower City properties, not including one devaluation request of only $17 on a piece of Tower City property.
You can add reductions in value asked by Forest City interests at the luxury Ritz-Carlton hotel – recently coming off 20 years of 100 percent tax abatement – of $241,440. Yes, back on the tax rolls finally. But seeking new reductions in taxes already.
The grand total comes to more than $3 million in reductions requested at Tower City.
Yes, the beat goes on.
We really need – as a community and as a state – to look not only to rigged tax valuations because of outright corruption reported in recent days but to the practice of giving wealthy interests lower and lower valuations on the properties. They have access to lawyers who can pursue these deductions.
CLEVELAND SCHOOLS HURT MOST BY DOWNTOWN CUTS
These efforts result in lower taxes for big property owners and thus less revenue for our schools, counties, cities and libraries. This also means others – homeowners – have to pick up the tax burden by paying higher property taxes. Because of the concentration of properties in downtown Cleveland the reductions hurt Cleveland schools the most. Some 55 percent of property tax revenue goes to the Cleveland schools.
The public also should DEMAND an end to tax abatements and tax shifting of the TIF program. TIF (tax incremental financing) is a form of abatement by which the taxes are paid normally but are diverted to be used for development, usually of the taxpayer’s project. That means tax revenue goes for private uses instead of public.
At minimum there should be a state law that makes it illegal for one community to give a tax abatement to a business to attract that business from another community in Ohio.
I’ve been examining the desire of leading downtown interests for tax breaks, either through tax abatement or lowering the value of their properties for taxation.
The above requests for valuation reductions are nothing new for Forest City at Tower City.
TOWER CITY WON REDUCTIONS AS ITS OWNERS CLAIMED GAINS
In 1994 in negotiations over the taxes due from Tower City officials agreed to hefty market value reductions for the years 1990, 1991, 1992 and consequently 1993, by the following percentages:
In the year 1990: 21 percent; in 1991: 20 percent; in 1992: 17.3 percent and in 1993: 12.4 percent.
Tower City opened The Avenue shopping complex in 1990 and had two new buildings – the Skylight Tower and the Chase Financial Tower (which includes the Ritz hotel) opened in 1991. These improvements resulted in higher property values.
The same week in 1994 that I reported the 1990-1993 reductions in my newsletter, Point of View, a Pee Dee story was headlined: “Tower City could add 2 anchors to complex.” The Pee Dee reported that Forest City Enterprises chairman Albert Ratner “said he hopes to add two new department stores to the Tower City complex soon.” (Such is the nonsense of our leaders and the vigor with which the Pee Dee takes is responsibility to report honestly. Of course, Dillard’s vanished and the building remains essentially unused.)
Then at the same time, it quoted Sam Miller, advisor to mayors, that the commercial real estate industry here “is well on its way back to once again become the darling of the investment community.” (You may have noticed all the skyscrapers going up in Cleveland since 1994, haven’t you?)
“The better news is that it is going to stay back for a long time,” said Sam. (He can get the Pee Dee to report just about whatever he wants.)
Despite the then rosy economic outlook expressed of the corporate executives, the same executives were seeking reductions in property values at Tower City going back to 1990, claiming economic problems.
For the year 1990, the total market value of Tower City was $152 million (rounded off) and the reduction was $32 million, a reduction of 21 percent.
For 1991, the total market value of Tower City was $241 million and the reduction was $49 million for a reduction of 20 percent.
For the year 1992, the market value of Tower City was $262 million and the reduction was $45 million for a reduction of 17.3 percent.
For the year 1993, the market value was $274 million and the value was adjusted by $34 million for a reduction of 17.3 percent.
It’s time the big boys paid their taxes just like everyone else.