The New York Wheel’s demise marks one of the largest EB-5 failures ever

The project was plagued by cost overruns and infighting

New York /
Oct.October 23, 2018 01:02 PM

A rendering of the New York Wheel (Credit: Perkins Eastman)

The New York Wheel is officially dead, putting an end to an ambitious project that was marred by years of delays, cost overruns and infighting.

Project spokesperson Cristyne Nicholas announced the decision on Tuesday. The news was first reported by the Staten Island Advance.

“After years of planning, the developers of The New York Wheel announce, with great disappointment, that the dream of building a world class attraction in Staten Island will unfortunately not come to fruition,” Nicholas said in a statement.

Former New York City Mayor Michael Bloomberg first unveiled the idea for a massive Ferris wheel on Staten Island in 2012, and the project quickly became a magnet for EB-5 immigrant investors working through regional center Canam Enterprises. The project ultimately attracted 412 investors on a $206 million loan that was set to mature in 2021, according to Canam’s website.

This makes the New York Wheel one of the largest EB-5 failures in the program’s history. The fraud scandal over the Jay Peak Resort in Vermont was over a similar amount.

Canam said in a statement to the Advance that the company believes the costs incurred by the project to date still meet the job creation requirements to grant its investors unconditional permanent residency in the United States.

“Canam, just as it always has in the past, will see our investors through their respective immigration processes,” president and CEO Tom Rosenfeld said. “This project came very close to completion and had already fulfilled all requirements as defined by the EB-5 program.”

Reaz Jafri, a partner and head of immigration at the law firm Withers Bergman LLP, said the failure of the New York Wheel could serve as a cautionary tale for EB-5 investors.

“This may be a kind of sad reminder to EB-5 investors that, when it comes to choosing a development, think long and hard about what you invest in,” he said “Real estate is very funny. If you see a 40 story commercial tower going up in Manhattan, it’s pretty safe. A concept developing in Staten Island, not so much.”

The project initially had an expected completion date of 2016 and an expected price tag of $450 million, but this number later ballooned to about $900 million. Work at the project came to a halt last year after the contractor Mammoet-Starneth walked off the site amid claims that the soil would not support the wheel.

The developer fired them soon after, and Mammoet-Starneth then filed for bankruptcy in December. In May, the two parties reached an agreement that gave them 120 days to find a way to move forward on the project and ultimately determined that the project would have a final deadline of Jan. 7, 2019 to get on track.

However, by late September, investors Lloyd Goldman and Jeffrey Feil said they were close to giving up on the New York Wheel because the city would not support a tax-exempt bond issue for it. The Economic Development Corporation had argued that public funds were too scarce and valuable to put toward the project.

“The New York Wheel was an ambitious venture,” EDC spokeswoman Stephanie Baez said in a statement. “While the developers were unable to secure the necessary funding for this project, the city is committed to working with the community and local stakeholders to determine potential uses for the wheel site.”


Related Articles

arrow_forward_ios
258 8th Avenue (Google, Target)

Target planning yet another NYC store in Chelsea

Target planning yet another NYC store in Chelsea
Churchill Real Estate's Justin Ehrlich and 381 Broadway (Google Maps)

Two-year Tribeca foreclosure saga continues with lawsuit over $20M

Two-year Tribeca foreclosure saga continues with lawsuit over $20M
Adam America's Omri Sachs and Dvir Cohen with 2503-2509 Broadway (Google Maps; Adam America)

Adam America secures $63M in financing for Upper West Side project

Adam America secures $63M in financing for Upper West Side project
Convene CEO Ryan Simonetti (Convene)

Convene closes Manhattan locations as corporate events fail to return

Convene closes Manhattan locations as corporate events fail to return
New York City District Council of Carpenters’s Monitor Glen McGorty (iStock; LinkedIn)

NYC carpenters union changes how it roots out mob ties

NYC carpenters union changes how it roots out mob ties
The Economic Innovation Group identified 145 real estate investments in Opportunity Zones (iStock)

Real estate deals dominate Opportunity Zones. Is that bad?

Real estate deals dominate Opportunity Zones. Is that bad?
11 Penn Plaza and Apple CEO Tim Cook (VNO; Getty)

Apple snags more space at Vornado’s 11 Penn Plaza

Apple snags more space at Vornado’s 11 Penn Plaza
Amazon's Jeff Bezos, Google's Sundar Pichai and Facebook's Mark Zuckerberg (Getty, iStock)

Tech giants occupy nearly 600M-sf of US real estate

Tech giants occupy nearly 600M-sf of US real estate
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...