The New York Wheel’s demise marks one of the largest EB-5 failures ever
The project was plagued by cost overruns and infighting
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.
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.”