EB-5 backs big NYC project

China Daily (Canada) - - ACROSSAMERICA - By EL­IZ­A­BETH WU in New York For China Daily

Through the in­vestor im­mi­grant visa pro­gram — or EB-5 — Chi­nese in­vestors have al­ready had a big im­pact on the Big Ap­ple, in­clud­ing the Bar­clays Cen­ter at the At­lantic Yards Project in Brook­lyn and the Kings­bridge Ar­mory re­de­vel­op­ment plan in the Bronx.

Now, as a surge in de­mand from wealthy Chi­nese for the green cards for cash of­fer is threat­en­ing to over­whelm the pro­gram, EB-5 money from China is be­hind what’s be­ing billed as the largest pri­vate real es­tate devel­op­ment in the his­tory of the United States and the largest devel­op­ment in New York City since Rock­e­feller Cen­ter — Re­lated Com­pa­nies’ Hud­son Yards.

The 38-acre site on Manhattan West Side between 34th and 30th Streets and 10th Av­enue and the West Side High­way, will in­clude 17 mil­lion square feet of com­mer­cial and res­i­den­tial space, more than 100 shops, 20 restau­rants, 5,000 res­i­dences, 14 acres of public open space, a public school and a luxury ho­tel. Re­lated says it will draw more than 24 mil­lion visi­tors a year and cre­ate more than 23,000 con­struc­tion jobs.

Re­lated is plan­ning to setup an in-house EB-5 cen­ter to help raise funds for the Hud­son Yards project, Crain’s re­ported last fall. A Re­lated Com­pa­nies spokesper­son told China Daily Wed­nes­day the project in­volved EB-5 in­vestors, but de­clined to give spe­cific num­bers.

New York City de­vel­op­ers have been uti­liz­ing the EB-5 pro­gram for a while, as sourc­ing cheap debt from for­eign mar­kets is be­com­ing ever-more pop­u­lar and de­vel­op­ers try to es­tab­lish their own pro­grams to fund new pro­jects.

Any for­eigner can ap­ply for an in­vestor im­mi­grant visa by com­mit­ting at least $500,000 to a project that cre­ates at least 10 self-sus­tain­ing, on-go­ing jobs in Amer­ica.

EB-5 in­vestors can in­vest ei­ther di­rectly to fi­nance pro­jects or go through re­gional cen­ters.

“An EB-5 re­gional cen­ter is an ‘um­brella’ un­der which in­vest­ment pro­jects that are EB-5 funded are man­aged and pro­cessed,” BoBi Ahn, a part­ner at New York law firm McCormick & O’Brien LLP, told China Daily.

EB-5 in­vestors align them­selves with re­gional cen­ters, she said, be­cause un­der the reg­u­la­tions, “in­vest­ments made through re­gional cen­ters can count ‘in­di­rect’ jobs cre­ated to­ward the required job cre­ation el­e­ment in or­der to qual­ify”, said Ahn.

Ac­cord­ing to the US Cit­i­zen­ship and Immigration Ser­vice (USCIS), which ad­min­is­ters the EB-5 pro­gram, ap­prox­i­mately 90 per­cent of EB-5 visas come through re­gional cen­ters. Last year, 90 per­cent of them were is­sued to Chi­nese na­tion­als.

Ac­cord­ing to the Real Deal, last fall Re­lated Com­pa­nies was in the process of re­quest­ing ap­proval to open their own EB-5 re­gional cen­ter, in­stead of having to rely on state-spon­sored sites, as de­vel­op­ers had in the past.

“More de­vel­op­ers who are han­dling large pro­jects are look­ing to uti­lize this source of fi­nanc­ing,” Steven Po­livy, head of law firm Ak­er­man Sen­ter­fitt, told Crain’s. Po­livy es­ti­mated there were roughly a dozen re­gional cen­ters op­er­at­ing in New York at the time and he ex­pected that num­ber to dou­ble over the next six months.

By having a re­gional cen­ter in­house, builders like Re­lated will be able to more ef­fi­ciently and flex­i­bly raise EB-5 fund­ing, said Mr. Po­livy. “De­vel­op­ers are get­ting se­nior con­struc­tion fi­nanc­ing from tra­di­tional sources like banks and then us­ing EB-5 to sup­ple­ment that, nor­mally a mez­za­nine loan in to­day’s mar­ket is about 15 per­cent but you can get the same cap­i­tal from EB-5 and pay a 5 per­cent re­turn,” Po­livy told Crain’s.

Hud­son Yards is a part­ner­ship between New York Univer­sity’s Cen­ter for Ur­ban Sci­ence and Progress, Re­lated Com­pa­nies and Ox­ford Prop­er­ties. The project will in­cor­po­rate the High Line phase, which will be fin­ished in Septem­ber this year.

The EB-5 visa pro­gram, cre­ated by Congress in 1990 to help stim­u­late the econ­omy by cre­at­ing jobs and op­por­tu­nity for for­eign in­vest­ment, is limited to 10,000 visas per year.

Last year, 6,895 Chi­nese na­tion­als were is­sued visas through the EB-5 pro­gram.

The USCIS es­ti­mates that the EB-5 pro­gram has cre­ated more than 57,000 jobs and raised close to $9 bil­lion.

EL­IZ­A­BETH WU / FOR CHINA DAILY

10 Hud­son Yards, a build­ing cur­rently un­der con­struc­tion to be com­pleted in 2015 over­looks the Free­dom Tower and down­town Manhattan, at the $1.2 bil­lion Hud­son Yards project.

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