Private equity real estate firms are fighting to keep an immigration program alive that has financed billions of dollars of real estate projects, largely centered in New York.
The EB-5 visa program grants foreign investors – and their immediate families – a green card in exchange for at least a $500,000 investment. This investment must spur growth of or preserve at least 10 jobs, a number difficult to count for both developers and the government. The program, which was started in 1990, was little used until the recession, when developers began tapping foreign investors for a cheap source of financing. In 2008, the government granted just 1,258 visas, and last year, the program hit its 10,000 visa allocation cap.
A number of real estate fund managers have written large checks to lobbying and law firms in the last year to ensure its continuity.
Related Companies has led the charge, spending $730,000 in 2015, up from $120,000 last year, largely with law firm Greenberg Traurig, according to the Center for Responsive Politics. This year’s lobbying bill is just a fraction of what the New York-based developer has gained from the EB-5 program. Related raised about $600 million from foreign investors to finance the foundations of three towers in its massive Hudson Yards development in Manhattan’s Far West Side, according to the Wall Street Journal. The firm operates an internal EB-5 center to reach foreign investors.
“EB-5 has been a tremendous help for us because it allowed us to put in early infrastructure before construction,” said Jeff Blau, Related’s chief executive officer, at a conference hosted by NYU’s Schack Institute of Real Estate last month.
CIM Group has also written large checks to support EB-5. The Los Angeles-based real estate investment firm spent $480,000 in 2015, up from $280,000 last year, to lobby for the program. Both CIM and real estate advisory services firm Greystone have paid Brownstein Hyatt Farber Schreck, a Denver-based law firm, for lobbying, according to the Center for Responsive Politics.
Greystone, which spent $60,000 on EB-5 lobbying this year, started a new group in June to provide EB-5 financing for real estate developers, led by Justin Gardinier. The managing director previously established an EB-5 capital-raising platform for CIM Group.
Now, Congress must choose whether to continue the EB-5 program, revise it or let it expire on December 11. Critics say the program is easy to abuse and that it sells American citizenship, circumventing the long waits typical for those without the means to invest such large sums, with little quantifiable benefit on the local economy. Senator Dianne Feinstein, a Democrat from California, blasted the program in an opinion piece last month, writing that it “sends a message that American citizenship is for sale, and the program is characterized by frequent fraud and abuse.”
One proposed change to the EB-5 program would take away New York City’s designation as a targeted employment area (TEA), which allows a minimum investment of $500,000 instead of $1 million. Another potential change would increase the minimum investment amount in a TEA from $500,000 to $800,000 or more. Congress may also increase regulatory compliance by standardizing a way to track job growth, checking investors’ backgrounds and inspecting regional centers.