Real estate developers secured a partial win on Friday through the extension of the EB-5 visa program into late 2016.
Congress attached the popular program, which allocates green cards to foreign investors in US projects, to the omnibus appropriations bill. Congress passed the huge funding bill, which President Barack Obama signed into law Friday.
The EB-5 visa program grants foreign investors – and their immediate families – a green card in exchange for at least a $500,000 investment in locations designated as a targeted employment area (TEA). This investment must generate or preserve at least 10 jobs, a number difficult for both developers and the government to confirm. 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; by contrast, the program hit its 10,000 visa allocation cap last year.
Since the program has been extended without any changes, real estate firms have told PERE they are happy to continue with business as usual before gearing up for another round of negotiations in 2016.
New York-based advisory firm Greystone started a new group in June to provide EB-5 financing for real estate developers, led by managing director Justin Gardinier. He said there will likely be a “mad rush” of firms filing petitions to participate in the program as well as a crush of foreign investors who want to invest $500,000 during the next nine months, before Congress could potentially raise thresholds or impose more restrictions for the program. Greystone spent $60,000 on EB-5 lobbying this year, according to the Center for Responsive Politics.
“There’s a number of very large New York City projects in the market today subscribing investors that wouldn’t necessarily qualify under new TEA definitions,” Gardinier told PERE. “I think there will be a pretty aggressive push to get those projects fully subscribed and sold out as soon as possible.”
Real estate firms and other industry groups had spent months and tens of millions of dollars lobbying for changes to the program, including increasing the number of visas allocated. Critics of the program wanted to change the definition of a TEA to incentivize development in rural and low-income areas, rather than more affluent urban areas such as New York City’s Manhattan, where the program has helped to fund the development of luxury residential towers. Both sides largely agreed that the government should put more protections against fraud into place to protect investors and the program’s reputation, which has been marred by recent headlines about investor and developer abuse.
Last week’s talks broke down close to the end of the negotiation process, after media reports had already cited changes to the TEA structure and other leaked revisions. Sources told PERE that there has been infighting among groups vying to represent the industry, and Congress received mixed messages from these lobbyists.
Senator Chuck Grassley, a Republican from Iowa, blamed industry groups for seeking last-minute revisions and senators making too many compromises.
“Our House and Senate leadership failed us,” he said in a speech on the Senate floor Thursday. “I’m very disappointed that the leadership simply extended a very flawed program.”
Grassley said he originally sought reform for EB-5, but now he is considering an end to the program.
Industry leaders, on the other hand, have publicly thanked Congress for the extension. The Real Estate Roundtable, which represents private and public real estate firms, said in a statement that the discussions leading up to the latest EB-5 decision provide a blueprint for future negotiations.
“The ten-month EB-5 extension proposed by Congress provides The Roundtable and other stakeholders with another platform to help policy makers reach our mutual end goal of long-term, comprehensive, and necessary regional center reforms,” said Jeffrey DeBoer, the group’s chief executive officer, in a statement Wednesday.