Skip to main content

EB-5 visa use booms; ex-elected officials cash in; immigrant investor funding eyed for sports facilities in Sacramento, Oakland

EB-5 is all over the news these days, in terms of record-breaking statistics, new opportunities to deploy immigrant investor funds, former elected officials cashing in, and some questionable deals.

The Association to Invest In the USA (IIUSA), the trade association for the EB-5 Regional Center Investment Pilot Program, on 2/1/12 celebrated a new peak in investment immigration:
US Citizenship and Immigration Services recently reported 2,364 EB-5 visas issued in the first three months of the current federal fiscal year. This equates to at least 10,000 new jobs for American workers. At this pace, the 2012 Program will come close to using its 10,000 annual visa allocation for the first time since the Program’s inception in 1994. 10,000 EB-5 Visas would mean at least 40,000 new jobs for US workers.
At a time of limited liquidity around the United States, the EB-5 Regional Center Investment Pilot Program is finally coming of age...
“These recent numbers confirm the trends that our industry has been seeing for the last couple of years.” said K. David Andersson, President, IIUSA, “We are a functioning example of 21st century economic development policy that works. Thanks to the Regional Center Investor Pilot Program, thousands of Americans are employed today, and at no cost to the American taxpayer. This Program needs to be a permanent part of the American economic development toolbox.”
Despite its record setting statistics and growing economic impact, the EB-5 Regional Center Investment Pilot Program is due to expire in September 2012, absent action from Congress. IIUSA estimates failure to reauthorize the Program in a timely manner would squander a golden opportunity to create over 100,000 new U.S. jobs...
Sports facility finance

And how are those jobs being created?

Boosters of a potential new arena in Sacramento are proposing a plan to use EB-5 funds. So too are those planning a new ballpark in Oakland for the baseball Athletics.

Graphic at left (click to enlarge) from report by Think Big Sacramento, which notes that EB-5 funds were used not for the Barclays Center but for ancillary development. Unmentioned is how the arena and basketball were used to sell the investment.

Ex-elected officials cash in

It's not just former New York Governor David Paterson; other former elected officials are useful figureheads to promote EB-5 investment.

Former San Francisco Mayor and California State Assembly Speaker Willie Brown is part of the management team of Golden State Renaissance Ventures, which operates the San Francisco Bay Area Regional Center.

EB-5 enters the NYC mayoral race (sort of)

The Wall Street Journal, in a 1/19/12 article headlined Liu's Bundlers Get Scrutiny on Donations, described how New York City Comptroller John Liu returned 114 donations worth $75,000 to his expected 2013 mayoral campaign, mainly from intermediaries, given a federal investigation into his campaign.

Among the contributions were $16,000 raised by Queens developer Yi "Richard" Xia, who told the newspaper he didn't know why the money was returned.

The Journal reported:
Mr. Xia is behind a company planning to build a $100 million medical center, hotel and residential housing complex in Flushing. The entire project was slated to be finished by 2014, Mr. Xia said in a June 2011 interview with the Journal about the project.
...Mr. Xia is also the managing director of the Federal New York Metropolitan Regional Center, a group authorized by the federal government to solicit foreign investors as part of an immigrant investment program called EB-5... Of the 20 donations the campaign returned that were connected to Mr. Xia, three of those donors work for Federal New York Metropolitan Regional Center. None of those donors returned requests for comment.
The Federal New York Metropolitan Regional Center, like others in the field, uses a name that attempts to convey to unwary investors the patina of officialdom, even though it's a private company.

And while the photo heading its website portrays Manhattan, its project, the perhaps unfortunately named Eastern Mirage, is in Flushing, Queens:
Eastern Mirage is an elegantly designed glass curtain wall tower that will feature state of art North Queens Medical Center (NQMC) and luxury living with high-end amenities right in the heart of downtown Flushing.
EB-5 enters film financing?

The Hollywood Reporter reported 1/23/12 on how EB-5 has apparently become considered a vehicle for film financing:
The law firm of Akin, Gump is suing a film executive whom is claimed to owe at least $2 million as a finder's fee for helping line up hundreds of millions of dollars in studio loans as well as distribution for the film, Father of Invention, starring Kevin Spacey.
The defendant is Mark Manuel, who allegedly had some bright ideas how Hollywood could take advantage of immigration laws for funding. According to a lawsuit filed in Los Angeles Superior Court on Wednesday:
"In early 2008, Manuel sought to arrange $100 million plus loans to major film and television studios pursuant to complex federal statutory regime by which foreign immigrants seeking EB-5 resident visas in the United States fund job-creating loans."
EB-5 to help save Guam?

According to a 1/31/12 report in KUAM News, Guam's News Network, Governor Eddie Calvo, in his 2012 State of the Island address, mentioned EB-5:
Calvo also talked about revitalizing and rezoning the island's capitol, and announced that the request for proposal was signed to begin the renovations to the Plaza De Espana and efforts to restore the capitol and bring the Guam Museum to Hagatna. The governor announced that as part of the finance strategies to build new schools and also to restore the capitol is through the EB-5 Visa Program in which foreign nationals have incentives from the state department to enter a U.S. city and invest their capitol.
Note that EB-5 does not require immigrant investors to live in the location of their investment. I rather doubt that the investors, mainly from China and South Korea, would want to live in and have their children educated in the Pacific territory of Guam, which is closer to Asia than North America and relies on tourism from Japan and U.S. military spending.

A China skeptic now promotes EB-5

EB5info.com reports, in Prominent Author Promotes EB-5 Visa Projects in China:
Prominent journalist James McGregor, author of One Billion Customers: Lessons from the Front Lines of Doing Buisness in China and the 2010 report China's Drive for "Indigenous Innovation" - A Web of Industrial Policies has been touring China discussing the U.S. economy and promoting EB-5 investments by the Midland Investment Group, a California based investment management company which is developing projects for a regional center based in Oregon.

During his tour promoted by Chinese Immigration migration broker CanAchieve, he mentions his experience:
I am a former president of the Sino-American Chamber of Commerce in the USA, I have good experience in China, known many people in China and I am very positive for EB-5 investment. I think that to the majority of Chinese investors, the United States is an opportunity not only for the U.S. government, the American people, but also for the investors, the EB-5 investment is a win-win opportunity.
We can say that now the risk is relatively small, because the U.S. economy is recovering, has come back from the bottom...."
There are many ways to consider EB-5 investment, but the most important thing we consider is what kind of company to deal with: are they law-abiding? Are they complying with government regulations and so on? For the addition of projects recommended by Midland, I have more confidence because I am familiar with their investment in Oregon, I believe they can do this project well.
I haven't seen the entirety of his remarks, but the excerpt, at least, is misleading. We can't say that the risk in EB-5 projects is "relatively small," because each project must be analyzed individually.
Also, a company that's law-abiding and complies with government regulations will not necessarily return investors' money.

The business culture in China

McGregor's book, as I wrote in December 2010, offered some clues as to why deceptive EB-5 marketing could be successful in China. Some quotes:
The sad fact is that the Chinese system today is almost incompatible with honesty.
...As a result, the Chinese can feel pretty good about doing almost anything as long as they don't get caught.
...China is not the legalistic society that typifies the West. If the Chinese want to do something, they find a way to skirt rules or laws.
It doesn't look like that's changed. In a 2/6/12 "Letter from China" in the New Yorker headlined Working Titles: What do the most industrious people on earth read for fun?, Leslie Chang wrote:
China was once a country governed by morals... Today, the focus is on zuoshi, how to get things done. All the rules for getting ahead can be reduced to one: Do anything to survive, because you're on your own.
A parallel in education?

In a partial parallel to the willingness to look not too hard to welcome Chinese investors, U.S. universities are welcoming foreign students, especially from China. The New York Times reported, in a 2/5/12 front-page article:
This is the University of Washington’s new math: 18 percent of its freshmen come from abroad, most from China. Each pays tuition of $28,059, about three times as much as students from Washington State. And that, according to the dean of admissions, is how low-income Washingtonians — more than a quarter of the class — get a free ride.

With state financing slashed by more than half in the last three years, university officials decided to pull back on admissions offers to Washington residents, and increase them to students overseas.

That has rankled some local politicians and parents, a few of whom have even asked Michael K. Young, the university president, whether their children could get in if they paid nonresident tuition. “It does appeal to me a little,” he said.

Comments

Popular posts from this blog

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…

Former ESDC CEO Lago returns to NYC to head City Planning Commission

Carl Weisbrod, Mayor Bill de Blasio's City Planning Commission Chairman and Director of the Department of City Planning, is resigning,

And he's being replaced by Marisa Lago, currently a federal official, but who Atlantic Yards-ologists remember as the short-term Empire State Development Corporation CEO who, in an impolitic but candid 2009 statement, acknowledged that the project would take "decades."

Still, Lago not long after that played the good soldier at a May 2009 Senate oversight hearing, justifying changes in the project but claiming the public benefits remained the same.

By returning to City Planning, Lago will join former ESDC General Counsel Anita Laremont, who after retiring from the state (and taking a pension) got the job with the city.

Back at planning

Lago, a lawyer, in 1983 began work as an aide to City Planning Chairman Herb Sturz, and later served as the General Counsel to the president of the NYC Economic Development Corporation, Weisbrod himself.