Skip to main content

Featured Post

Atlantic Yards/Pacific Park graphic: what's built/what's coming + project FAQ (pinned post)

So, will all EB-5 investors in Staten Island Wheel get their money back? I doubt it. They may not (all) even get green cards.

The Staten Island Wheel, a troubled, ambitious project to bring a giant ferris wheel to the waterfront, was canceled yesterday, as the Staten Island Advance first reported, with some $450 million money spent to little avail.

The question is what happens to the 412 immigrant investors, who invested $206 million ($500,000 each) with the hope of getting green cards for themselves and their family and, of course, getting their money back, perhaps with a slight measure of interest.

An ambiguous official statement

A press release from the EB-5 loan middleman, Can-Am Enterprises, a so-called regional center that typically earns significant fees on each deal:
NEW YORK, Oct. 23, 2018 /PRNewswire/ -- CanAm Enterprises is disappointed that the corporate entity behind the New York Wheel project has informed it that they have decided to suspend all development. The company, which made a $206 million loan to the developers of the New York Wheel through the EB-5 Immigrant Investor Program, believes that the costs incurred to date support enough EB-5 Program-qualifying jobs to meet the USCIS job creation requirements for the unconditional permanent residency for all of our 412 investors in the project.

Tom Rosenfeld, President and CEO of CanAm Enterprises said, "CanAm, just as it always has in the past, will see our investors through their respective immigration processes. This project came very close to completion and had already fulfilled all requirements as defined by the EB-5 program. As a secured creditor, we also expect to enforce our rights and remedies including, among other things, in the collateral pledged to secure our loan." 
(Emphases added)

So, will they get their green cards? 

The standard is fairly gentle: the job-creation requirements, 10 jobs per investor, are calculated not by head count but via an economist's formula. The Advance this morning quoted Can-Am as saying there were enough jobs created by construction.

So it's possible--but there's also a significant backlog of visas for investors from China, and there's a significant barrier. 

The Real Deal yesterday called the Wheel one of the "largest EB-5 failures in the program's history." The Commercial Observer quoted EB-5 analyst Michael Gibson, who offered skepticism about green cards:
“It would depend really on how much work was done and the evidence they submitted for the application,” Gibson said. “Because of the delays and the lack of capital expenditure [in the Wheel], there’s a good chance that a number of investors will not get their conditions approved.”
The chances of a refund

So, what are the chances of the investors getting their money back? Despite Can-Am's statement, it's doubtful, given the limited collateral and the program's rules. As The Real Deal reported in June:
The U.S. government, however, requires that investments remain “at risk” in an active project until all of that project’s investors’ visas are approved. At 701 Seventh, for example, there are approximately 400 investors. Because of this, EB-5 funds must often “redeploy” money from one project to another, and some believe that investors aren’t fully aware of what they’re signing up for.
The Advance's Tracey Porpora reported in September that the Wheel has just one structure (or two?) built:
About $250 million was spent on the construction of the parking garage and terminal building. The two structures were initially estimated to cost $180 million -- but ballooned to $250 million, the source said.
It's hard to imagine that those structures would deliver enough revenue to pay back the investors, especially since, as the New York Times reported:
“It’s unfortunate that we’re stuck with the ugliest part: a parking garage that blocks the view from Richmond Terrace, without the wheel and any of the amenities” that the developers promised, said David Goldfarb, a former president of the St. George Civic Association who lives near the site. He said he hoped that city officials would demand the removal of the garage, so that “at least when you walk along Richmond Terrace that you’ll have a view of the harbor.”
And in Brooklyn

So, what's the relevance to Atlantic Yards/Pacific Park? It's unlikely the project will be abandoned--or, if it part of it is, we won't know for a very long time. But there are three rounds of EB-5 investments, totaling $577 million, coming due in the next years, without much of a revenue cushion to pay them back. So stay tuned.