THE FUTURE OF EB-5 AND FOREIGN INVESTMENT IN NYC
By Ali Ebrahimi
Rest assured, the EB-5 visa program will continue to thrive, especially now with a Trump Presidency.
Not sure what that is? The EB-5 is a controversial immigration program that offers foreigners a quick path to U.S. citizenship by investing $500,000 to finance a business that eventually employs, directly or indirectly, at least 10 American workers.
A new proposal to renew/reform the program, with plans to tighten guidelines and increase the investment requirement from $500,000 to $800,000, is causing serious alarm for developers, many of whom have been using easy EB-5 funding to fund their projects, including mega development project Hudson Yards and Michael Shvo’s 125 Greenwich Street project, just to name a few. This combined with Trump’s looming presidency and his strong stance on immigration reform has many concerned about the program’s future, and the future of foreign capital flowing into the New York real estate market.
The EB-5 program has been around for over 25 years but gained popularity with developers more recently. Not surprising, since it brings tremendous amounts of capital into the U.S., particularly to new development projects in New York City.
Why so controversial? Questions have been raised about the inadequacy of the screening process and where the money is coming from, with possible money laundering and ‘dirty money’ entering the country. Others argue that the program has been marred by fraud and used to build projects in wealthier areas like Manhattan and Las Vegas, instead of high-unemployment rural areas of the country for which it was initially intended.
Some interesting facts:
- Manhattan’s Hudson Yards development, the biggest beneficiary of the EB-5 program, raised over $600 million in EB-5 funding for the first phase of the project in 2014.
- Last year, 10,000 EB-5s were given out. Of these, 85% went to Chinese investors. With employment-based immigration programs like EB-2 and EB-3 becoming tougher to attain, EB-5 is one of the only feasible options for Chinese immigrants right now.
- Trump is no stranger to the program. His son-in-law Jared Kushner raised $50 million in EB-5 funding for his Trump Bay Street development project in Jersey City, about a quarter of the total project financing. Nearly all the investors in this case were Chinese.
The President Elect may take a strong position against illegal immigration, but the EB-5 is a LEGAL immigration program that also injects capital into our country – a win-win. Trump also understands the need for capital and for investment. A real estate developer himself, he has on numerous occasions made use of EB-5, making it reasonable to believe that he will be a strong proponent of the program and continue to back it.
So yes—most industry experts agree that the next four years look bright for the New York City real estate market.