Hotel developers in New York City and across the nation have gotten over their initial hesitancy and have become dependent on the EB-5 program that gives visas to international investors in job-creating projects. According to the New York Times, 15 Marriott projects in the last four years, including a Courtyard Marriott in Midtown Manhattan, Sam Nazarian’s Park Avenue South hotel and Felcor Lodging Trust’s $230 million redevelopment of the Knickerbocker Hotel are all relying heavily on the program for funding.
“We would go to conferences and talk about the program, and people just didn’t believe it was real — they didn’t believe you could raise that much money,” said Catherine Holmes, partner at the law firm Jeffer Mangels Butler & Mitchell that helps developers use EB-5 funding. But once Marriott began using it more frequently, she said,”people started to take it more seriously.”
Now the program offers inexpensive capital in a maket otherwise beset by tight credit. EB-5 investors frequently accept returns of less than 4 percent, where interest rates on debt can range from 6 percent to 10 percent and equity partners want 20 percent returns.
“Foreigners are buying visas and are much less concerned about the rate of return they earn on their investment,” said David Loeb, a senior analyst at Robert Baird, told the Times.
Though other New York city projects, including the Barclays Center and the International Gem Tower, have relied upon this financing, they have been criticized for bending employment data to secure it. [NYT] — Adam Fusfeld