NYC hotel developers increasingly rely on funding from visa program

New York /
Sep.September 07, 2012 09:30 AM

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


Related Articles

arrow_forward_ios
Blackstone's Stephen Schwarzman with MGM Grand Las Vegas and Mandalay Bay in Las Vegas (Getty)
Blackstone sells MGM Grand, Mandalay Bay stakes
Blackstone sells MGM Grand, Mandalay Bay stakes
Holiday Inn at 99 Washington Street (Google Maps, Getty)
Facing foreclosure, world’s tallest Holiday Inn files for bankruptcy
Facing foreclosure, world’s tallest Holiday Inn files for bankruptcy
Hyatt CEO Mark Hoplamazian and Dream Hotel Group founder Sant Singh Chatwal with 355 West 16th Street in Manhattan NYC (Hyatt, Dream Hotel)
Hyatt to acquire Dream Hotel Group for up to $300M
Hyatt to acquire Dream Hotel Group for up to $300M
Maefield Development's Mark Siffin and 20 Times Square (aka 701 Seventh Avenue) (Getty, Edition Hotels)
Massive loan on Maefield’s 20 Times Square in trouble
Massive loan on Maefield’s 20 Times Square in trouble
From left: 608 Fifth Avenue, 22 North Loop Road, 38 West 36th Street (608 Fifth, Weiss/Manfredi, Morphosis, and Handel Architects, Apartments, Getty)
Top 10 Manhattan loans: Big lending enters deep freeze
Top 10 Manhattan loans: Big lending enters deep freeze
Sonesta Hotels’ John Murray and The Shelburne Hotel (Illustration by Kevin Cifuentes for The Real Deal with Getty Images, Affinia, Sonesta)
TRD Pro: Biggest hotel sales of the past year
TRD Pro: Biggest hotel sales of the past year
(Photo Illustration by The Real Deal with Getty)
Pension funds pull back on commercial real estate
Pension funds pull back on commercial real estate
569 Lexington Avenue (Doubletree Metropolitan, Getty)
Lights out: Why more than 10,000 hotel rooms remain closed
Lights out: Why more than 10,000 hotel rooms remain closed
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...