UPDATED, May 5, 11:20 a.m.: When City Connections Realty launched an EB-5 regional center in the fall of 2015, the mid-sized firm expected business to boom.
Fearing imminent regulatory changes to the popular program, thousands of foreign nationals — mostly from China — jumped at the opportunity to invest in U.S. real estate projects in exchange for a visa.
But after just 18 months, City Connections quietly pulled the plug on its regional center.
“The truth of the matter is, this isn’t something you do as a side line. It looked like a shiny new penny to me, something exciting and different,” said David Schlamm, the firm’s president. “I think I had no business getting into it. I had no experience.”
Operational for just over a year, City Connections’ regional center never raised money from investors, and Schlamm said his former partner in the regional center, Min Chan, bought out his half of the business for an undisclosed amount.
Schlamm said he discovered that foreign investors had little appetite for the small projects he was targeting. “They were more interested in the big deals — Hudson Yards or the Barclay’s Center,” he said, referring to projects that’ve been partially financed with EB-5 money. “We were a small, new EB-5 regional center and that actually worked to our disadvantage.” Being responsible for the regional center also distracted him from his residential brokerage, which merged with DSA Realty in January.
Chan told The Real Deal she’s still in the EB-5 business, and has renamed the regional center SkyView EB-5 Regional Center.
The EB-5 program — which has been tapped by developers like Related Companies, Extell Development and Silverstein Properties — has exploded in popularity in recent years. There are currently 1,277 active regional centers listed on the U.S. Citizenship and Immigration Service’s website, including 101 registered in the state of New York.
The program is at a crossroads, however.
It was temporarily extended by Congress through May 5, but the real estate industry’s been pushing for it to be reauthorized for another year with few changes. Before leaving the White House, the Obama administration proposed new rules, such as raising the minimum investment amount to $1.4 million from $500,000.
USCIS’ newly-appointed ombudsman, Julie Kirchner, was a longtime executive at the Federation of American Immigration Reform (FAIR), a lobbying group that advocates ending the EB-5 program. In January, a FAIR staffer published a blogpost titled “Drain the EB-5 Swamp.”
Trump senior advisor Jared Kushner, who tapped the program to pay for construction of a rental tower in Jersey City, has said he’ll recuse himself from EB-5 policy matters.