City Connections shutters EB-5 center

"It looked like a shiny new penny to me," said brokerage chief David Schlamm

TRD New York /
May.May 03, 2017 03:00 PM

Min Chan and David Schlamm

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.

Related Articles

With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Renderings of 130-02 South Conduit Avenue and Triangle Equities’ Joshua Weingarten (Credit: Terminal Logistics)

Triangle Equities lands $87M loan for massive JFK warehouse project

From left: 172 Madison Avenue, 100 East 53rd Street, Woolworth Tower, 53 West 53rd Street, 615 10th Avenue

Loan wolves: Bankers are stalking developers as debts come due

State Sen. Julia Salazar and Assembly member Harvey Epstein proposed the tax this month in an effort to disincentivize real estate speculation (Credit: iStock, Getty Images)

Experts take issue with proposed tax on mezzanine loans

Brookfield's largest-ever $15B property fund has invested in properties from New York (666 Fifth Avenue) to Bangalore (the Leela Palace hotel) (Credit: Brookfield, Getty Images, Leela)

Real estate fundraising hits lowest level since 2013

Some investors continue to find U.S. commercial real estate as attractive places to park their capital (Credit: iStock)

Brexits and Bubbles: How investors view Europe’s shaky real estate market

Sen. Lindsey Graham and the Hudson Yards development (Credit: Getty Images, iStock)

New EB-5 rules targeting abuse may be eased