Grassley blames “moneyed” NYC developers for rejecting EB-5 reform

Visa program expires March 23

New York /
Mar.March 19, 2018 05:20 PM

Hudson Yards, Jeff Blau and Chuck Grassley

Sen. Chuck Grassley is blaming “moneyed” New York developers for crushing proposed legislation that would have extended the EB-5 visa program for five years.

In a series of tweets on Friday, the Republican senator from Iowa indicated that his “EB-5 Reform Act” would not be included in the upcoming federal funding bill, which Congress must pass by March 23 to avoid a government shutdown. EB-5 visas — popular among New York developers — let foreign investors obtain a U.S. green card in exchange for investing $500,000 into a job-creating development project.

In his Twitter tirade, Grassley said that he and Sen. Bob Goodlatte of Virginia worked out a “compromise” that was rejected by “Manhattan real estate moguls” and their “moneyed interests.” He lambasted the EB-5 program for being “rife with fraud and corruption” as well as “major national security loopholes.”

To date, the EB-5 program has been extended in a series of one-year resolutions, despite calls to overhaul the program by raising the investment amount and requiring more transparency. “It’s very difficult to run a program like that,” said Ron Klasko, managing partner at Philadelphia-based Klasko Immigration Law Partners.

In recent weeks, Sens. Grassley and Goodlatte circulated a proposal that sources said was negotiated with industry representatives. Those representatives pulled their support last week, sources said.

“The EB-5 industry is at the edge of a cliff right now,” said Doug Hauer, chair of Mintz Levin’s EB-5 financing practice. “It may not be too late to reposition the discussion with lawmakers, but that’s going to involve concessions on the part of the parties who have negotiated the deal thus far.”

Grassley and Goodlatte’s proposal would have raised the minimum investment amount to between $925,000 and $1.025 million, up from $500,000 to $1 million.

It also would have “set aside” a certain number of visas each year for projects located in specific geographies and sectors. For example, 200 visas would be earmarked for government infrastructure projects, while 1,450 visas each would be allocated for projects in rural areas and high-poverty urban areas.

Although Grassley didn’t name names, Related Companies — which relied on EB-5 investment to help fund its Hudson Yards development — has lobbied against changes to the program. So has the U.S. Immigration Fund, a regional center that has raised money for many Manhattan projects.

Ron Klein, a former U.S. Congressman and now a lobbyist with Holland & Knight, said the “set asides” unfairly punish urban developers. “We’ve been fighting against including this bill because parts are just fine — such as anti-fraud provisions — but the other is a death sentence for urban areas,” said Klein, whose clients include USIF.

Another problem with Grassley and Goodlatte’s proposal was the elimination of so-called “targeted employment areas,” or low-income areas where the investment threshold is lower. Over the past few years, many New York developers cobbled together census tracks to benefit from TEA designation even though their projects were physically located in ritzy Manhattan neighborhoods.

“People were saying, ‘Why are EB-5 funds going to build high-end condos?’ The answer is condos are not being built for people who need jobs — but by people who need jobs,” said Abteen Vaziri, the director of Greystone EB-5 Holdings.

According to Klein, there were other mechanical issues with the latest proposal, including a 120-day moratorium on new investor filings and a provision that bars EB-5 money from projects that have sovereign money as part of the capital stack. “For [the past] three years, the exact same people have been writing this bill and you end up with the same result,” he said.

But he stopped short of saying that EB-5 would not be part of the omnibus bill.

“My view is it’s never over until it’s over,” Klein said. “We have until Friday.”


Related Articles

arrow_forward_ios
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

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

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Related's Jamar Adams and Steve Ross with 14-06 Gateway Boulevard (Credit: Getty Images and Google Maps)

Related is the latest developer to target the Rockaways

Related is the latest developer to target the Rockaways
New York City District Council of Carpenters’s Monitor Glen McGorty (iStock; LinkedIn)

NYC carpenters union changes how it roots out mob ties

NYC carpenters union changes how it roots out mob ties
The Economic Innovation Group identified 145 real estate investments in Opportunity Zones (iStock)

Real estate deals dominate Opportunity Zones. Is that bad?

Real estate deals dominate Opportunity Zones. Is that bad?
Assemblymember Marcela Mitaynes  and Sen. Charles Schumer (Photos via Protect Sunset Park; Getty; Facebook)

With NY poised to lose billions, socialists fight real estate

With NY poised to lose billions, socialists fight real estate
From left: Edison Properties CEO Robert Selsam, Ironstate Development's Michael Barry, Stellar Management founder Larry Gluck (LinkedIn; Gluck Family Foundation)

These developers could benefit the most from Soho’s rezoning

These developers could benefit the most from Soho’s rezoning
The Grand Hyatt Hotel at 109 East 42nd Street and and  RXR’s Scott Rechler (Wikipedia Commons; Getty)

Grand Hyatt redevelopment could be 1,600-foot supertall

Grand Hyatt redevelopment could be 1,600-foot supertall
arrow_forward_ios

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

Loading...