The EB-5 visa program, heavily favored by New York developers as a way of raising cheap capital overseas, is headed toward another six-month extension.
The so-called “clean” extension does not include changes backed by Sen. Chuck Grassley, a staunch critic of the program, which gives green cards to foreign investors in exchange for a $500,000 investment. Language extending EB-5 through Sept. 30 was inserted in the federal omnibus bill released Wednesday night. Federal lawmakers have until March 23 to pass the spending bill to avoid a government shutdown.
Barring any 11th-hour shakeup, the six-month reprieve is a win for developers and industry players who said Grassley’s EB-5 Reform Act would be a death knell for the industry. Grassley’s proposal called for extending EB-5 through 2023. It also would have raised the minimum investment amount to $925,000 from $500,000, and set aside 1,450 visas for investment in rural areas.
Although the “set asides” posed a major threat to New York projects, stakeholders on both sides of the aisle acknowledged that the long-term uncertainty surrounding EB-5 is taking a toll.
“Getting six years of certainty on the program — and adjusting to a new reality — ultimately, I think, would have been better for the industry as a whole,” said Justin Gardinier, founder and CEO of real estate investment adviser TigerBridge Capital (formerly JSG Capital).
He said investors who used to rush to get their money in before legislative deadlines are no longer motivated to do so. “That kind of crying wolf at this point doesn’t really work,” he said, adding that the backlog on visas has put a damper on investment from China.
Gardinier and others said Grassley’s EB-5 Reform Act was the closest lawmakers and stakeholders came to reforming the industry.
Grassley’s proposal died last week after pushback from developers and regional center owners. The Iowa senator subsequently went on a Twitter tirade, accusing “Manhattan real estate moguls” of rejecting changes to the EB-5 program, which he said was “rife with fraud and corruption” and poses a “major” national security threat.
But Ron Klein, a partner at Holland & Knight who represents the U.S. Immigration Fund, which raises money for major New York projects, said it was a good thing that Grassley’s proposal did not pass. He called on Congressional leaders to open the discussion to EB-5 stakeholders and the public “to build consensus around true fixes” to the program.
“We are grateful that the leaders of Congress did not let a small group of legislators, who did not share their proposed changes to their fellow members or the public until the very end, ram through a bill that would have mortally wounded or destroyed the EB-5 program,” he wrote in an email.