More than 100 Chinese EB-5 investors in Maefield Development’s 701 Seventh Avenue skyscraper want to stop their money from being redeployed into a new development nearby.
In a petition filed Monday in Manhattan Supreme Court, 124 investors pushed to stop the U.S. Immigration Fund (USIF) and its principal, Nicholas Mastroianni, from moving their funds into Maefield’s TSX Broadway, a 47-story hotel project across the street.
Government rules require EB-5 investors to keep their capital “at-risk” until their green cards have been approved, a process that’s taking more time than ever before to complete. Because the original loan for 701 Seventh Avenue had already been paid off, USIF proposed the reinvestment.
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But in the petition, the EB-5 investors allege that during a recent vote on a redeployment plan, USIF “coerced” them into choosing the option that most benefited itself.
The dissenting investors in 701 Seventh are split: One group, fed up with visa wait times estimated to be as long as 15 years, wants their money back. That group claims they were told they could retrieve their funds more quickly if they agreed to vote in favor of moving all the other investors’ money into TSX Broadway.
In turn, the investors who want to continue the visa process are upset they are only being offered one project to redeploy into, and that what happens with their money is in part up to the investors who are withdrawing altogether. The investors allege that Mastroianni’s company used “scare tactics,” such as telling them that the company would notify United States Citizen and Immigration Services that they were no longer eligible for green cards if they did not consent to redeploy their money into TSX Broadway.
The 124 investors further claim that by paying off the 701 Seventh Avenue loan a year before it was due, USIF “manufactured” the need to redeploy into TSX Broadway in the first place. They describe TSX Broadway as a “faltering” project that has had “a lack of adequate financing from major institutions and banks for the last two years” and which is “riskier” than 701 Seventh. They also claim Mastroianni will receive a “disproportionate” return on the proposal: He’s set to receive a 9 percent interest annually (up from 5.4), while the investors would earn 3 percent, according to court documents.
Mastroianni declined to comment. Maefield did not respond to a request for comment by press time. There are a total of 400 EB-5 investors in the 701 Seventh Avenue project.
“The investors deserve a fair reinvestment plan put forward in good faith by unconflicted fiduciaries acting in the investors’ interests, rather than their own self-interest,” said the filing attorney, Matthew Sava of Reid & Wise. He filed the injunction so that the dispute can be handled in a private arbitration process.
Last month, The Real Deal reported that dozens of EB-5 investors in New York City development projects, including 701 Seventh Avenue, were looking to abandon their pursuit of green cards after realizing that actually obtaining them would still be many years away.