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More American Cronyism: US Government Selling Visas To Fund Luxury Apartment Buildings

Tyler Durden's picture




 

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Merging, on paper, the affluent midtown neighborhood and the struggling one uptown placed Hudson Yards in a community with an overall high unemployment rate, positioning developer Related Cos. to gain low-cost financing from foreigners seeking green cards.

 

The program through which that happens, known as EB-5, enables foreign nationals to obtain U.S. permanent-resident status by putting up money for new business ventures that create American jobs. It gives ventures in high-unemployment and rural areas a special status to encourage investment. But as the program’s popularity has soared in recent years, the bulk of immigrant investment is going to projects that are located, like $20 billion Hudson Yards, in prosperous urban neighborhoods.

 

At least 80% of EB-5 money is going to projects that wouldn’t qualify as being in Targeted Employment Areas without “some form of gerrymandering,” estimates Michael Gibson, managing director of USAdvisors.org, which evaluates projects for foreign investors.

 

Increasingly, the money appears to be flowing to the flashiest projects, which the investors often see as safest, EB-5 professionals say. Among those getting EB-5 money are an office building set to host Facebook Inc. near Amazon.com Inc.’s Seattle headquarters, a boutique hotel in high-end Miami Beach, and a slim Four Seasons condo-hotel in lower Manhattan that sports a penthouse with an asking price above $60 million. In all of them, geographic districts were crafted to include higher-unemployment areas.

 

– From the Wall Street Journal article: How a U.S. Visa-for-Cash Plan Funds Luxury Apartment Buildings

Another day, another story highlighting just how completely corrupt and sleazy the U.S. economy has become.

I’ve covered the issue of EB-5 visas before, and how a program that was initially supposed to help high unemployment neighborhoods attract investment, has become another scheme to further enrich America’s crony capitalist class.

Before we get into the meat of this post, here are a few excerpts from last year’s piece, How NYC’s Biggest Real Estate Project in a Generation is Being Financed by Selling Green Cards to the Chinese:

Developer Related Cos. says it has raised roughly $600 million from the families to build the foundation for three skyscrapers at the West Side project, a 17-million-square-foot colossus of office, retail and residential space set to open over the next decade.

 

To finance the concrete-steel platform, Related tapped a little-known and at times controversial federal visa program known as EB-5, which offers green cards to foreign families who invest at least $500,000 in U.S. projects that create at least 10 jobs per investor.

 

At times the program has invited scrutiny. The U.S. Securities and Exchange Commission last year warned of “fraudulent securities offerings” related to the EB-5 program, in which investors put money into nonexistent projects. The program also has come under fire because it can be difficult for investors overseas to discern safe investments from risky ones, and if the investment fails to create the required jobs, they don’t get a green card. In addition, claims of jobs created are difficult to verify and the program administrator has been criticized for not having an effective system for doing so.

 

Developers are embracing the program largely because it provides low-cost capital. Money borrowed through the EB-5 program carries much lower interest rates, sometimes half of what companies typically pay, executives said. That is because investors are primarily seeking green cards, not a profit, and generally are willing to accept low returns, EB-5 advisers said.

While that article explained the recent explosion in EB-5 visa popularity, it failed to highlight the fact that this money was supposed to disproportionately help struggling areas. In reality, it’s all being funneled to luxury construction. Here’s how.

Also from the Wall Street Journal:

NEW YORK—The cluster of luxury apartment buildings and office towers rising in a development west of midtown called Hudson Yards seems a world apart from the low-income housing projects of upper Manhattan.

 

But for purposes of an immigration program that helps finance Hudson Yards, it and Harlem’s Manhattanville public-housing towers are in the same district: a stringy one connected by three Census tracts that run along the Hudson River.

 

Merging, on paper, the affluent midtown neighborhood and the struggling one uptown placed Hudson Yards in a community with an overall high unemployment rate, positioning developer Related Cos. to gain low-cost financing from foreigners seeking green cards.

 

The program through which that happens, known as EB-5, enables foreign nationals to obtain U.S. permanent-resident status by putting up money for new business ventures that create American jobs. It gives ventures in high-unemployment and rural areas a special status to encourage investment. But as the program’s popularity has soared in recent years, the bulk of immigrant investment is going to projects that are located, like $20 billion Hudson Yards, in prosperous urban neighborhoods.

 

A primary concern is that the use of EB-5 financing for high-price condo and office towers sops up the program’s capacity and leaves poorer communities out in the cold. No more than 10,000 visas that lead to permanent-resident status can be given out each year under the program. It hit the limit in the fiscal year ended Sept. 30, 2014.

 

Though statistics aren’t made public on individual projects, a recent paper by two New York University professors tracked 25 large business startups that have turned to the EB-5 program to raise a total of more than $4.5 billion in financing. Twenty-two were urban real-estate projects, including 14 in prime Manhattan neighborhoods and others in Seattle and on the Las Vegas Strip.

 

Related is the single largest user of EB-5 financing. By its own measure, it accounts for about 20% of the dollars being raised through the program today. The closely held company used the program to raise $600 million for a first phase of Hudson Yards last year and is in the process of raising another $600 million for a new office tower and a retail hub.

 

The coming debate in Congress stands to bring the program its greatest scrutiny since it was created in 1990.

 

Things began to change in 2009, amid two shifts. The agency overseeing the program—the U.S. Citizenship and Immigration Services unit of the Department of Homeland Security—let the job-creation tally count more construction jobs if they last at least two years. And banks all but shut off credit for construction projects amid the economic slump.

 

Real-estate developers discovered EB-5. Money from foreign investors, primarily Chinese, began to pour into major developments around the U.S., typically supplementing more-senior debt. A hotel and apartment project in Washington raised more than $40 million through the program. A W hotel in Hollywood raised $20 million. A planned 16-tower apartment project connected to Brooklyn’s Barclays Center basketball arena took in $229 million.

 

Lenders have since returned to real estate, but developers are attracted by another aspect of EB-5 financing: low cost. Because the foreign investors are after a green card, they have been willing to accept very low interest rates on money they lend, typically for four or five years. Developers save even though they face other costs to use the program.

 

Many of such projects could easily have been financed on the private market, according to Gary Friedland, who wrote the NYU paper with fellow professor Jeanne Calderon. “It’s a profit enhancement,” he said. “The original argument was more of a ‘but for’ argument,” in which EB-5 was meant to spur projects that wouldn’t otherwise have happened. “That focus has been lost.”

 

At least 80% of EB-5 money is going to projects that wouldn’t qualify as being in Targeted Employment Areas without “some form of gerrymandering,” estimates Michael Gibson, managing director of USAdvisors.org, which evaluates projects for foreign investors.

 

Increasingly, the money appears to be flowing to the flashiest projects, which the investors often see as safest, EB-5 professionals say. Among those getting EB-5 money are an office building set to host Facebook Inc. near Amazon.com Inc.’s Seattle headquarters, a boutique hotel in high-end Miami Beach, and a slim Four Seasons condo-hotel in lower Manhattan that sports a penthouse with an asking price above $60 million. In all of them, geographic districts were crafted to include higher-unemployment areas.

 

Meanwhile, some wanting to raise money for projects in rural areas and low-income parts of cities say they find it increasingly hard to compete. Evan Daniels has been trying for four years to raise about $40 million through the EB-5 program for a door-manufacturing plant in the rural southwestern Missouri town of Lamar.

 

“The harder we worked on this, the more we found the money was going to L.A. and New York,” he said.

 

In China, one pitch is speed in obtaining green-card approvals from U.S. Citizenship and Immigration Services. Related’s main broker has advertised that EB-5 investors receive initial approvals 11 months faster than the standard wait. That would mark a big advantage, because the average wait is about 14 months. It is unclear how its applications would be processed so quickly. USCIS declined to comment on Related’s applications.

So the U.S. government is subsidizing the wealthiest developers to build projects for the wealthiest Americans. Someone must have taken a class taught by the Federal Reserve.

Recall the post from earlier this year: Number of NYC Apartments for Rent Above $50k/Month Triples Since ’08; 82% of U.S. Construction = Luxury Units. Now we know why.

Screen Shot 2015-08-14 at 1.50.17 PM

Just another day in the imperial Banana Republic.

 

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Fri, 09/11/2015 - 17:36 | 6537774 bitterwolf
bitterwolf's picture

So your solution to securing foreign money investments would be taco shops and 99 cent stores to employ anchor babies and niggers instead of high end real estate development?

Fri, 09/11/2015 - 17:46 | 6537803 WhackoWarner
WhackoWarner's picture

Point of this article is to point out another loophole that does nothing to increase investment in creating sustainable local emloyment.  It is not some entry level commentary for your obvious prejudice.

Your argument appeals only to racial predjudice and not to the actual downfall of the program's intent and abuse.

 

 

Fri, 09/11/2015 - 18:47 | 6537952 MalteseFalcon
MalteseFalcon's picture

SHUT.IT.DOWN

Sat, 09/12/2015 - 09:59 | 6539270 Firepower
Firepower's picture

"Your argument appeals only to racial predjudice..."

...says the whitebread SWPL who hasn't lived 30 miles NEAR a colored making less than $400,000 a year since 1987...

Browning Crime: The Coming USA Terror http://wp.me/p2kmGE-42l

Fri, 09/11/2015 - 20:34 | 6538209 junction
junction's picture

Related Companies was the high bidder for the Port Authority's World Trade Center lease in 2001 but pulled out its bid suddenly to let Larry Silverstein get the lease.  According to one source, Silverstein got his start working with the Mafia in the porn industry.  In the 1970s, porn was a gold mine.  Martin Carey, the brother of Governor Hugh Carey, would rent his Newport mansion out to porn filmmakers when he was also fronting the Gambino crime family as an operator of the Vantage gas station chain.  Hugh Carey gave his brother half the emergency set-aside of gasoline in 1976, when gas was hard to come by in the aftermath of the Arab oil embargo.  Related Companies is used to working with crooked government agencies, but it folded under pressure to withdraw its WTC lease bid.

Fri, 09/11/2015 - 20:55 | 6538257 markpower49
markpower49's picture

Too many Americans are commie losers who would down vote your great comment.

Fri, 09/11/2015 - 17:38 | 6537781 Navymugsy
Navymugsy's picture

No wonder I'll never be able to move back to my hometown. It's been financially gerrymandered.

Fri, 09/11/2015 - 17:41 | 6537785 SillySalesmanQu...
SillySalesmanQuestion's picture

Why couldn't I get my business financed like this...? Oh, wait....I'm white, middle class and over-privileged.

Fri, 09/11/2015 - 21:16 | 6538319 RaceToTheBottom
RaceToTheBottom's picture

Hire a black, lady who was a veteran to head up your company. 

 

Fri, 09/11/2015 - 17:41 | 6537788 A Lunatic
A Lunatic's picture

I guess if you're not a Mexican or Syrian this is the only way to get a visa........

Fri, 09/11/2015 - 17:44 | 6537793 11b40
11b40's picture

No, B'wolf.  Don't be stupid.  How about we don't subsize any of this crap.  What subsidy do you benefit from?

Fri, 09/11/2015 - 17:47 | 6537805 Secret Weapon
Secret Weapon's picture

Everything the Feds touch turns to shit. 

Fri, 09/11/2015 - 18:03 | 6537845 Sudden Debt
Sudden Debt's picture

Hello!?

For me that sounds a lot like the Australian and Swiss imigration way and I LOVE IT!!

Let the rich come in!

 

My father always said: the more porches and jaguars you see in the streets, the better off you'll be.

 

Now these days, we're scarring of wealthy people, telling them they're the devil because they have money.

Not everybody is a evil banker you know.

And you don't want to live in a place surrounded by poor people because chances are you'll end up poor also.

WHAT IS THIS???

COMMUNIST AMERICA WHERE MONEY IS EVIL??! DEATH TO CAPITALISTS????

Fri, 09/11/2015 - 18:20 | 6537870 Chuck Knoblauch
Chuck Knoblauch's picture

Do you carry a gun or do you rely on first responders?

Gun stores in Texas, Ohio, and NC looted.

Does your condo have its own grocery store?

I find it funny how safe you think it is outside.

Fri, 09/11/2015 - 18:20 | 6537882 negative rates
negative rates's picture

When you eat your own shit, there is no need for a store.

Fri, 09/11/2015 - 18:47 | 6537949 o r c k
o r c k's picture

Trickle up.

Fri, 09/11/2015 - 18:51 | 6537956 Crocodile
Crocodile's picture

The problem, like many, is a failure to define terms.  There are two type of wealthy, the asset wealthy (i.e. Warren Buffet) and the income wealthy (i.e Buffets's secretary).  The propaganda is always about the wealthy and it is the hard working (in most cases) income wealthy that are the targets, when it is the asset wealthy that tilt the playing fields (i.e. favorable tax evasion) in their favor and then their are the outright thieves (i.e. Clinton's)

Fri, 09/11/2015 - 21:13 | 6538309 Faeriedust
Faeriedust's picture

And the CEO's who make three million a year for shooting off hot air to news outlets are which kind of wealthy?

What about the revolving-door politicians who end up with jobs paying several million annually with Goldman-Sachs after doing them a few favors?

And yes, what about the Clintons?  What about the Bushes, who earn million-dollar salaries from Arab potentates for . . . being Bushes?  Are THESE the "hardworking" wealthy?

NOBODY works hard enough to deserve a million dollars a year, when people who clean up the vomit in hospitals or lay hot asphalt in the summer don't come close to $100K.  I've known corporate executives, high government officials, admirals and corporals, secretaries, truck drivers, and highly-paid lobbyists.  The higher they're paid, the LESS work they do, and the more privileges they demand.  Those high-wage "earners" are paid for little more than the ability to choose an expensive suit.

 

 

 

Fri, 09/11/2015 - 21:44 | 6538443 Md4
Md4's picture

Well said.

Cannot argue with that.

At some point, I hope, the "Great Leveling" will visit these folks as well.

Like the charge on the plates of a capacitor, discharge (to equilibrium) is inevitable.

m

Fri, 09/11/2015 - 19:46 | 6538097 divedivedive
divedivedive's picture

After a decent 30 year career my wife and I requested permanent residency in Mexico because we were afraid our savings - which were decent in size - might not last in the US. We had to provide documentation to Mexico to assure we would not be a burden. We had a very good life in the US but our costs here are maybe 50-80% less. (And now we have a very good life as well).

Fri, 09/11/2015 - 18:05 | 6537850 Chuck Knoblauch
Chuck Knoblauch's picture

And they think it's safe here?

Fri, 09/11/2015 - 18:09 | 6537865 Atomizer
Atomizer's picture

Good, more people working within to get the death penalty. We aren't going to become a American Union. You'll fucking die first. 

Are you listening Jeb Bush? 

Fri, 09/11/2015 - 18:16 | 6537879 Chuck Knoblauch
Chuck Knoblauch's picture

You're on the list now.

You're in big trouble.

Fri, 09/11/2015 - 19:18 | 6537885 Md4
Md4's picture

The purpose of the program is to increase needed business development, that will spur job growth in low-income areas...in exchange for...American generosity in the form legal residency status (which should come with separate rules and obligations, to be met by the holder of that status in addition to the mentioned program's rules).

It is NOT intended to be fraudulently manipulated to serve a warped, opulent, and narrow-minded misuse of that generosity.

Prosecute and repeal (permanently eject as necessary).

Don't repeat.

Problem solved.

m

Fri, 09/11/2015 - 18:28 | 6537905 Atomizer
Atomizer's picture

Good, more people working within to get the death penalty. We aren't going to become a American Union. You'll fucking die first. 

Are you listening Jeb Bush? $15/hr selling at $.50 turd burger. Your idea will drain when no one pays the hamber so Janet Yellon can keep Federal Reserve can keep interest rates at NIRP. Kidding, next joke coming soon. 

Fri, 09/11/2015 - 18:31 | 6537910 matagorda
matagorda's picture

Also the $350m redo of the SLS (Sahara) casino in Las Vegas, where Harry Reid was bribed to expediate EB-5's for Chinese child porn entreprenuers (see  http://abcnews.go.com/US/whistleblowers-us-gave-visas-suspected-forgers-... and http://www.breitbart.com/big-government/2015/03/27/exclusive-former-u-s-...).  Alas, things aren't going well, as its cocaine-using Qualcomm heir backer couldn't get a gaming license -- see http://www.reviewjournal.com/columns-blogs/inside-gaming/sls-las-vegas-t...

Fri, 09/11/2015 - 18:33 | 6537918 johmack2
johmack2's picture

its moments like these that i have to wonder if zerohedge is some marxist troll site, what exactly is the problem of having rich people wanting to invest in your country?

 

Fri, 09/11/2015 - 19:11 | 6537966 Md4
Md4's picture

Respectfully, luxury condos aren't what we need.

New manufacturing, new R&D, from new scientific research, leading to new technology founding that new manufacturing are what we need.

Let the wealthy haven where they're from.

I'm sure those places needed their money too...

m

Fri, 09/11/2015 - 21:36 | 6538405 TeaClipper
TeaClipper's picture

Manufacturing, R&D, and Scientific research has moved to a new address, didn't anyone tell you?

Fri, 09/11/2015 - 18:40 | 6537932 CheapBastard
CheapBastard's picture

Wait until the next administration decides these RE deals are communist plots to destabilize America and confiscate all the Chinese property. Boy, will they be surprised!

Fri, 09/11/2015 - 18:47 | 6537950 Crocodile
Crocodile's picture

May we have a link for the purchase of that flag?  Thanks.

Fri, 09/11/2015 - 18:48 | 6537953 BernankeHasHemo...
BernankeHasHemorrhoids's picture

It's all the Jews fault. And those goddamn Spics. Standard bitching and whining on this shitty site.

Sat, 09/12/2015 - 09:32 | 6539232 prymythirdeye
prymythirdeye's picture

Bye Felicia

Fri, 09/11/2015 - 19:20 | 6538030 Able Ape
Able Ape's picture

The insanity is going insane...and that's NOT good...

Fri, 09/11/2015 - 19:31 | 6538060 ThrowAwayYourTV
ThrowAwayYourTV's picture

The poor will always be poor because they are poor supervisors of their own money and lives.

Truth is, 98% of us will die in the class we were born into.

Even if you give the poor a new house and $25 an hour job, 98% of them will screw it up.

Sorry, but the truth hurts.........98% of the time.

Fri, 09/11/2015 - 19:43 | 6538091 Md4
Md4's picture

98% is pretty high.

Why don't we try it, and find out?

Anything is better than feeding TBTF banks and the Wall Street racket that does precious little but warp it further than government and the Fed already have.

Besides, they'll at least spend it on and with the middle and lower class, and that'll be a much better state of affairs than we have now.

m

Fri, 09/11/2015 - 19:58 | 6538130 PoasterToaster
PoasterToaster's picture

Someone hasn't seen that documentary Trading Places.

Fri, 09/11/2015 - 21:56 | 6538385 RaceToTheBottom
RaceToTheBottom's picture

The US used to have the highest mobility between classes, but recently the US has really dropped.  It was a well publicized NYT study, google it.  

It probably has accelerated now that we are giving handouts to the ultra wealthy.  It is funny that the countries that have passed the US is social mobility are the ones the people here call Socialists (namely northern Europe, Scandinavian).  Not sure how their recent immigrants will affect that.

 

Fri, 09/11/2015 - 19:33 | 6538070 QQQBall
QQQBall's picture

Dude - sell them the penthouse and seize the funds and asset forfeiture the fuck outta those furners. Think of it - cadillac patrol cars!

Fri, 09/11/2015 - 21:02 | 6538278 ThrowAwayYourTV
ThrowAwayYourTV's picture

I went thru a Wendy drive thru the other day and ordered a large chili, no cheese. A cesar side salad and 4pcs chicken nugget.

When I got back to the office I had a small chili with cheese, and a garden salad.

First thing I thought was, "How the hell can someone fuck something so simple as that up?"

Ok, so thats my point. Give them $25 and hour and a new house and see how long that last.

Fri, 09/11/2015 - 21:29 | 6538370 Joebloinvestor
Joebloinvestor's picture

They were doing this in Calif over 10 years ago.

One of the reasons you see more foreign owned business.

Fri, 09/11/2015 - 23:37 | 6538709 Dr. Bonzo
Dr. Bonzo's picture

Got a line on an association of Koreans doing this shit in Hawaii. They kept turning over the same 500K to different accounts helping other Koreans secure their visas against a fee. Soon as the paperwork cleared they'd move the cash to the next person. Move it through banks, small businesses, investment vehicles, whatever assets they can to get their papers. One massive scam. No one's investigating. No one's even interested. It's funny, when you consider we have a prison Gulag that would make Stalin wet his panties. But the feebies and the other boys in blue are too fucking dense to tackle financial scams. The just focus on the low-hanging fruit.

Hey, let me throw this in for shits and giggles. You guys know of all the new and "stringent" passport photo requirements the US has imposed on everyone right? Check this shit out.... latest fad is Asia is to digitally alter passport photos to "beautify" the photos. It's mostly women doing it to look prettier or younger or less fat on their passport photos. All pretty innocent, except... it's fucking laughable. Digital photography has rendered passports completely useless. Good news for the rest of us though. I'm watching the Asian broads to see how long they keep getting away with this shit.

The wheels are coming off the wagon folks. There are no fucking rules. Good news for some of us.

 

Sat, 09/12/2015 - 06:44 | 6539066 overmedicatedun...
overmedicatedundersexed's picture

the crime and corruption at high levels of .gov and society has reached into every area of western life..with no controlling legal authorities..law and justice are now only a weapon used against the poor and middle class.

that is our problem in the west..the economic hit of 2008 is just an example.

Sat, 09/12/2015 - 07:50 | 6539099 22winmag
22winmag's picture

Treason!

 

Hang 'em high!

Sat, 09/12/2015 - 08:00 | 6539107 Equalizer
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