A week ago we wrote how Pennsylvania is financing various state infrastructure projects by selling residency to Chinese "investors" for $500K each. As it turns out, the practice of pimping passports for Chinese capex is hardly new or just isolated to Pennsylvania and is, in fact, massively widespread throughout America's insolvent states whose tax collections are far below budget and which are in desperate need of fresh funds to embezzle invest in random boondoggles.
Case in point, New York, where the Biggest real-estate project in a generation, the Hudson Yards, is now officially financed by 1200 Chinese families in search of visas allowing them to live (and park their stolen cash) in the US.
According to the WSJ, "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.
The amount brought in so far, which privately held Related hasn’t previously disclosed, is a record for the cash-for-visa program.
Related’s success shows how the once-obscure federal program has grown in popularity among developers and foreign investors since the recession.
The great news is that, through another loophole in the immigration code, those oligarchs who stole a lot, if not more, and are now terrified to live in their native countries, can purchase a "get out of jail" card from Uncle Sam for a lofty price.
The bad news is that America, that paragon of moral virtue place where torture and droning are now a fixture of daily life, has given up all claims to the moral high ground as it will provide the vilest of offshore criminals with an unconditional amnesty if only they promise to build one or two high-rise buildings in some bloated, if insolvent, megapolis, assuring at least a few more union votes in the next election.
Not surprisingly, the companies most eager to take advantage of the EB-5 program are US homebuilders, desperate to find any demand, but certainly demand for expensive projects. All the better, if the proceeds ultimately trickle down to the bottom line.
In San Francisco, home builder Lennar Corp. has raised about $200 million through the program for San Francisco projects that include more than 12,000 housing units on a former naval shipyard. Developer Forest City Ratner Cos. has taken in more than $475 million for the real-estate project connected to Brooklyn’s Barclays Center. In lower Manhattan, World Trade Center developer Larry Silverstein is trying to raise about $250 million for a 937-foot Four Seasons hotel and condominium going up.
In all, 10,928 foreign investors applied to invest through the program in the fiscal year ended Sept. 30, up from 6,346 a year earlier and 486 in 2006, according to U.S. Citizenship and Immigration Services, the program’s administrator. Most projects have been real-estate developments.
To be sure, the EB-5 program is nothing new: Congress created it in 1990 to spur job creation through foreign investment. It was used infrequently for years. However, it was not until 2009 when administrators clarified a rule to allow temporary construction jobs to be counted toward the 10-job-per-investor requirement, sparking more activity.
And while the immediate trade off for the $500K investment is a temporary visa, if the project is found to have produced the pledged 10 jobs per investor, the investors and their immediate families become eligible for green cards. Also known as asylum. Also known as a new superclass of uber-wealthy individuals who stole so much in their native country, they can no longer safely live there and instead come to the US to inflate the prices of comparable housing. Not that most Americans can afford to compete for a duplex apartment at 15 CPW that is, but it sure builds resentment among the New York hedge fund class, who not only can't outperform the market for 6 years in a row, but now have to look up to their new Chinese overlords. Or at least landlords.
The growing popularity has made for lengthy processing times for investors and developers. But Related successfully urged the federal government to declare the development a project of such national importance that it deserved expedited approval.
Raising the money through traditional means would have been difficult because of the yearslong gap between when the platform over the 13-acre train yard is started and when the buildings are completed and income starts rolling in, said Related Chief Executive Jeff Blau.
“It was a very critical part of the puzzle,” said Mr. Blau, who expects to rake in hundreds of millions of dollars more from Chinese and other foreign investors as the project progresses.
Also not surprising, Chinese nationals are the biggest source of EB-5 funds, making up more than 85% of visas approved in the 12 months ended in September. Many are investing for their children rather than for themselves, said Kenneth Li, a Houston real-estate broker who has offered advice to Chinese investing in EB-5 projects. But really, they are investing for themselves: as the current Chinese politburo has shown, the allegiances of the president can turn on a dime, and today's oligarch may well be tomorrow's inmate. So it is best to have a cozy little 12,000 triplex in midtown Manhattan handy just in case the People's Liberation Army comes knocking one day.
Another tangent: the EB-5 program caps the number of visas allowed per year at 10,000; within that total, the number from individual countries is also capped, however as noted above, China is by and far the biggest (ab)user of the "cash for citizenship" swap. What is unclear is just how many Chinese billionaires will end up US citizens in the coming years before every single Chinese oligarch who wants to buy a US passport is provided one.
Then again, one may wonder: is it really bad news? "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."
And since we live in a time and place where capital misallocation is the only game in town, and where central banks will blow a few trillion without batting an eyelid on the most idiotic uses of funds (mostly on making trillionaires out of billionaires), is it really that bad if a few Chinese criminals-cum-billionaires are allowed to park their wealth, and ass, in the US? Following Obama's recent 5 million strong amnesty of illegal immigrants, it's not as if US immigration policy makes much sense anyway.