EB-5 Legislation Clears Senate, Now Congress Awaits
Daniel Geiger Aug. 14, 2012, 7 a.m.
Legislation related to the EB-5 Immigrant Investor Program, a financing pipeline that has been used to fund several major development projects in the city, has cleared one hurdle towards renewal.
Last week, the U.S. Senate passed a bill that would restore an important component of the program set to expire at the end of September. According to people familiar with EB-5 and the legislative process to preserve it, a similar bill must now pass through Congress in the next few weeks before the program sunsets on September 30, a deadline that could possibly cut off millions of dollars of financing for a number of construction projects.
According to Rick Spees, who chairs the law firm Akerman Senterfitt’s government affairs and public policy practice group, members of Congress had pledged to renew the legislation if it passed through the Senate. But the bill has been put under the review of a Congressional committee that may decide to examine either it, or other immigration-themed bills that it is bundled with, more closely. Immigration issues have been contentious, stoking concerns of delay among EB-5’s proponents.
“They have the right to say we need more time,” Mr. Spees said. “I would put the odds of this legislation getting renewed at about 65 percent to 35 percent in favor of it getting done. But you don’t know, it could always get hung up in the bureaucratic process.”
The federal program allows pools of foreign money to be raised to finance real estate projects as long as they are projected to create a certain number of jobs. In exchange, the investors who contribute money – usually sums of at least $500,000 apiece – receive a visa to the U.S. and are put on track towards gaining citizenship. The program has particularly caught on among China’s rising upper class, who have seen it as a convenient way to gain entry to the U.S. Because the investors are receiving citizenship in the deal, they are willing to accept lower rates of return on their money, making the program a source of cheaper capital for developers.
The legislation in question specifically pertains to authorized administrators of the EB-5 program called regional plan centers. These centers are permitted by the government rules to market development projects overseas, raise the money and push the projects through the necessary government approvals so investors can receive their visas. Steve Polivy, a partner at Akerman Senterfitt who oversees its real estate department and has structured several major EB-5 transactions said that structuring deals without the regional plan centers would be difficult and would essentially shut the program down.
“You need regional centers to do these deals,” Mr. Polivy said.
Several large projects, including a $77 million plan to redevelop the Battery Maritime Building, a $200 million mixed use development in Downtown Brooklyn called City Point and a roughly $70 million deal to redo the retail at the George Washington Bridge Bus Station, have tapped what is called the EB-5 Immigrant Investor Program for funding.
“You would have projects that were partially funded that can’t proceed and suddenly they have to go out and find alternative financing and they’re scrambling,” Mr. Polivy said, envisioning a worst case scenario in which a renewal of the legislation stalls for months.