banner in the form of an abstract American flag with text of EB-5 Visa

The EB-5 immigrant investor program, which has been used to fund major development projects throughout the United States, has been limping along for the past few years, and some have even predicted its demise after rules were tightened last summer.

How might the program, which awards U.S. green cards and visas to foreigners who put a minimum of $900K into a U.S.-based project that creates or retains at least 10 U.S. jobs, fare under a Biden presidency vs. a second Trump administration? That’s a question on the minds of wealthy would-be immigrants, as well as U.S.-based developers happy to borrow money from them cheaply.

The answer, though, is fraught with politics.

“This program is an economic development program, but it’s painted with the brush of immigration,” said Aaron L. Grau, executive director of Invest in the USA, a trade group.

“Immigration is really not being touched, because it’s politically a time bomb,” said Ronald Fieldstone, a partner with the law firm Saul Ewing Arnstein & Lehr in Miami.

EB-5 has been pitched as a win-win-win-win program: the investor gets visas for him or herself and family members, plus his or her money back with a little interest; developers get access to cheap capital; and American workers are employed. An entire industry of EB-5 regional centers, which pool and loan out the investments and facilitate the visa process, sprang up as well.

While EB-5 was a lifeline of capital for developers when banks curtailed lending during and after the Great Recession, the program has been beset by ongoing allegations of fraud. It has been continually reauthorized by Congress, but only for short periods of time. It is currently reauthorized through Dec. 11, after which any new administration will likely re-examine it, potentially through a foreign investment lens.

Generally speaking, President Donald Trump has cut immigration to a trickle, though he’s spared people immigrating via EB-5. Former Vice President Joe Biden‘s platform is more open to immigration, but both politicians are wary of political backlash, Grau and Fieldstone said.

“The Obama administration was relatively neutral about EB-5,” Fieldstone said. “There are also other factors at play, such as who wins the Senate control of the Judiciary Committee, which oversees Homeland Security, which oversees USCIS,” the U.S. Citizenship and Immigration Services, which runs the EB-5 program.

Fieldstone said that legislators don’t always support EB-5 along party lines, but instead because of rural/urban concerns since most of the program dollars get invested in urban areas. Sen. Chuck Grassley of Iowa and Democratic Sen. Patrick Leahy from Vermont have led the charge calling for reform of the program to stem fraud and abuse.

“There’s a good chance one of them could come to chair the Senate Judiciary Committee and set the tone for EB-5’s future,” Fieldstone said.

Grau pointed out that significant changes were made to the program last year, most notably that the minimum investment went up from $500K to $900K.

But interest in the program has dropped precipitously since the coronavirus began, as stricter rules and additional factors have dampened enthusiasm. Sharing an analysis of USCIS data, Lee Y. Li, director of policy research and data analytics for IIUSA, noted that 4,285 EB-5 investors filed petitions for immigrating in the first half of fiscal year 2020, but most of those probably invested funds before the new regulations took place.

“And only 21 I-526 petitions were filed in Q2 FY 2020, when the new regulations fully went into effect,” Li said.

The USCIS website shows that more than 100 regional centers have closed this year. But developers would still love to have cheap EB-5 loans as part of their capital stack.

“Developers will still be interested in using EB-5 funds due to the extremely low rate of approximately 1%,” said J.C. de Ona, Southeast Florida Division president of Centennial Bank. “With banks lending more conservatively nowadays, EB-5 funds can be used to bridge the capital gap required by a senior lender. If done correctly, it can be a win-win for everyone.”

Going forward, Grau said that industry leaders would be happy to find common ground to assuage concerns about the program.

“Senior staff at USCIS, Sen. Grassley’s office, Sen. Leahy’s office, the Judiciary Committee staff on the House side all agree that any reauthorization of the program needs to include integrity measures,” Grau said. “There will be material changes regardless of who is president. Right now, the law does not require that annual reports be provided to investors. The devil is always in details, but the industry is behind integrity measures. There’s no requirement that there be third-party evaluations or audits. We support that.”

Families that pursued visas so that young people could attend college in the U.S. have been put off. In April, Trump issued a temporary ban on immigration that has since been extended through the end of 2020 (though it spared people using EB-5).

Rohit Kapuria, counsel in Saul’s Chicago office said. “There is a sentiment globally that the U.S. under this administration is not immigrant-friendly,” which has led to a drop in demand from would-be foreign investors.

The administration has fought legal battles over whether students stuck abroad during the pandemic would meet their visa requirements, and over wages for workers on H-1B visas. Furthermore, the State Department now recognizes Hong Kong as a part of mainland China, which will result in longer backlogs for applicants.

“It’s those types of restrictions under this administration that have had a very negative effect on EB-5, because the bottom line is: The U.S. is no longer an immigration-friendly jurisdiction,” Kapuria said. “So EB-5, by default, obviously, take the hits. Other countries are now capitalizing on investment-based immigration services, such as New Zealand, Portugal, Australia, Cyprus. These are all immigrant-friendly jurisdictions. In Canada, people are basically saying, ‘Why go to the U.S. if there’s a certainty of more anti-immigrant flavor?’ They’d rather go elsewhere. That’s been something that we are concerned about, at least in the immigration world. What would happen if we have four more years?”

“For now, the focus of the market will be on who wins the general election, as investors try to price in risk under each possible administration,” Fieldstone said. “No. 1, getting the election over is good. It doesn’t matter who wins. It’s good to get the election over so the uncertainties in positions taken by the politicians and the parties will become much more clear.”

 

Source: Bisnow

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A group of developers announced plans to build a major industrial park one week after acquiring a 24.2-acre property in Lake Park.

The vacant property is on the north side of Silver Beach Road, just east of Congress Avenue. It was acquired for $17.2 million by ASVRF Silver Beach Road, a joint venture between Ridgeline Property Group, Mitchell Property Realty and American Realty Advisors.

The developers said the project, dubbed Silver Beach Industrial Park, would total 363,288 square feet in four buildings. Each building would total 90,822 square feet with a 32-foot clear height. That would make them ideal for distribution businesses.

“It is excited for us to be partnering with RPG in Florida,” said Ed Mitchell, president of Mitchell Property Realty. “We believe their national relationships with capital sources, brokers and tenants, coupled with our local market expertise, creates an exceptional platform for us to grow our industrial presence.”

The project has yet to secure approval from town officials. The developers plan to deliver it in the first quarter of 2022. Robert Smith of CBRE was retained to lead the marketing effort.

There aren’t many large tracts of industrial land left in eastern Palm Beach County, yet demand for space is growing as more people order goods online. The property isn’t far from the Port of Palm Beach, which has a busy shipping operation.

 

Source: SFBJ

Midsection of businessman with true and false wooden blocks on seesaw at desk

Panelists representing the industrial, office, retail and multifamily sectors of commercial real estate made the case for investment in their respective sectors at NAIOP’s CRE.CONVERGE, the virtual conference recently taking place.

In a real-time audience poll, the attendees cited industrial as the sector they would be most likely to invest in.  However, much of the discussion pointed to the upsides in what, so far in 2020, has been mostly seen as a negative story for the other sectors.

“Retail may be the sector everyone loves to hate, but all that means is that it’s at the bottom of a cycle that is going to rebound,” said Wade Achenbach, executive vice president, Portfolio Management at Kite Realty Group. “The strip sector and the mall business were struggling for a lot of reasons, and COVID has dramatically made them the hardest hit. If you just look at that trend alone, that’s going to be short lived. You have to be very careful of what you’re looking at. There is no online-only retailer that’s making money today, nor has there ever been. What’s really happening when somebody says e-commerce?  It’s more of an omnichannel. Even Amazon realizes the value of stores with its purchase of Whole Foods.”

The old adage, buy low and sell high, applies.

“I think there is more of an opportunity (in retail) than any of the other sectors,” Achenbach said.

Speaking on behalf of the office sector, which many are questioning in light of the shift to work from home, George Hasenecz, senior vice president, Investments at Brandywine Realty Trust, said its demise has been incorrectly predicted in the past — just as it is now.

“When you think about all the economic events and social trends that have occurred, the dot com bust, September 11, the densification of the office and COVID, people have always said that office is dead. Office has always reinvented itself,” said Hasenecz. “Work from home has been successful in response to the crisis, but it’s very difficult to work in a collaborative environment. How do you maintain your culture, bring new employees on and recruit? Work from home really does go against people’s needs and desires to come together. We think that Class A office is going to be in high demand. Companies want to make sure their employees and their talent feel safe. There still is the competition for talent and office space will be used as a recruiting tool.”

A similar story is playing out in the multifamily sector, said John Drachman, co-founder at Waterford Property Company. The pandemic has driven many people out of dense urban areas and into suburban multifamily units. The turnaround has been sharp in large markets such as New York, San Francisco, Los Angeles and Chicago, where vacancies are increasing and rents are falling. One year ago, the main story line in these markets was a lack of affordable housing.

“As with retail and office, a wider perspective will benefit investors,” Drachman said. “People will move back to urban areas. If you can stomach a little bit of pain, over the long term there could be great buying opportunities for urban apartments.”

Rene Circ, senior managing director and COO at GID Industrial and GID Investment Advisors LLC, spoke on behalf of the industrial sector, which to no one’s surprise seems to be strong. He said there are essentially very few people who are not buying things online.

“I would argue that too much capital is allocated to multifamily and way too much is allocated to retail,” Circ said. “Investors will need to invest in industrial.”

The panel was moderated by Will McIntosh, head of Research at USAA Real Estate.

 

Source: GlobeSt.

double down

For some Miami developers, the last few months have provided an opportunity to “double down.”

“Our affordable division is extremely active,” Jon Paul PĂ©rez, executive vice president of Related Group, said during The Real Deal’s latest episode of Coffee Talks.

PĂ©rez noted that Related has broken ground on three projects in the last 45 days.

Another guest on the episode, Dezer Development founder Gil Dezer, also remains bullish on building across Miami. Last week, Dezer received the first approval for a massive project at North Miami Beach’s Intracoastal Mall, despite opposition. When asked about financing for the project, Dezer said that his company has been covering all costs.

“We don’t have financing today, but we don’t necessarily need it today either,” Dezer noted.

For PĂ©rez and Related — the largest developer in South Florida — there are opportunities away from the luxury beachfront markets.

“We’re very bullish in Wynwood,” Perez said. “I think that’s one of the neighborhoods that has the most growth potential.”

He noted that Related owns four sites there, which it will transform into 2,000 units, and is finishing a new headquarters in Coconut Grove.

The pair are competitors and collaborators: Dezer and Related teamed up on the Residences by Armani/Casa last year. Closings began in December 2019.

“It was just in time, Dezer said. “We had our opening party, and a week later, Covid happened. Sometimes you have more luck than brains.”

Click here to watch the YouTube video Coffee Talk with Gil Dezer & Jon Paul PĂ©rez for more top developer takes on the Miami market.

 

Source: The Real Deal