The controversial EB-5 program was designed to encourage investment from wealthy foreigners in a range of projects by granting permanent residency in the United States to those who are willing to immigrate and invest $500,000 in a business that creates at least 10 jobs. Over the past 11 years, the EB-5 Coalition, an industry group in Washington, estimates that the EB-5 program has generated an estimated $15 billion in investments. But instead of supporting struggling economies, much of that money has gone to large-scale luxury real estate.
According to an analysis by professors at New York University, investments in the program are primarily financing large-scale, luxury or entertainment-oriented real estate developments. Hospitality ventures have attracted particular interest, including nearly $1 billion gathered in the last year from 2,000 investors to build a Chinese-style casino in Las Vegas, $600 million from 1,200 investors for New York’s mixed-use Hudson Yards project and $150 million from 300 investors to construct the new Waldorf Astoria in Beverly Hills.
Financing & Politics
After years of controversy, the program’s future remains uncertain, especially after last week’s election. In September, Congress reset the expiration date on parts of the program to December 9, and President-elect Donald Trump campaigned heavily on immigration reform, pledging to build a wall on the Mexican border and increase the deportation of criminal non-citizens. He also said he wanted to reduce legal immigration and ensure jobs are offered to Americans first.
“Whether President-elect Trump will actually follow through on these pledges remains to be seen,” Stephen W. Yale-Loehr, a law professor at Cornell University and an immigration lawyer, told the New York Times. “It is always difficult for Congress to enact significant immigration changes because immigration is so complex and controversial.”
Reformers from both political parties are now seeking to shift the program’s focus toward “underserved” areas, and to raise the investment minimum to $800,000. In addition, the Times reports, they hope to make the projects more accountable by requiring better disclosures to protect potentially vulnerable immigrants from fraudulent schemes. Federal securities regulators have filed several enforcement actions against people committing fraud through the program in recent years.
EB-5 Developments
Several hotels in the country's pipeline are depending on EB-5 investments. According to the Times, here are a few upcoming properties that can be credited to international investors.
The Beverly Hills Waldorf Astoria in Los Angeles is being developed by Beny Alagem, an Israeli-born American entrepreneur who also owns the Beverly Hilton. Three hundred investors contributed $150 million to the project in the form of a loan, and the project is expected to create 3,629 jobs.
The Wanda Group, the largest commercial developer in China and is owned by the nation’s richest man, is said to be seeking foreign investment program financing for its Wanda Vista Hotel in Chicago. The city approved the project last November. The Wanda Group is also developing One Beverly Hills Hotel next to the new Waldorf in that city.
The Genting Group, a global development conglomerate based in Malaysia, is developing Resorts World Las Vegas with nearly $1 billion of program money. The $4 billion project includes 3,100 rooms and 100,000 square feet of gambling space, restaurants, shops, a panda habitat and a 4,000-seat theater.
And 350 foreign program investors put up $175 million for Empire Outlets, a mall and hotel complex planned for Staten Island. Goldman Sachs is a partner in the project, which aims to create 4,500 jobs.
All of this investing has created a backlog of uncertain futures. Currently, 22,000 petitions are pending with the Citizenship and Immigration Services, which is directed under the Department of Homeland Security.
All of this leads to a pressing question: What will happen to hotel investment in the U.S. without EB-5 support?