The abandoned Melrose building in Houston may be getting put to use through a new hotel development. Chron reported that the Dallas-based construction and architecture firm Beck Group acquired permits to develop a 225-room Le Meridien hotel in the building, which is projected to open Q3 2017.
The property received $15 million in funds from the Atlantic American Opportunities Fund, a company based out of Tampa that provides real estate development financing using the federal EB-5 visa program. The program allows foreign nationals who invest in job-creating projects in the U.S. to receive green cards for a certain number of jobs created or sustained through their investment. Currently, foreigners can receive a green card for permanent U.S. residency for investments of at least $500,000 in a U.S. business or project. The investment must create or preserve at least 10 jobs in the U.S.
Gary Prosterman, president of Memphis, Tenn.-based Development Services Group, the developer of the property, told the Houston Chronicle that falling oil prices were a concern for investors, and financing the project would have been more challenging if the property was unable to acquire EB-5 financing as well as state and historic tax credits.
"We're comfortable that there's enough diversification in the Central Business District that the project merited moving forward," Prosterman said.
The EB-5 program assisted in the development of this and several other properties in the past, but the program could potentially be coming to an end. The program is scheduled to expire on Dec. 11, and members of the hospitality industry are petitioning Congress to vote to either sustain or reinstate it. There are no shortage of foreign investors, with the country's cache of 10,000 visas it is allowed to distribute annually through Sept. 30 drying up in May.
A Cornell study recorded by Arian Mahmoodi and Jan A. deRoos into the EB-5 program found that, while the program is an attractive idea to kickstart U.S. hotels struggling to secure financing, it may also promote inefficient investing. "Without proper checks and balances, we believe that the availability of EB-5 financing may encourage development of speculative hotel investments," Mahmoodi wrote in the report. Regardless of this, there are a number of hotels in the U.S. currently under development that are benefitting from EB-5.