Obama Administration Hides Huge Tilt of EB-5 Funds to New York City

By David North, November 21, 2016

Newly analyzed data shows a remarkable concentration of immigrant investor (EB-5) funds in New York City, and particularly in Manhattan (by far the richest of the five boroughs).

In this academic data set — created by two university professors, not by CIS — we find 68 percent of the EB-5 funds noted therein went into New York City, which has 2.7 percent of the nation's population.

The EB-5 visas are, in effect, purchased by rich aliens for $500,000 per family. These visas can then be turned, if all goes well and a couple of years pass, into permanent resident alien status for everyone in the family. The program is due to sunset on December 9 unless Congress acts to extend the deadline.

Looking a little more closely at this data source we find that 43 percent of these funds from aliens, again nationwide, went into the island of Manhattan, where 0.5 percent of Americans live. The population estimates we have used are based on the year 2014 and are from the U.S. Census.

One wonders what will happen when and if the incoming Trump administration notices that all these EB-5 funds went disproportionately (by an 86:1 margin) into a borough in which the voters went almost nine to one against their candidate.

Meanwhile, ironically, the Obama administration, which loves the EB-5 program, has refused to produce statistics on the distribution of EB-5 moneys geographically. This despite the fact that the distribution of immigrants, by city and state, has been published for decades, maybe a century. Whether the administration did this deliberatively or not, the result has been to mask the enormous tilt of these funds — originally designed to serve depressed areas — to prosperous areas, such as Park Avenue and Wall Street.

Given that the government refuses to publish much data on the EB-5 program, two New York University faculty members (Jeanne Calderon and Gary Friedland) dug into other sources to create a list of 25 major EB-5 projects nationwide. Their focus was on the economics of the program, and not the geographics. They said:

The Database generally defines large-scale projects as commercial real estate projects in major metropolitan areas with a total project cost of at least $150 million and an EB-5 capital component. As indicted in the Database the capital raises for some of the projects are still ongoing and not fully subscribed.

"A Roadmap to the Use of EB-5 Capital: An Alternative Financing Tool for Commercial Real Estate Projects" was published by the New York University's Center for Real Estate Finance Research in May 2015. It is a careful analysis of the economics of the program, dealing with concepts such as "capital stack" and "mezzanine financing"; it certainly is no jeremiad against the program.

While the data on the 25 huge projects was not, by definition, a sampling of EB-5 projects nationwide — there were no references to the huge EB-5 failures in rural Vermont and South Dakota, for example — the 25 projects consumed a very large portion of the EB-5 funding in the years before the list was published.

Bear in mind that there is a ceiling on EB-5 visas of about 10,000 a year, and that there are 2.5 to 3.0 visas for each investment (covering spouses and children), so the program draws about 3,333 to 4,000 investments a year. The listed projects had 9,275 investors in total, and that plays out to a range of about 23,000 to 28,000 visas.

Thus these 25 projects burned up between two and three years' worth of the EB-5 investments, nationwide. The geographic distribution of these 25, supported by more recent data, is suggestive of the continuing concentration of such investments in large, well-to-do urban areas.

The 25, incidentally, included 15 in Manhattan, four in other New York City boroughs, and six in the rest of the country. The six were, one each, in nearby Jersey City, N.J., and in more distant Las Vegas, Los Angeles, Miami, Seattle, and San Francisco.

Most of the developers of the 25 projects (such as Blue Rock, with a "luxury condominium" on Manhattan's Upper East Side) are not well known to the public. There were, however, six projects involving names of interest.

  • The Durst family had two projects, both in midtown Manhattan. A second-generation Durst, probably not managing either project, is Robert, who is now on trial for murder in California.

  • Two of the West Coast projects were managed by American Life, Inc.; the Securities and Exchange Commission has collected big fines for its use of non-registered broker dealers from the firm ($1 million), and from its president, Henry J. Liebman ($240,000), as we reported earlier.

  • The project in Jersey City is the Trump Plaza, run by the Kushner family; a second generation of that family (Jared) married a second generation of the Trump family (Ivanka), and the press has reported that Jared managed to remove N.J. Governor Chris Christie as the Trump transition director. Christie, in an earlier role as U.S. attorney, sent Jared's father to jail for some of his real estate practices, as the New York Times reported.

  • The big Atlantic Yards project in Brooklyn is 70 percent owned by the Greenland Holdings Group of China, which is turn is owned by the city government in Shanghai, according to the Wall Street Journal.

As I have noted before, the EB-5 program continues to attract interesting people.


I am grateful to Texas lawyer Shea Armstrong for pointing out the geographic data in the NYU report.