Want a Green Card? Invest in Real Estate - NYTimes.com: "“It is a good financing vehicle,” said Asaf Shuster, the vice president for business development of the Victor Group, which is raising $90 million from 180 foreign investors for a 60-story condominium at 281 Fifth Avenue. The project’s total budget is roughly $400 million, and “in order to build such a big project, you need a lot of equity and a big stack of financing,” Mr. Shuster said.
Before the advent of the visa program, the company would have taken out a loan and paid around 12 percent in interest, “but EB-5 money can be as low as 5 percent,” he said. Developers pay the costly immigration agents, as well as legal fees and other expenses, said Mr. Finkelstein, who is advising the Victor Group on 281 Fifth Avenue.
But while the program can make sense for foreigners and developers, several well-documented cases of fraud have occurred, primarily involving developers who misrepresented themselves to investors and then failed to deliver a completed project. And while a traditional commercial bank pays close attention to construction schedules and dispenses funds as the project proceeds, EB-5 investors deliver lump sums, so a developer could spend the money before the project is complete and wind up with a funding shortfall.
So far, New York City has yet to have a major problem with EB-5, but it may be only a matter of time. “It usually takes about five years, and a lot of these projects were started in 2011, so it is too early to know which ones will fail,” said Mr. Chang of Sotheby’s. “But in my mind, I see some red flags and projects that are not in good shape.”
Another criticism of the program is its lack of transparency and oversight. Even the program’s proponents have called for improvements."
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Before the advent of the visa program, the company would have taken out a loan and paid around 12 percent in interest, “but EB-5 money can be as low as 5 percent,” he said. Developers pay the costly immigration agents, as well as legal fees and other expenses, said Mr. Finkelstein, who is advising the Victor Group on 281 Fifth Avenue.
But while the program can make sense for foreigners and developers, several well-documented cases of fraud have occurred, primarily involving developers who misrepresented themselves to investors and then failed to deliver a completed project. And while a traditional commercial bank pays close attention to construction schedules and dispenses funds as the project proceeds, EB-5 investors deliver lump sums, so a developer could spend the money before the project is complete and wind up with a funding shortfall.
So far, New York City has yet to have a major problem with EB-5, but it may be only a matter of time. “It usually takes about five years, and a lot of these projects were started in 2011, so it is too early to know which ones will fail,” said Mr. Chang of Sotheby’s. “But in my mind, I see some red flags and projects that are not in good shape.”
Another criticism of the program is its lack of transparency and oversight. Even the program’s proponents have called for improvements."
'via Blog this'
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