Is Lower Manhattan Now a Low-Employment Area?

Politicians pushing to reform America’s EB-5 visas may have been handed some extra ammunition this month when the builder of the World Trade Center in lower Manhattan revealed that it was seeking to raise $500 million for the latest phase of the project through the investor immigration program.

New York developer Silverstein Properties has been marketing the investor visas, which were designed to put foreign funds to work in areas of low employment in the US, to help fund the 81-storey, Norman Foster-designed 2 World Trade Center, the second office tower to be built on the site of the former World Trade Center.

2 World Trade is the latest Manhattan development to make use of EB-5 funds, and the inclusion of the prime office project in the immigrant visa scheme adds to speculation that the program, which is currently up for renewal, may put in place more stringent job requirements in its new form.

Trading Investment for Immigration

Silverstein has recently been marketing EB-5 visas in China, giving mainland investors the chance to earn US residency in return for committing at least $500,000 to the construction of the 1,340 foot (410 m) tall tower, according to an account in the Wall Street Journal.

Of the 10,000 investor visas granted last year, about 9,100 were issued to applicants from mainland China, or just over 85 percent.

Originally conceived as a program to provide immigration opportunities to wealthy foreigners willing to invest in rural areas, or places where unemployment is at 150 percent the national average, state governments charged with implementing the program have been criticised for allowing property developers to use the program to fund high-end projects in thriving business districts.

Low Employment Areas Where Your Building Has a Jet Concierge

Asking office rents in One World Trade, which sits adjacent to Silverstein’s new project, are currently more than $60 per square foot ($646 per square metre) per month . Both Rupert Murdoch’s News Corporation, and the tycoon’s 21^st Century Fox have reportedly signed agreements to lease space in Two World Trade when it is complete.

And Two World Trade’s reliance on EB-5 seems to represent a broader trend in New York, where a number of other developers have taken advantage of the program to provide low interest financing for their projects.

New York-based Witkoff used EB-5 to channel a reported $175 million in funding into a 58-storey luxury condominium project at 111 Murray Street in Manhattan, where penthouses sell for as much as $17.5 million, and residents will have the option of using the building’s concierge private jet service. And billionaire Stephen Ross’ Related Co is also relying on the investor visa program to help fund its $20 billion Hudson Yards project.

A recent study by two professors from New York University’s Stern School of Business estimates that at least $3.2 billion of EB-5 fnding has gone into New York City real estate projects since 2010.

Grassley-Leahy Pushing for Reform

Even some property developers who have benefitted from the EB-5 program are pushing for more stringent guidelines, out of fear that current practices may fuel a backlash, while other observers are raising concerns over whether funds are being directed where they would provide maximum benefit for the nation’s economy.

With the legislation that created the EB-5 program having expired in October, a new bill sponsored by senators Patrick Leahy, of Vermont and Chuck Grassley of Iowa, seeks to put tighter controls on where EB-5 funds can be used, as well as raising the minimum investment level to $800,000.

The new bill, which is currently making its way through the US Congress, would limit the ability of state governments to patch together low-employment areas with bustling business districts to create single “targetted employment areas,” a practice which local promoters have relied on to funnel EB-5 funding into prime areas of America’s downtowns.