New York Developer Lobbies Against Changes to Immigrant Investor Program

A New York real-estate developer is playing a central role in blocking a bipartisan plan to overhaul a controversial immigration program that gives green cards to foreign investors.

Related Cos., a developer of massive mixed-use projects, has waged an aggressive campaign to head off proposed changes to the so-called EB-5 program in an apparent effort to keep low-cost money flowing to luxury urban projects such as its $20 billion Hudson Yards development in Manhattan.

The EB-5 program offers green cards, allowing for permanent legal U.S. residency, to immigrants who invest at least $500,000 in certain U.S. businesses measured to create at least 10 jobs per investor. The program allows 10,000 visas a year.

At the heart of the fight is that developers including Related use a provision meant for rural and high unemployment areas in order to bring financing for luxury projects, often in some of the most expensive neighborhoods in the country.

Critics decry the practice, known as gerrymandering, because it involves creating special districts that link the luxury projects with economically struggling neighborhoods. They say it sucks money away from distressed areas that could most use the investment.

The developers say entire regions benefit from projects in central cities, which they say create jobs everywhere. They say they have offered compromise overhaul plans, to no avail.

Related has spent more than $1.4 million on immigration-related lobbying since January 2015, more than double any other individual user of the EB-5 program, up from zero in previous years, according to federal lobbying records.

Related executives have poured money into federal political donations, largely targeting congressional committees. Between January 2015 and November 2016, Related Chairman Stephen Ross, Chief Executive Jeff Blau and their wives contributed a combined total of $1.27 million to federal candidates and political-action committees, compared with a total of $833,000 in the eight years before 2015, according to federal campaign-finance reports.

A Related spokeswoman said the program spurs large and small projects throughout the country, and with the help of EB-5, “Hudson Yards is now an economic engine pumping over $150 million a month in construction costs alone into the economy and creating thousands of jobs.”

“We continue to support a robust expansion of the EB-5 program, greater transparency and stronger oversight measures to ensure the program’s integrity moving forward,” she said.

Related has been a central strategist with smaller real-estate companies in pressing lawmakers to block changes sought by a bipartisan group, making it by far the most active individual player on the issue.

“They’ve been effective at getting the message out,” said Nicholas Mastroianni II, chief executive of US Immigration Fund, a Related ally and one of the largest companies that pools together EB-5 funding from foreign investors. “They’ve been effective at communicating with leadership.”

A key provision of the EB-5 law, which took effect in 1990, was due to expire in September 2015, but has been given three short-term extensions since. Foreign investors have rushed in under the existing rules well past the program’s capacity, with applications pending from more than 20,000 immigrant investors—roughly six to seven years’ capacity of visas given that investors typically bring family members.

The latest four-month extension keeps the program alive until April, when many developers, including Related, have said they hope the political environment will favor a long-term extension given that President-elect Donald Trump is a real-estate developer and his son-in-law, Jared Kushner, has used the program. Mr. Kushner, named Monday as a White House senior adviser, will recuse himself from EB-5-related issues, his spokeswoman said.

A Trump transition spokesperson didn’t immediately respond to a request for comment on the EB-5 program.

A bipartisan group of lawmakers pushing for changes to the program is growing frustrated. The provision meant to direct money to struggling areas “has been rendered obsolete,” said Sen. Patrick Leahy (D., Vt.) after the latest attempt at a compromise early last month failed. “Anyone who maintains today’s EB-5 program is about creating jobs is either a lobbyist for the real-estate industry or simply not paying attention.”

In 2015, Mr. Leahy and Sen. Charles Grassley (R., Iowa), the top Democrat and Republican on the Senate Judiciary Committee, respectively, agreed with their counterparts in the House on a general overhaul package meant to address the developers’ use of the distressed-area provision.

But they ran into resistance from a set of developers and others in the industry—most prominently Related. The developers, in turn, found support from a handful of key senators including Sen. John Cornyn (R., Texas) and Sen. Charles Schumer (D., N.Y.), who have been resistant to the changes opposed by the developers.

Mr. Schumer has said the government shouldn’t be trying to direct development to specific parts of cities, and a spokesman said he believes good projects in EB-5 “should rise to the top based on how many jobs they’ll create.”

A spokesman for Mr. Cornyn pointed to the senator’s prior remarks that he wants to make sure “money is invested in urban and rural areas as well.”

The Related executives’ and their wives’ recent political donations have been largest for committees tied to House and Senate Republican leaders, including $272,000 to the National Republican Senatorial Committee.

Also aiding Related’s position have been business trade groups, the Chamber of Commerce and the Real Estate Roundtable, which both have taken positions nearly fully aligned with Related, people familiar with discussions said. Mr. Blau is on the board of the Roundtable and advocated for the group to lobby on EB-5. Roundtable Chief Executive Jeff DeBoer said he would have taken up the issue regardless.

Related appears to have benefited from its relationship with Mr. Schumer, who in 2015 helped block changes Related and other developers were against.

Emails obtained via the Freedom of Information Act show that Mr. Schumer and Mr. Ross were in direct contact over EB-5 for Hudson Yards, and Mr. Schumer urged a division of the Department of Homeland Security to expedite Related’s EB-5 applications.

A staffer for Sen. Schumer, Leon Fresco, in November 2013 asked the Homeland Security division for an update on the expedited applications, saying that “my boss will want to call Ross and say the result is coming.”

A month later, Mr. Fresco checked back again.

“Anything new on this? Now that the Dolphins won, Steve Ross is getting antsy and calling my boss again,” he wrote. Mr. Ross owns the Miami Dolphins.

The next month, Mr. Fresco asked again, saying “the boss ran into Stephen Ross and he asked about it.”

The spokesman for Mr. Schumer said he “advocates for all kinds of projects across New York that create jobs.”

The applications were expedited—a point Related used in advertising to help raise funds from investors in China.

http://www.wsj.com/articles/new-york-developer-lobbies-against-changes-to-immigrant-investor-program-1484058703

Mentions

• Related New York City Metro Regional Center
• Related Companies
• Hudson Yards Manhattan Tower A-1 - A-8
• U.S. Chamber of Commerce
• U.S. Immigration Fund, LLC
• Patrick Leahy
• Chuck Grassley

States

• New York