Resi brokerage following in footsteps of top NYC developers
City Connections Realty scored approval to open an EB-5 regional center, becoming the first residential brokerage to do so.
The new designation means that the 100-agent firm led by Dave Schlamm can sponsor EB-5 investors who invest $500,000 in the American economy and in exchange receive a green card. City Connections’ geographic reach will extend to development projects throughout New York state, as well as Connecticut, New Jersey and Pennsylvania.
“We don’t know where the opportunity will lie. We had to take some risks [in our application], and one of the risks was applying for a broad category,” said Min Chan, an EB-5 attorney who joined City Connections last year and is a co-founder with Schlamm of the regional center.
There are 76 regional centers in the state of New York, including some run in-house by developers like the Related Cos., Extell Development and Silverstein Properties, according to the U.S. Citizenship and Immigration Services website. In New York City, EB-5 investors are funding projects including Hudson Yards, Pacific Park Brooklyn and condominium projects Michael Shvo, Bizzi + Partners and Howard Lorber’s 125 Greenwich Street, Witkoff Group’s 1 Park Lane and Macklowe Properties’ 1 Wall Street.
Schlamm said City Connections would target community-oriented developments like assisted living and affordable housing projects, which other regional centers may not be as focused on.
“We’re not going to be doing huge, glitzy condo buildings,” he said. “We have to find a niche market. Our goal is to go for something a little different.”
The regional center was approved in just eight months, much to the surprise of Schlamm and Chan.
“I was expecting them to call and say, ‘Hey, Min, we need more information from you.’ It was a pleasant surprise,” Chan said. “Now we’re in the position to really sit down with developers and talk about how we’ll partner with them.”
Opening a regional center can cost around $200,000, and regional centers typically collect $50,000 to $60,000 from each investor.
Chan said the brokerage is looking to do two or three projects a year to start, and will target developers looking to raise $10 million to $15 million for projects up to $50 million.
The regional center is part of City Connections’ big play to attract Chinese clients.
The firm hired a Chinese staffer to facilitate written communications with potential investors and clients. And the firm is also building a website to market New York City properties directly to Chinese investors. The site – Meixi.china.com – is hosted in China, meaning it will be fully searchable there.
“I’m making a commitment to do business with China, that’s the macro view of it,” Schlamm said. “There’s a little niche that has huge opportunities.”
Despite the recent economic turmoil in China, Schlamm said he’s bullish on continued Chinese investment in New York real estate. “If I’m sitting in China, I may want to buy real estate in what’s perceived as a very safe place,” he said. “I think there’s going to be a pipeline for years.”
But EB-5 has faced criticism over a relatively low financial threshold for investors and the industry’s lack of transparency. Others have pointed out that the program, which intends to create jobs in underserved areas, are, in fact, financing glitzy condo towers in Manhattan.
When the program comes up for renewal Dec. 11, a series of changes may kick in to address those concerns.