Wanted: Immigrant Funds to Build Final World Trade Center Tower
Silverstein Properties markets EB-5 visa program in China, aiming to raise about $500 million
A rendering of 2 World Trade Center. Silverstein Properties’ goal is to raise about $500 million in low-cost financing to construct the lower Manhattan tower.
To help finance construction of the final office tower to go up at the World Trade Center site, its developer is turning to aspiring immigrants.
Silverstein Properties Inc. recently began a marketing push in China seeking investors to put in $500,000 apiece for 2 World Trade Center through the federal EB-5 visa program, which gives green cards to foreigners who invest in certain job-creating businesses.
Silverstein’s goal is to raise about $500 million in low-cost financing for the lower Manhattan tower, according to marketing materials.
The move is likely to draw scrutiny because the developer is benefiting from a provision of the program meant to aid rural areas and economically ailing neighborhoods. Such moves now are coming under fire in Congress, with critics saying the skyscrapers take money away from parts of the country where financing is scarce.
Janno Lieber, who oversees the World Trade Center redevelopment at Silverstein, defended the company’s use of the program, saying new office towers create jobs for residents throughout the region across income levels.
The developer is turning to the program for 2 World Trade Center, he added, because the tax-exempt financing that was critical for the completion of the other World Trade Center towers was used up building them.
“In the absence of tax-free Liberty Bonds,” he said, “EB-5 is key to completing the rebuilding.”
Silverstein is seeking to start the 1,270-foot-tall 2 World Trade now that it is negotiating a lease with 21st Century Fox and News Corp to occupy more than half the 2.8 million square foot tower. News Corp is the parent company of The Wall Street Journal, which would move to the tower.
With a key portion of EB-5 due to expire Dec. 11, Silverstein’s turn to EB-5 for the tower intersects with a fight in Washington over similar large urban real-estate projects, which have dominated the program in recent years.
Almost all of these projects, including a condo tower on “Billionaires’ Row” south of Central Park and the $20 billion Hudson Yards development west of Midtown Manhattan, are in prosperous neighborhoods but technically are considered “targeted unemployment areas.”
That is because federal rules don’t specify area boundaries, but rather say only that such areas must have an unemployment rate that is 150% of the national average. So state governments and developers have created strangely shaped districts to make their projects qualify, a process known to critics as gerrymandering.
Projects in these areas can raise money at $500,000 per investor, compared with $1 million outside—making fundraising far easier.
The boundaries of the district for 2 World Trade Center couldn’t be learned. But when Silverstein raised about $250 million for a hotel and condo tower two blocks to the north, it used a district drawn by state officials that lumped the census tract containing the tower—whose unemployment rate was 3.8%—along with four others.
The district extended south, off the southern tip of Manhattan, up the East River and back onshore at a set of public housing projects in the Lower East Side, according to a letter with the district boundaries posted on a Silverstein website. The unemployment rate after expanding the district was 12.7%.
Such practices—now commonplace for Manhattan developments using EB-5—have angered those who want to see the program benefit rural and low-income neighborhoods, including the Senate Judiciary Committee Chairman Charles Grassley (R., Iowa).
“Some projects are abusing the program by taking EB-5 money away from high unemployment and rural areas that truly need the capital,” Mr. Grassley said in a statement. “It only makes sense to stop allowing developers to use rivers and public parks to link their projects in affluent areas to areas with high unemployment and allow the funding to go to places that are truly in need of a helping hand.”
Large developers and their backers in Congress have said jobs are created well beyond the small boundaries of a project’s census tract. Similar rules on the issue should remain in place, they say, allowing much of the nation to be considered a targeted employment area.
Among the concepts being considered is a proposal to allow high-unemployment census tracts as well as other special economic development zones to qualify, a designation that could allow the World Trade Center itself to qualify given that the redevelopment of the site has been considered a government priority.
Whatever happens with the program, Silverstein still would need to piece together other sources of financing for the tower. The company is expecting to finance construction with about $2 billion in bank debt, according to the advertising materials in China. It also needs hundreds of millions of dollars in equity, and it is out seeking partners, according to several people familiar with the financing.
- New York
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