EB-5 WORRIES, CHINA’S SLOWDOWN ARE CREATING UNCERTAINTY FOR DEVELOPERS

Developer Steven Witkoff’s plans for a big high-end development have been put on hold, as signs of oversupply—along with the EB-5 uncertainty—are putting dimming demand in New York’s luxury market. The property, the Park Lane Hotel, sits just two blocks north of the 57th Street corridor dubbed Billionaires’ Row, the epitome of Manhattan’s uber-luxury boom. Steven bought the property for $660M in 2013, and will keep it as a hotel for the time being, Bloomberg reports. Partner and fellow developer Harry Macklowe—co-developer of 432 Park Place, another high-end NYC project—says the velocity is not what it was, but “because we have cash flow, we have the flexibility to wait.” Since the recession, towers aimed at multimillionaire buyers and money parkers have hit the Big Apple en masse, leading to concerns of who can actually afford to buy them. Despite the concerns of demand, the New York market, as a whole, just keeps building, with Manhattan median home sales hitting a record $1.15M in Q4.

WHAT TO WATCH FOR ON EB-5 THIS YEAR

If you’re considering using EB-5 financing to get a project done, this would be a pretty good time, says Polsinelli shareholder Dawn Lurie, who’ll be among the speakers at Bisnow’s NY Foreign Investment event on Jan. 19 at New World Stages.

Often, there’s a wait-and-see approach taken by developers when government programs face an uncertain future (think 421a). But Dawn says the uncertainty since last month’s vote to extend the program without changes is actually fueling a rush of established regional centers applying to get in on the program before September, when it’s set to go for another vote before Congress. Whatever form EB-5 takes after September, Dawn says it’s a fair bet that it’ll involve increased due diligence requirements and that it’ll take more resources and time to navigate the process. She says Senate Bill 2145, sponsored by NY’s Sen. Chuck Schumer, can act as a kind of “crystal ball” for what a new EB-5 may look like.

Xinyuan Real Estate US managing director John Liang, who’ll also speak at our event, says Xinyuan’s Oosten condo development in Williamsburg was able to take an IRR in the 20s and get it into the 30s from a $50M EB-5 investment that replaced a portion of the equity Xinyuan had put down. He says it was like icing on the cake when a regional center approached Xinyuan after its capital stack had already been structured and ground had been broken—a sign, he says, that the project’s financials were especially strong. We’ll see you at our event on Tuesday, Jan. 19, starting at 7:30am at New World Stages, 340 West 50th St. Get more info and sign up here.