The residential apartments adjacent to the Barclays Center in Downtown Brooklyn; luxury condominium at 101 Murray St.; the residential rental building at 625 West 57th St. under development by the Durst Organization; the Gem Tower on West 47th St., a mixed use retail/hotel development in the heart of Times Square; the 630 foot Staten Island Wheel, the foundation for three office towers at the Hudson Yards, residential rental towers in Astoria and Long Island City, as well as hotels and mixed use developments around the city and the nation are being partially funded by Employment based 5 Category, a program established by Congress in 1990 as a method of bringing in foreign capital and creating jobs. EB-5 capital has been provided as mezzanine and preferred equity financing for a series of key economic development initiatives in New York City.
Through the EB-5 program, a program investor and their immediate family can obtain permanent residency in the United States by investing $500,000 into an approved project located in a Targeted Employment Area which creates/preserves at least 10 jobs for qualified United States workers. The majority of foreign investors participate in the EB-5 program by investing in commercial enterprises managed by designated “Regional Centers”. A Regional Center is not merely defined as a geographic area, but rather as a business entity that coordinates foreign investment within that area in compliance with the EB-5 decision framework. The Regional Centers are entities approved by the government to secure foreign investment to use such investment to promote job creation within a defined geographic area. There are two types of regional centers; one owned by a developer of real estate ‑ which include the Related Companies; Extell Development and Silverstein Properties ‑ and independent regional centers.
Another source of capital is Israeli-bond financing issued and traded on the Tel Aviv Stock Exchange. WeiserMazars reported that more than $14 billion of real estate financing was completed in 2014.
As reported in the Real Deal in May, the Moinian Group closed a $361 million bond issuance on the Tel Aviv Stock Exchange, the largest debt offering on the exchange to date by a U.S. real estate player. The issuance is backed by about 15 properties in the New York portfolio, including 3 Columbus Circle and 535-545 Fifth Avenue.
Moinian is joining a group of other leading developers and owners,which include Extell Development, The Related Companies, The Lightstone Group, the Pinnacle Companies and other owners who are utilizing bond financing for assets which include rent regulated, stabilized rental, and Department of Housing and Urban Development apartments, hotels, office buildings and development sites in the metropolitan area and around the continental U.S.
Some of the major benefits of this form of financing includes:
• Interest rates ranging between 4-7% (unsecured)
• Generally, no collateral requirement
• Long durations, eliminating frequent refinancing needs
• Some financial covenants required however, substantially lower than in other markets.