By Michael Dresser, The Baltimore Sun
5:20 PM EDT, October 1, 2011
The private developers of two high-profile state projects are seeking financing through a visa program that lets wealthy foreigners go to the front of the line for green cards and possible U.S. citizenship in return for a $500,000 investment.
Developers of the Seagirt Marine Terminal expansion and the proposed $1.5 billion office-retail-residential complex at State Center — projects in which state government agencies are key partners — are attempting to use the program to raise money in such countries as South Korea and China, where immigrants face long waits to enter the United States through conventional channels.
Also seeking financing though the federal EB-5 visa program are the company building the $1 billion slot machine and entertainment palace at Arundel Mills and the developer of a proposed $1.5 billion waterfront community in Baltimore's Westport area.
The EB-5 program — established by Congress as a job-creation measure under President George H.W. Bush in 1990 — has critics, including some who say it allows the wealthy to jump the queue and in effect buy American citizenship. As use of the program has grown in recent years, some say it needs greater oversight.
But the visa program also has staunch defenders in both parties who call it a useful tool for attracting talented people and their capital to the United States, creating jobs in the process.
"EB-5 investment is a win-win-win on so many levels," said Joseph Weinberg, development president of the Cordish Cos., developer of the Maryland Live! Complex at Arundel Mills. "Having wealthy persons move to the U.S. and then create more jobs with new investment is great for the U.S. and Maryland economies. It is fantastic for Maryland to attract overseas capital rather than it going to other states and countries."
But state Sen. Nancy Jacobs, a Harford County Republican, said she finds the program troubling. The Senate minority leader said she would like to see the General Assembly bar the use of such funds for state-backed projects but doubts that will happen.
"That just sounds like we're selling citizenship," she said. "It doesn't pass the smell test. It seems like we're turning this country over to the Chinese."
The program, lightly used for most of its existence, has gained popularity in recent years as banks have become more reluctant to lend even to established developers. It allows immigrants who invest $500,000 to $1 million in projects that create jobs — a minimum of 10 jobs per investor — to get preferred consideration for visas and, after two years in the United States, permanent resident status.
The number of visas issued through the program has grown to about 2,500 a year, federal officials say. But the EB-5 program still represents less than 1 percent of U.S. immigrants who go on to receive green cards each year.
A Washington immigration lawyer who is helping to seek investors for the Seagirt and State Center projects said Maryland has lagged in tapping into the program.
"Many states and municipalities … are using it as a really valuable economic tool," said David M. Morris, whose private DC Regional Center has put together investment offerings for the Seagirt and State Center projects.
Morris said EB-5 funds would not be the primary source of financing for either project and that both could go forward without immigrant investors. The advantage of EB-5 money, he said, is that it could be raised at a lower cost than other funds because the investors are not necessarily seeking the highest returns.
Topping these investors' priorities, he said, are securing visas and making sure the projects create the number of jobs required for the investors to acquire their green cards — a vital step for those who choose to apply for U.S. citizenship. "The investors need to find projects they feel will satisfy that," Morris said.
The Maryland Department of Transportation, which has played a lead role in both the Seagirt and State Center projects, had no say in the decision to seek EB-5 visa financing, said spokesman Jack Cahalan.
"The private developer is responsible for financing the private components of that project, and the state plays no role in that process," Cahalan said.
He said that in the case of State Center, where the state and city are supporting a move to replace the crumbling Preston Street office complex with a mixed-use development, his agency knew that lead developer Ekistics LLC intended to seek such financing.
He said there is no mention of EB-5 financing in the agreement creating the public-private partnership between the state and Ports America Chesapeake for the construction of a new 50-foot-deep berth at the Seagirt Marine Terminal. But he noted that Ports America, which has a 50-year lease to run the facility in return for an eventual investment of up to $1.8 billion, is a private entity.
The Ports America deal, announced by the O'Malley administration in January 2010, has been widely hailed as an innovative way to attract private money to finance an expansion the port of Baltimore needed to prepare for the opening of a wider Panama Canal in 2014. The wider canal will enable larger ships to make the run from Asia to the East Coast; the Seagirt expansion is expected to give the port an advantage in attracting those vessels.
The State Center project has been more controversial. While it has won the support of City Hall and the surrounding neighborhoods, it is opposed by downtown business leaders, including Orioles owner Peter G. Angelos, who see it as government-sponsored competition with buildings they own. Opponents filed suit last year seeking to block the Baltimore project.
A business plan prepared for possible State Center investors spells out an intention to raise $10 million to $65 million through the EB-5 program toward the $230 million needed to build two office buildings in the first phase of the project. The state would provide $28 million to build a parking garage, and the balance is expected to come from other private investors.
George Tyler, chief financial officer of Ekistics, agreed with Morris that the deal does not depend on the success of the EB-5 offering. Neither, he said, does the developer need state approval for what he called a "purely private" financing decision.
"The state doesn't get into this mix. They are aware but not involved," he said.
Morris said EB-5 financing is not guaranteed to have a part in the Seagirt project. He said he approached Ports America with an offer to raise money for the project and received authorization to launch a bid to raise $40 million in EB-5 investments. A Ports America spokesman agreed that it is not certain EB-5 money will have a role in the project. He did not return phone calls seeking further comment.
Patrick Turner, whose Turner Development Group hopes to transform the once-blighted Westport waterfront with the help of EB-5 financing, is enthusiastic about the program.
"It makes great sense," he said. "It obviously helps generate economic development in poorer census tracts." Because of its location in a high-unemployment zone, the Westport project — like the others in Baltimore — qualifies for the EB-5 program's $500,000 investment threshold rather than the $1 million that applies in healthier job markets.
But Mark Krikorian of the Center for Immigration Studies, which describes itself as "low-immigration, pro-immigrant," said he'd like to see Congress get rid of the program — for philosophical and economic reasons.
"It's almost laughably cheap," he said, noting that an immigrant who invests $500,000 can bring immediate family members to the United States as well. "We're practically giving citizenship away, not selling it."
Congress has been ambivalent about EB-5s since their inception, keeping the program going as a pilot but declining to make it permanent. Unless Congress acts, it would expire in 2012, but it has influential backers.
Muzaffar Christhi, director of the nonpartisan Migration Policy Institute at the New York University School of Law, said the EB-5 program attracted limited interest in its early years. In 2000, a series of articles in The Baltimore Sun outlined how the program had been tainted by allegations of insider dealing by former immigration officials.
"It has had a checkered career for sure and extraordinary growth in the last two years," Christhi said.
But Christhi said he has reconsidered his former opposition to the program. "My change was driven by the argument that the good thing about immigration is diversity." Immigrants bring diversity not just in ethnicity, but in skills, he said.
Christhi said the program poked along at a rate of 500 to 700 visas a year until it started taking off in 2008 as lending from conventional U.S. sources started to dry up. In the past four years, he said, the number of regional centers across the country promoting such deals has grown from about two dozen to 189.
Over the past three federal budget years, according to the U.S. Citizenship and Immigration Service, an average of about 2,500 visas have been issued under the program. The program is on track to set a record of about 5,000 — about half its statutory limit of 10,000 — in fiscal 2011.
Christhi said the program needs stepped-up oversight to guard against the possibility of fraud and to make sure job-creation goals are met.
"Whenever you have a program that has a growth of this rate, it deserves scrutiny even though the program is fundamentally a good one," he said. "Even a good idea can turn into a bad one very quickly."
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