Steven Witkoff is planning the development of a 900-foot condominium and if everything goes as planned, construction will finish in 2020. Once completed, the tower will stand as part of Billionaire’s Row, a section of New York where multiple ultra-luxury skyscrapers overlook Central Park from the southern edge. While this sounds great, it also creates controversy about the EB-5 program used for funding.
Witkoff, along with his partners, plan to use over $200 million in low cost financing coming from immigrants as part of the EB-5 program. Immigrants would pay in increments of $500,000 through a provision of a Federal visa program designed specifically to help struggling neighborhoods.
As part of the program, state officials created a special district that will link Witkoff’s planned tower with projects in East Harlem intended for public housing, something that other developers do. Once complete, the massive tower will be worth $1.7 billion, making it the highest-end project so far associated with the EB-5 program. Through this program, immigrants receive green cards in exchange for investing in development that creates jobs.
At this time, the construction schedule remains open. When confronted on allegations that he is exploiting a government program, Witkoff insisted he is following all the rules. He added that his project would create a tremendous amount of construction jobs for New York and beyond. He also said that many other construction jobs completed because of funding from the EB-5 program, projects that would not have finished otherwise.
Critics Raise Concerns
However, critics believe that Witkoff’s tower is a perfect example of widespread abuse of EB-5, an immigrant investor program that is currently at the center of debate in Congress. Last September, several primary members of Congress agreed on the method of reform for any aspects of EB-5, which included changes to prevent fraud. However, Witkoff’s planned tower remains a sticking point.
The problem is that a significant portion of the investment money heading toward targeted areas of employment are now being redirected to lavish building projects in high-end areas. As such, there is an abuse of the program but in addition, EB-5 is not fulfilling its intended purpose according to the law.
Urban projects account for most of the money coming into the EB-5 program, benefiting from a provision in which businesses must locate to areas of unemployment rates of at least 15% or rural regions. As a result, developers only need to raise $500,000 per investor opposed to $1 million for other areas.
Under the Federal rules of the program, there is no size specified for the targeted employment areas. This is the reason for the creation of districts linking to luxury developments with low-income neighborhoods. As for Witkoff’s project, it remains in question based on what Congress decides.
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