Steven Witkoff's incoming Central Park South luxury tower has come under fire again, this time for its use of the EB-5 green card program. The 900-foot tower at 36 Central Park South, which is expected to command asks of up to $13,000 per square foot, is the highest-profile building to take advantage of the immigrant investor program to-date. The Wall Street Journal notes that critics of the project are calling its use of EB-5, which secures green cards for investors in projects that create jobs, a "widespread abuse" of the program. Witkoff, of course, is unfazed, "Those are working-class people who are getting those jobs...EB-5 has been a huge positive for the financing market."
Critics say that the way developers like Witkoff are using the program is a form of gerrymandering. According to the Journal, urban projects like Witkoff's 1 Park Lane fall under a provision that requires the business produced through EB-5 to be located in rural regions or areas with unemployment rates that meet or exceed 150 percent of the national average. This provision allows developers to accept investments in more attainable $500,000 increments rather than the typical $1 million investment.
Because federal rules don't specify the size of the unemployment rates, developers and state officials have started to create areas that are (tenuously) linked to the luxury development. With 1 Park Lane, Witkoff and company created an area that ranges from The Plaza to a section dense with public housing in East Harlem to harness EB-5. Because of practices like this, the national program is having trouble luring investors to less dramatic projects in more rural areas.
The program helps developers save five to eight percentage points a year on a loan, the Journal says, which stirs up another issue: a lot of the developments using EB-5 today can be financed without the program. The jobs that investors are creating with their contributions would exist anyway.
1 Park Lane last stirred up controversy when an investigation into HUD paperwork and tax documents discovered that Witkoff's 1 Park Lane together with JDS's 111 West 57th Street would together only contribute 23 affordable studio apartments to the city after the developers paid the city for a combined additional 57,000-square-feet of development rights.
· Swanky New York Condo Project Exploits Aid Program [WSJ]
· Two Super Luxury Towers Subsidize Only 23 Units [Curbed]
· All 1 Park Lane coverage [Curbed]
· All 36 Central Park South coverage [Curbed]