Frum-friendly EB-5, Distressed Payment Plans & a Lower Manhattan riddle

Frum-friendly EB-5

EB-5, the controversial cash-for-green card program that was once dubbed the “crack cocaine” of real estate financing, has found salvation in the unlikeliest of places.

Jeff Akerman is looking to raise at least $100M through the program for a development targeting Orthodox Jews. Lakefront Estates is slated to house 12,000 residents in the $600M project, eyeing devout Jewish families priced out of upstate New York and Williamsburg. And because the project is rural – on Lake Okeechobee in Florida – foreign investors get to skip the crushing visa backlog.

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EB-5 (cont.)

“They’re able to get a conditional residency and get in the country within one year, as opposed to waiting several years,” Ronald Fieldstone, the lawyer assisting Akerman with the EB-5 raise, told the Post. The bulk of the funds will come from Chinese 🇨🇳 and Indian 🇮🇳 nationals, who were active investors in high-profile urban EB-5 projects but cooled off after the processing times made it a dud bet for them. The minimum EB-5 investment on rural (considered high unemployment) projects is $800K, compared to the $1M needed on urban projects.

Akerman’s project (1,000 SFHs for sale, 300 rental units) is open to all buyers (Fair Housing, obvz), but the target market is clear: the project has 2 shuls 🕍 , a yeshiva, a mikvah (a ceremonial bath), and has promotional videos in Yiddish.

It’s part of a wave of rural developments hoping to tap into a program most associated with glitzy big-city projects. If you were a developer of such projects in the mid 2010s, you probably considered getting an EB-5 tattoo: the fundraising mechanism, which basically equates to a cheaper form of mezzanine debt, brought in billions of dollars ($40B+ by one estimate) for projects such as Hudson Yards, Pacific Park, the Public Hotel, Oceanwide Plaza and 125 Greenwich Street. Late financier Howard Michaels once described it as “legalized crack cocaine,” and regional centers, which arrange the EB-5 funds for developers, became some of the most powerful figures in the industry. But many of those deals have been mired in investor lawsuits, and the program has long been a political minefield: in ‘22, it was reauthorized for 5Y, with higher investing thresholds and some (still sus) fraud-protection mechanisms baked in.

Payment Plan

New analysis from the CRED iQ crew on when delinquent borrowers are making – or not making – their loan payments: Over a third of them ( 🔴 )have said YOLO and stopped paying altogether; 10% ( 🟣) are past maturity but still making good on their monthly payments. (They also have an analysis of distress by property type, which you can check out here.)

111 Problems in FiDi

A hot mess of a tower is looking for a new lease of life as a resi project. InterVest Capital Partners (fka Wafra Capital Partners 🇰🇼 ) wants to turn the 1.2M sf 111 Wall St. into rentals, TRD reports, and has had discussions with office-resi alchemist Nathan Berman to handle the job. But InterVest has a $500M clusterfuck to tackle before it can get started: its debt comes from a consortium (incl. PIMCO, Howard Marks’ Oaktree) that would have to give the new plan its blessing; Oaktree had previously moved to focus on the mezz but later dropped that plan.

InterVest bought the building for $400M (leasehold in ‘20, ground in ‘21) with an eye toward turning it into a shmancy office destination for upscale tenants - no fault of theirs on the timing, but it could not have been worse. Its partner on the deal was Elie Schwartz of Nightingale Properties 👏 👏 👏 - TRD says he’s no longer involved.

(PS: A fun little side quest: Schwartz, the central character in RE’s biggest-ever crowdfunding scandal, is back in the fundraising game, as The Promote reported last month.)

Quickies

•  Uniqlo is bringing five stores to Texas, its first foray into the Lone Star State 🤠 (Houston, Sugar Land, Dallas, S. Arlington and Frisco)

• A little bit of “accounting jiggery-pokery:” How banks use “hold to maturity” to mitigate the impact of interest-rate jumps

• JPMorgan is looking to sell its Fulton Market rental tower; expects to take a loss (bought the Chicago property for $111M in ‘17)

• Lower Manhattan’s office woes are worse than the data show: Big chunks of “shadow space” are on the sublease market

• Hackman dials back a $1.3B plan to expand Television City in L.A.

• Don Hankey’s website is just a straight flex: the billionaire’s firm displays all its lines of credit and returns (h/t @pomp)

Tessler’s Travails

Diamonds are forever, but condo projects only last while you service your debt. Diamond 💠 merchant-turned luxury condo developer Yitzchak Tessler is facing foreclosure on his signature New York project at 172 Madison, TRD reports, with distressed RE investor ArcPe looking to recover $62M in debt. The 72-unit tower has 10 remaining pads for sale, including the penthouse (dubbed “Le Penthouse” 🤲).

“I personally don’t think it’s slow sales,” ArcPe’s David Gordon, who bought the note in January from Deutsche, told the publication. “More than anything right now, I just think he has the penthouses he wants to finish and a lack of money to finish them.” Tessler could still stave off the foreclosure by placing the project into bankruptcy.

Thank You

I would have been happy with 20. Nearly 100 of you showed up throughout the night for The Promote’s first Happy Hour in NYC: longtime sources, friends, new readers, ex-colleagues, even a guy who thought it was an event for my old firm. Thank you so much for the kind words and for coming- I'm really overwhelmed. And I promise that we’re just getting started.

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