Since the 2008 crash, domestic capital has been scarce, sitting at just $3 billion in 2009 after hitting a whopping $230 billion in 2007.
Naturally, EB-5, an investment program allowing foreigners to essentially buy green cards in exchange for a $500,000 investment, along with the creation of 10 U.S. jobs, became a goldmine for real estate developers, with everyone from the World Trade Center's Silverstein Properties to Extell Development taking a hit of the crack cocaine of real estate financing. (Seriously. Insiders really call it that.)
Altogether, EB-5 investments hit close to $5 billion last year, with nearly 90% of investments coming from China.
Interestingly, the development coincided with the Chinese invasion of capital to the U.S. In recent years, Chinese investors have picked up iconic trophy assets at record prices with little-to-no regard for short-term yield.
Of course, meager 1.5% annual returns beat losing 20% in domestic-equity markets.
Despite its popularity, EB-5 financing could be seeing a slowdown amid concerns of fraud, not to mention rumors of Congress shutting it down next month. This is forcing developers to look elsewhere for cheap capital, namely Israeli bonds.
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