October 1, 2012
By: Scott Blake
Investment visas pump millions into MiamiBy Scott Blake The US governments Immigrant Investor Program — known as “green card via the red carpet” — is pumping millions of dollars into South Florida business ventures from wealthy foreign nationals willing to invest big money to secure a place in the US. Those familiar with the EB-5 visa program say it has helped create some innovative projects in South Florida, including the University of Miamis Life Science & Technology Park in Miami. And more projects — chosen for their potential for economic development and job creation — are in the works. “Theyre not just buying a green card,” said Maralyn Leaf, a Miami attorney specializing in immigration law who has worked with EB-5 investors and business ventures. “This is a government program that brings in employment and doesnt use a penny of taxpayer money.” The nationwide program provides permanent US residency for foreign nationals who invest $1 million — or at least $500,000 in “targeted employment areas” — in new businesses. EB-5 was designed to help the economy through job creation and capital investment. The money from each investor is tied to creating or preserving at least 10 full-time jobs for US workers. The program has spawned more than 20 so-called regional centers in Florida, including several in Greater Miami that have generated seed money for everything from new hotels and restaurants to bio-science and research startups. The regional centers promote economic growth by garnering immigrant investors for new commercial enterprises. Foreign nationals also can bypass the centers and invest in standalone businesses. Even local government wants to get into the action. Miami officials are seeking federal approval to create an EB-5 regional center at City Hall. Perhaps Greater Miamis most successful regional center was a venture called Birchleaf Miami 31, which generated $20 million from 40 immigrant investors for development of the Life Science & Technology Park. The office and lab complex was designed to house medical research, biotech and science firms. “Its a very good example of how the program can work,” said Ms. Leaf, who worked on the Birchleaf venture. With Birchleaf, money from investors went to Wexford Science & Technology, the parks developer, in the form of a loan. “These are millionaires and sophisticated businesspeople,” she said about the Birchleaf investors, adding that some have started their own businesses here since receiving visas through the program. In addition, Ms. Leaf and Luciana Fischer, also a Miami attorney, are forming an EB-5 venture named Leaf Fischer Investment Group to garner immigrant investors for the development of a resort on Key Largo. She said about a dozen foreign nationals are interested in investing in the proposal, called Fishermans Cove, which would include a marina, restaurant, retail shops and spa. The Birchleaf project went without hitches, but that doesnt mean theres no financial risk for EB-5 investors. “This is an enormously complex program,” Ms. Leaf said. “A lot of due diligence should be done, first by the regional centers and then by investors.”To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.
TALLAHASSEE, Fla. – April 12, 2012 – In most cases, people who purchase condominium units from bulk buyers won’t be able to sue them if there are construction defects or other problems.
Florida Gov. Rick Scott last week signed a bill that extended the protections for investment groups that have bought multiple units in a building. That means the investors don’t have any more responsibility than other buyers in the building.
The measure went into effect July 1, 2010, and Scott extended it for three more years until July 2015.
The exemption for bulk buyers boosted sales of distressed condos, helping the housing market recover, proponents say. Critics insist the measure isn’t consumer-friendly and shouldn’t become law permanently.
Florida law used to consider a developer anyone who bought more than seven units in a building of 70 units or more. Those buyers were forced to assume the same legal and financial risks as developers who build condos.
The bill eliminated the title of developer for bulk buyers, giving investment groups more incentive to make deals for deeply discounted units.
While investors scooped up South Florida condos, “a lot of other areas in Florida are having problems in terms of absorbing unsold units,” said Marty Schwartz, a Miami lawyer and a co-sponsor of the bill.
Some investor groups have proposed making the bill’s protections permanent.
“I still think there’s a need for it, but only for a limited period of time,” said Donna DiMaggio Berger, a Broward County lawyer who represents condo associations statewide. “Why would we want to make it permanent when the (housing) market is no longer distressed?”
From late 2008 until September 2011, investor groups made more than 100 bulk deals for condos in Palm Beach, Broward and Miami-Dade counties, according to CondoVultures.com, a Bal Harbour-based consulting firm. The total dollar value was nearly $3 billion.
Copyright © 2012 the Sun Sentinel (Fort Lauderdale, Fla.), Paul Owers, Sun Sentinel, Fort Lauderdale, Fla. Distributed by MCT Information Services.
Commercial Investors Eye Single-Family Homes
Published on: Wednesday, March 07, 2012
Written by: David Bodamer
With the latest data from the Case-Shiller National index showing that housing prices have fallen for the eighth straight month and are now back to January 2003 levels, the housing crisis appears no closer to its end.
But might there be an unlikely savior on the horizon for the single-family sector in the form of commercial real estate investors? On Monday, the Federal Housing Finance Agency (FHFA) announced a pilot program through which it would take bids from investors to buy foreclosed residential properties in bulk for the purpose of turning them into rentals.
The pilot program is the result of an effort launched last summer by the FHFA, along with the Treasury Department and the Department of Housing and Urban Development, to solicit outside input on how the government could deal with its millions of real estate owned (REO) residential assets and help turn the housing market around. The first pool of assets is a group of 2,490 properties, including 2,849 units in some of the hardest-hit residential markets: Atlanta, Chicago, Florida, Las Vegas, Los Angeles and Phoenix. There are 1,743 single-family homes, 527 condos, seven manufactured homes, one co-op, 118 duplexes, 36 three-unit buildings and 58 four-unit buildings.
To date, investors have purchased homes in foreclosure auctions and rented them out. But investors can only buy one or two assets at a time this way. The idea here is to enable investors to buy larger pools of foreclosed homes in order to get them on the market as rentals and deal with the glut of troubled assets more quickly.
“This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties and reduce the supply of REO properties in the marketplace,” FHFA Acting Director Edward J. DeMarco said in a statement.
Investors must fill out a qualifying form on the FHFA’s REO Asset Disposition page, post a security deposit and sign a confidentiality agreement to access detailed information about the properties. According to the FHFA, only investors who qualified through this process will be eligible to bid.
The concept of involving the private sector to help solve the foreclosure problem has some high-profile backers.
Lew Ranieri, who helped pioneer mortgage-backed securities in the 1970s, and Kenneth Rosen, chairman of real estate market research firm Rosen Consulting Group, are the main authors on a policy paper issued this monthlaying out how the private sector’s involvement could help turn around the housing market and deliver attractive returns to investors.
“Without question, this is an opportunistic place to make investments,” Rosen says. “It’s similar to what opportunity funds have done with commercial real estate. There are more than one million units to be auctioned. Instead of having small players buy the assets, this would allow for bulk acquisitions.”
Overall, 453,266 residential units are currently classified as REO. Of those, the federal government holds nearly 50 percent of the inventory through Fannie Mae and Freddie Mac and another 9 percent with the Federal Housing Administration. In addition, private label securities hold 33.3 percent of the REO inventory and banks hold 17.5 percent.
But gaining control of those assets is a time-consuming process. In existing auctions, properties are sold one at a time. Private equity investors have gotten involved in converting vacant homes into rental properties, according to Rosen. But creating bulk programs could increase interest by making it easier for large investors to amass portfolios.
Investors then have several strategies for how to handle the assets. According to the policy paper, “Homes can be purchased for three potential outcomes, depending on a range of factors: the micro-conditions of the home, employment and income of potential tenant/owners and the macro-conditions of the neighborhood and market.” Specifically, investors could choose to offer the units in rent-to-own, rent-to-rent or resale arrangements.
In a rent-to-own scenario, an investor would enter a long-term relationship with a tenant who would offer the renter a right-of-refusal to buy the home. The lease could also be structured to give the tenant a share of any upside in a property’s sale. According to the policy paper, “This share can be structured to be payable regardless of whether or not the tenant purchases the home or be restricted to only if the tenant converts to ownership. This share can be pro-rated down or eliminated if a tenant leaves before the ?ve-year term.”
In a rent-to-rent scenario, the investor operates the asset as a straight rental property. And a resale would simply involve moving the asset to an owner-occupier.
“The private sector has a lot of solutions to the mortgage problem,” Rosen says. “They are engaged and want to be involved. I think this is something that has to be pushed as fast as it can.”
One caveat Rosen notes is that the government needs to ensure that the participants in the program are legitimate players. For example, the policy paper notes, “Programs that we deem to be unscrupulous are requiring tenants to pay a down-payment when signing a lease. We believe ?rst and last month’s rent and/or a security deposit in keeping with state law is acceptable, but do not believe additional advance payments are warranted.”
If all goes well, Rosen thinks the pilot program could be expanded “full scale” within a year with the government offering its inventory in bulk sales as well as banks and private-label securities conducting similar programs.
This article was republished with permission from National Real Estate Investor.