Dive Brief:
- Developers for the 94-story, $1 billion Vista Tower in Chicago have secured a $700 million construction loan, the largest real estate-related financing deal in the city's history, from China-based Ping An Bank, according to the Chicago Tribune.
- Magellan Development Group and Wanda Commercial Properties of China broke ground on the Jeanne Gang-designed hotel and condominium tower nine months ago without full financing in place, which is unusual for a project of that size. Developers said they believed they would get better loan terms if they could deliver more presales — 35% of the pricey units have been sold thus far — and successfully complete the risky underground portion of work.
- Magellan and Wanda will pay for the rest of the project with $300 million in equity financing, up to $200 million of which could come from foreign investors through the EB-5 visa program, Crain's Chicago Business reported.
Dive Insight:
When complete, the Vista Tower will be the tallest building in the world designed by a woman-owned architecture firm and the third-tallest building in Chicago.
Other developers have seen success obtaining large loans for luxury residential towers in Chicago despite relatively tight lending conditions, such as Oxford Capital Group's and Quadrum Global's $170 million loan to build a 56-story, 479-unit luxury apartment building.
Project officials said they are still in the EB-5 application phase, during which the project will be qualified to receive foreign investments through the program. Wanda and Magellan said they are already starting to inform potential Chinese investors about the investment opportunity.
The EB-5 program was set to expire at the end of April, but Congress extended the popular yet controversial investment vehicle through the end of September. This option for foreign investors gives them an expedited green card application process in exchange for a $500,000 to $1 million investment in a commercial undertaking approved by the U.S. Citizenship and Immigration Services.
However, not everyone is a fan of the program. In March, U.S. Rep. Steve King, R-IA, introduced a bill that would end the EB-5 program. He cited the potential for "fraud and abuse" in the wake of some high-profile criminal prosecutions related to the investment scheme.
One of those schemes involved Seattle developer Lobsang Dargey, who pleaded guilty to fraud earlier this year after it was revealed that he spent $240 million in EB-5 investor money on personal luxury items and on projects that were never approved by the USCIS.
