August 12, 2019

West Coast Real Estate Update: August 12, 2019

Holland & Knight Update
Susan Jennifer Booth | Stacie Andra Goeddel | Robert M. Haight Jr. | Loren Kessler Higgins | Karl J. Lott | Douglas A. Praw | Andrew J. Starrels | Rebecca M. Freed | Chris Gregores | Geoff Kelly | Ure Morales

Department of Homeland Security Publishes EB-5 Program Changes

The U.S. Department of Homeland Security (DHS) published rule amendments to the EB-5 investor visa program on July 24, 2019, in the Federal Register. The rule, effective Nov. 21, 2019, codifies existing policies and changes certain aspects of the EB-5 program, including an increase to required minimum investment amounts and reforming targeted employment area designations. To keep pace with inflation, minimum investment amounts will increase from $1 million to $1.8 million in most areas and from $500,000 to $900,000 in targeted high unemployment and rural areas (TEA). In order to combat the inconsistent manner in which states had determined TEAs, the rule authorizes DHS to directly designate TEAs in line with congressional intent.

Under the EB-5 program, individuals may apply for lawful permanent residence if they make the necessary investment in a commercial enterprise in the United States and create or preserve 10 full-time jobs for qualified U.S. workers. Many EB-5 investors, already facing wait times of years, had expressed concerns over having to refile their petitions in light of the anticipated rule changes. However, the rule allows petitioners to retain the priority date established by a previously allowed petition in the event of having to refile due to the new changes. "DHS believes that priority date retention may become increasingly important due to the strong possibility that the EB-5 category will remain oversubscribed for the foreseeable future," the rule states.

Investors Spurring Co-Living Projects

The housing shortage and rising rent prices in major cities have generated an increase of dorm-like communal living developments. The co-living space has evolved from small apartments with common areas to residential facilities with quality amenities, including co-working spaces, housekeeping, furnished units and fitness centers, typically found in more expensive asset classes. The target demographic is 25-year-olds to 50-year-olds earning $40,000 to $90,000 per year and working in a major market where rent prices for a one-bedroom apartment are often beyond reach. Because of the success of recent co-living projects, investors are generating growth in the new asset class. Funding has trended upward since 2015, with $800 million secured so far this year.

In Los Angeles, where high demand for housing has been the norm for decades, the first ground-up, large-scale co-living project is under construction in Hollywood. The development, Treehouse Hollywood, aims to build a community and a new way of living. Treehouse offers communal amenities, including a library and a café, that are free to residents, while also providing tenants their own private bedroom for personal space. Other co-living projects have opened across the city and more are planned. In March, a national co-living operator announced plans to build $100 million worth of co-living units in LA over the next two or three years. According to Shawn Lambert, an investor research analyst at Jones Lang LaSalle, “in a very short period of time, a whole new class of multifamily residential assets entered the market. The sector is receiving a lot of interest. Investors are beginning to see co-living as a tested niche subsector.”

New York Debuts Self-Driving Cars

The Brooklyn Navy Yard rolled out autonomous vehicles (AVs) for employees and visitors to connect passengers from its NYC Ferry stop to other points within the complex. The Brooklyn Navy Yard Development Corporation partnered with Optimus Ride for the initiative. The program starts six autonomous vehicles at the yard that will run on a loop between Dock 72, where the ferry stop is located, and the Navy Yard’s entrance at Flushing Avenue and Cumberland Street, a distance of about 1.1 miles. On weekends, it will connect the ferry dock to Building 77, home to the complex’s new food hall. The shuttle will operate between 7 a.m. and 10 p.m., with ridership expected to top 500 passengers per day. The Navy Yard houses approximately 10,000 jobs. 

Among street layouts, parking requirements and trip counts, AVs have long been expected to change land use and land use policy. It will be interesting to track how the AVs at the Brooklyn Navy Yard work out and whether, using this small sample size, the AVs change how people commute. Maybe more corporate parks and concentrated job areas on the West Coast and elsewhere will adapt the Navy Yard model.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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