Boston-based regional center, EB-5 Jobs for Massachusetts (EB5MA), has successfully funded its most recent real estate project using EB-5 capital from foreign investors. The Melcher Street Project, located at 49 Melcher Street, is a restoration of a currently vacant, five-story historic building in the Seaport District of Boston.
About the Project
Real estate developer, CRE Management, is transforming the space into 21 residential lofts, two floors of restaurant space, and two commercial office units, while preserving the rustic wood beam ceilings and historic nature of the structure. The apartments in the renovated 49 Melcher Street in South Boston's Fort Point are expected to be available this fall.
Reportedly, a 140-seat French bistro called Bastille Kitchen is setting up in the lower levels of 49 Melcher. This restaurant, from Mistral co-owner Seth Greenberg, will cost $3.5 million, be 8,500 square feet, and include a 70-seat private dining space. Up until this revitalization, Melcher Street was mostly a side street just off the Seaport District, a throughway to the surrounding Innovation District.
That is changing as the entire Fort Point area is experiencing quite the revitalization. This development joins other entrants along the street – the 94,220-square-foot commercial building at 51 Melcher and a 38-unit at 63 Melcher with 23 innovation units. There is a push by area developers and brokers to nickname the area “M Block” (think MeatPacking District from New York). The aim is to denote the block as desirable and hip to the 18-35 age demographics.
This project’s close proximity to the Innovation District, a tech hub that is an important force in the Boston economy, also plays a role. According to reports from Mayor Menino’s office, more than 200 companies and 4,000 jobs have been added to Innovation since January 2010.
Seth Greenberg told The Herald's Donna Goodison, "Melcher Street has the same character with all the brick and beam buildings. It could be a really good mixed area with some residential [buildings] and really cool restaurants—just a new, modern city-driven neighborhood."
Renderings of Bastille Kitchen that will occupy the lower floor of the buidling.
About the Teams
In January 2012, EB5MA began to work on developing the Melcher Street Project as a new EB-5 opportunity with GFI Partners, a Boston-based real estate investment and development company that had previously collaborated with EB5MA. Additional members of the EB-5 team of professionals were Wright Johnson, who prepared the economic report (initially, and then revised to avoid the tenant occupancy issue), Clem Turner of Homeier & Associates, who provided a review of the securities offering, and Global Law Group, who prepared a review for EB-5 compliance-related issues.
“EB5MA independently marketed the project and we are almost fully subscribed with just one spot left. The construction loan closed at the end of April, so the project is now fully capitalized and officially under construction. The additional EB-5 capital, when placed, will reduce the amount of the senior construction loan,” said Jillian Fortuna, EB5MA’s Chief Operating Officer. “We are excited to participate in the growth and development happening in the Seaport District.”
Working the Project
“At first when we looked at this project, we were proceeding based on the idea that we could count jobs from the new commercial space on the fifth floor. This had been a widely accepted practice in the EB-5 industry, and USCIS had approved I-526 applications for our regional center on a similar mixed-use redevelopment project in New Bedford, which also included these types of indirect jobs. We saw that the Seaport district in Boston is currently undergoing a major redevelopment and expansion, and that there is a need for office space. However, the added time and expense that would be needed to defend against USCIS’ objections, that these jobs were relocated, plus more importantly the risk to the investors’ green cards, we were not willing to go down that road,” said Fortuna.
“At the same time, we always understood the need for a tight nexus between the investor’s capital contribution and the job-creating business, which is why we created a joint venture with the restaurant.”
Famed Seth Greenberg is behind the restaurant on the first floor of 49 Melcher Street, an EB-5 funded project in Boston.
“I believe the question has to be one of reasonableness. Our goal is to develop commercially viable projects that contribute jobs and value to Massachusetts’ economy. The Melcher Street Project does that.”
Raising for the Project
According to Fortuna, the Melcher Street Project was EB4MA’s first experience with raising EB-5 capital on their own.
“As an attorney, and having formerly worked at an investment management firm in Boston, I was particularly concerned with maintaining compliance when it came to the SEC regulations. We ran into many different situations on this year-and-a-half journey. We had to make sure we knew who we could market to, who we could compensate, and how. With the JOBS Act loosening the restrictions on general solicitations, it makes marketing somewhat easier. However, understanding and applying the SEC rules can be difficult, which is why having competent securities counsel on hand is so helpful.”
“Once we figured out what our boundaries were, our next step was making sure we were only accepting accredited investors. We want our investors to be able to fully understand and tolerate the risks and illiquidity of an EB-5 investment. Initially, when we meet with a new potential client, we have an intake sheet that includes an attestation. We will follow that up with a comprehensive investor questionnaire, which includes a list of their assets. We only want to accept qualified investors, someone that can prove they have verifiable sources of funds. Through the vetting process, we found about 25-30 percent of the potential investors we met with were not able to qualify. In the long run, finding this out up front is better than rushing to process an investor through USCIS, ending up with a denial, and having to unwind the transaction,” she explained.
“The actual marketing of the Melcher Street Project was relatively easy. Our office is located in downtown Boston, the developer’s office is a few streets over, and the project is only a 10-minute walk away. We were glad to spend time with potential investors, answering their questions and addressing concerns. What we saw was an investor cycle that lasted between one to three months, and could be up to six plus months, from the time we first met them, through the vetting process, until they subscribed and deposited their capital.
“With all the obstacles and challenges that inevitably comes with working with the EB-5 program, when I get to meet again with a family that has received an approval and how see how happy they are to be in the U.S., that is truly my favorite part.”
EB5MA (EB-5 Jobs for Massachusetts, Inc. Regional Center, Boston, MA) received its regional center designation in June 2009. The Melcher Street Project is their third successfully funded venture in Massachusetts. Many investors in the other two EB-5 projects, located in Allston and New Bedford, have already received their I-526 petition approvals and obtained their temporary green cards.
The Everett Street Project in Allston is a music recording and arts studio. The project was $2.5 million, with $1 million of EB-5 funding contributed by an individual investor. The studio is filling a large gap in the local music industry.
The New Bedford Urban Renaissance Project is a mixed use real estate project located in downtown New Bedford developed by Columbus Capital Advisors. The developer was seeking $5 million in EB-5 funds. With the success of this project, 357 new jobs will be created in Massachusetts. All 10 investors have successfully received their I-526 approvals from USCIS.
EB5MA is currently negotiating and finalizing agreements with three new projects in Boston and Greater Boston area whom they have been working with for six months to over a year. While these additional three will be much larger, EB5MA will continue its relationship with CRE Management and Columbus Capital Advisors as they source new, “boutique” EB-5 projects, like 49 Melcher Street.