The Utah Performing Arts Center with developer Garfield Traub Swisher and designer Pelli Clark Pelli Architects is ready to begin the design process with the help of the Salt Lake City community. The Performing Arts Center concluded their public outreach program that included two 8-foot tall chalkboards located on Regent Street and an open
Garfield Traub Theater Development Case Study
The Need: A high-quality downtown performing arts center had been a goal of the City of Durham for many years when Garfield Traub and its team were selected by the City to develop the center. Independent studies identified substantial market demand for touring Broadway musicals, concerts and
The Utah Performing Arts Center with developer Garfield Traub Swisher and designer Pelli Clark Pelli Architects is ready to begin the design process with the help of the Salt Lake City community. The Performing Arts Center concluded their public outreach program that included two 8-foot tall chalkboards located on Regent Street and an open house for the community at Gallivan Center.
The 8-foot tall chalkboards allowed the community to give their input on what they believed the new Utah Performing Arts Center should include in its new design. The open house followed this phase of the design process with the purpose of letting community members see the collected feedback and how it is going to be incorporated into the beginning stages of the design process.
“We are excited to be a part of the Utah Performing Arts Center development process and look forward to seeing the positive effects it will have on Salt Lake City,” said Garfield Traub Swisher principal Steve Swisher. “The new performing arts theater will really revamp the City and attract retailers, restaurants, and other entertainment.”
The 2,500-seat theater located on Salt Lake City’s Main Street will include improvements to Regent Street directly behind the theater, in between 100 and 200 South. “The parking garage on Regent Street has approximately 20,000 square feet of retail space on the ground floor,” according to Robert Farrington, economic development director for Salt Lake City Corporation. “With some cosmetic changes to that structure, a little bit of extra retail that will be in the back of the theater itself and changes with signage and programming, maybe tables and chairs in the street when it’s not being used for loading the theater, you can really transform that street into a more intimate, pedestrian feel.”
“The City really wanted to include the community in as much of the design process of the Utah Performing Arts Center as possible so the community can take pride in their new Performing Arts Center and give them insight on things they may not of been aware of,” said Steve. “We feel the outreach program served its purpose and was a huge success.”
The Utah Performing Arts Center design is projected to be finalized during the Summer of 2013. For more information, visit: http://www.utahperformingartscenter.org/
Garfield Traub Theater Development Case Study
The Need: A high-quality downtown performing arts center had been a goal of the City of Durham for many years when Garfield Traub and its team were selected by the City to develop the center. Independent studies identified substantial market demand for touring Broadway musicals, concerts and other entertainment. Downtown momentum was already building with the redevelopment of the American Tobacco Historic District, The Durham Bulls Athletic Park and other signature projects. Duke University had an older arts facility it wanted to demolish for building new campus facilities, and Duke and the city wanted to preserve Durham as the headquarters for the American Dance Theater which needed new facilities.
The Challenge: Durham’s downtown development activities were very enterprising, but the City was insisting that the private sector invest in and share risk and responsibilities with the City. Furthermore, the historic 1,000-seat Carolina Theatre of Durham and its Board of Directors and community supporters were very concerned what a new theater would do to this beloved local institution and its future.
The Risk: While recognizing that the ownership and capital financing of a new performing arts center would fall primarily to the City, the City did not have the desire or the resources to operate or accept the associated risks of operating and promoting a performing arts center.
The Opportunity: With both the City and Duke and some influential civic leaders seemingly ready to contribute and move forward, and the city having engaged two theater specialists to assess the marketplace, the missing piece was to add a development and finance leader to the effort. Garfield Traub in concert with a local design firm, Szostak Design Inc., was selected to lead the team that would deliver the DPAC.
- Financing – The DPAC was funded primarily by low-cost City financing that did not require a voter referendum. Sources of funding included taxable Certificates of Participation repaid by a portion of Citywide Hotel Occupancy Tax, facility naming rights, a Duke University grant, an operator loan and philanthropic sponsors. Furthermore, Garfield Traub led a selection effort that resulted in the City negotiation of a public/private partnership between the City as facility owner and Nederlander Organization and Professional Facilities Management to be the operator and promoter of the Durham Performing Arts Center (DPAC). The operator submitted a proposal to operate the DPAC, assume the risk of operating losses, and guarantee theater activity to ensure that City economic impact goals would be met. Those goals included (1) Pedestrian activity and downtown vitality, (2) Construction and permanent job creation, (3) Increased property valuation and taxes in the vicinity of the theater, (4) Increased city visitation, including hotel room nights, dining, retail and transportation spending, and (5) Inducement of adjacent, private investment and business activity.
- Delivery – With Design-Build not being allowed as a form of delivery within North Carolina at the time, the team recommended and the City agreed to use a Construction Manager At Risk (CMAR) contract to ensure a predictability of on time and on budget success. The DPAC was completed ahead of schedule and under budget.
The Result: The ambitious initiative led to the opening of the DPAC. It is owned by the City and The DPAC has exceeded the original projections of attendance, surplus cash flow and economic impacts by multiples of original projections, and has contributed greatly to the development of many new restaurants, retail, office, and other related mixed-use developments, in spite of the recession in full force upon the opening of the theater in 2009. Five new downtown restaurants opened in the first two years of DPAC operations, despite the national recession. The DPAC produces $28 million in annual economic impact according to the Durham Convention & Visitors Bureau, and was rated #1 by trade publication Pollstar as the top-selling theater in the U.S. and #2 in the world for the first half of 2012. Projections for surplus cash flow after operations were originally conservatively estimated at $400,000 per year, with approximately $160,000 (40%) going to the City. The actual results have exceeded the original, purposefully conservative projections by a factor of ten! This year the DPAC reported a net income of more than $4.5 million in fiscal 2011-12, with $1.8 million of these funds going to the City of Durham.
Co-promotion and joint marketing activities have proven that “a rising tide raises all ships” for a properly planned arts venue. As evidence, in spite of early concerns that the DPAC would be competitive with the historic 1,000-seat Carolina Theatre of Durham, less than three years after the grand opening of DPAC, it was announced that the Carolina Theatre was ranked among the top 100 theaters in the world in attendance for the first time in its history. This Garfield Traub-led venture proves what smart partnering of the public and private sectors can accomplish.
To find out how your City can successfully build a performing arts center or any other public development to meet your City’s needs contact Garfield Traub.
Garfield Traub Hotel Case Study
The Need: Lubbock, Texas, a community of 200,000 population and a trading area of 750,000 located in the high plains area of west Texas and home to Texas Tech University and its student population of 35,000, lacked a full service hotel and a modern convention center to attract business meetings and tourism. Significant tourism was being sacrificed and the city itself lacked quality meeting and support facilities for its businesses and its citizens. Texas Tech had a Majors Program for Restaurant, Hotel and Institutional Management and no appropriate property in the community for its students to utilize for their laboratory experiences.
The Challenge: Historic hotel economic data would not support the private financing of a full-service hotel and conference center, creating a demand for public financial support in order to ensure the successful financing for the development. Three attempts by private developers had been attempted with no success over more than half a decade leading up to the selection of Garfield Traub Development. Texas Tech’s leadership had other priorities ranked above this initiative.
The Risk: The city had been led each time in the past to believe that the level of municipal financial participation to accomplish the successful financing of such a development was less than reality. The real number was in excess of what the city wanted to contribute, so a gap existed that needed to be filled, and the city leadership had a great need to be schooled in the realities of hotel finance and operations. Texas Tech might not be able to exert its influence in assisting.
The Opportunity: The city was ready to be taught and to be more collaborative because of the previous disappointments. Texas Tech now had a new Chancellor and a desire to collaborate with the city. The Lubbock CVB and EDA were ready to help, and the economy was advancing with tourism ripe to attract to Lubbock. Importantly, the largest mixed use redevelopment in the nation, a 325 acre land development stretching from Texas Tech’s front door of University all the way east to downtown was advancing in its evolution and had planned for a hotel and conference center to be located within this Tax Increment Financing Zone. The time was right.
- Financing – A capital stack was created using a Public/Private Joint Venture with the City. The financing consists of an equity investment by the hotel owner/operator totaling 10% of cost, a bank loan totaling 53% of cost, a city bond totaling 17% of cost, Foundation Grants to the City totaling 17% of costs, and Naming Rights and Room Licenses totaling 3%. Because of the City’s investment, it owns the conference facility and the land underneath, and leases the facility to the hotel owner and operator for a period of 80 years. The City’s bonds are amortized by its traditional revenues, but are enhanced by new property taxes, hotel occupancy taxes, enhanced sales tax revenues from new tourism, and do not lien the new facility. The Foundations justified their generous contributions as enhancing the Texas Tech curriculum and enhancing the infrastructure of the community. The new hotel designed and constructed within the conference and hotel facility separate spaces for the use of students, a new classroom, teachers office and locker facilities for weekly training. Finally, the Naming Rights and Room Leases were geared to the alumni and friends of Texas Tech and done in concert with the Alumni Association. Similar to stadium seat license agreements, for a onetime fee to the hotel development fund, an alumnus could purchase the rights to a room for every Friday and Saturday night for every home football game for a period of ten years.
- Delivery – Design-Build was utilized by the City for the conference center utilizing a fast-track, best qualifications competition allowed by Texas legislation. The facility was delivered on time and on budget.
The Result: Garfield Traub delivered a 303-room, full-service hotel with a 22,000 square-foot conference center. The Overton Hotel and Conference Center is located across University Boulevard from the Texas Tech University campus and Jones AT&T Stadium. As mentioned above, the hotel was financed with private debt and equity and the whole development with a classic Public/Private Partnership. The facilities offer convenience for hotel guests attending conferences, business meetings, weddings and many other social events. Guests are greeted by a stunning lobby and enjoy the expansive first class facilities and amenities. This innovative public/private partnership has produced the finest hotel and conference center in Lubbock and the region. The Overton is the only hotel in West Texas to receive the Four Diamond Award from AAA. In Fiscal Year 2010-2011, 85% of the top room night-producing events hosted in Lubbock utilized the Overton Hotel & Conference Center as their headquarters facility. Because of the development of the Overton Hotel the increase of jobs, tourism and citywide visitor spending, sales and use taxes all took place as well as reduced pressure on residential property taxes.
To find out how your City can successfully build a hotel and conference center to meet your City’s needs contact Garfield Traub.
Garfield Traub Courthouse Case Study
The Need: Build a new, secure municipal courthouse to meet the needs of the city for the future.
The Challenge: Mayor unable to place the request for new bonds for a new courthouse before the voters for a period of 4 years due to other established priorities. Solve the problem of having to wait for the public referendum so that the courthouse development could proceed on a much earlier schedule. Utilize a design-build and best value selection to ensure a predictable good result in the on-time, on-budget delivery of the new courthouse.
The Risk: Judges residing in a 46 year old, overcrowded and unsafe environment, exposing themselves, staff and citizens to possible injury and harm. Time was of the essence. Waiting 4 extra years would expose the city to significant inflation on the budget.
The Opportunity: To work with city staff, judges and courthouse staff in planning a modern and safe facility, connected to the new jail and resolving the financing dilemma. The door was opened to city introductions by the contracting firm already building the new jail.
- Financing – Recommending the use of excess city revenues coming from “fines and forfeitures” revenue as a source for amortizing new bonds sold to design and build the new courthouse. This historic revenue source had a history of generating $25 million per year, 5 times the amount needed to amortize the $60 million price tag for the new courthouse, therefore ensuring the ability to gain Investment Grade Ratings for the new bonds without a needed referendum approving the sale of General Obligation Bonds.
- Delivery – By avoiding the necessity to award a referendum approved bond offering in the prescribed design-bid-build method to the “lowest bidder”, and suffering the exposure to the poor results endemic in such a process, the city was able to compete and award the assignment to the design-build team deemed best qualified with the best value option for the city.
The Result: The new 208,000 square-foot, six-story Municipal Courthouse of Atlanta, now known as the Lenwood A. Jackson Justice Center, replaced the 46-year old, 46,000-square-foot building that ran out of space a decade prior to this new project. The new City Court was designed to fulfill all the City’s space requirements for 25 years. Garfield Traub’s innovative, low-cost, tax-exempt financing solution, utilizing a 25 year AAA Rated Certificate of Participation and backed by an Atlanta 25 year Annual Appropriation Lease commitment to be appropriated from the city’s “fines and forfeitures” revenues, did not require the City’s general obligation and taxing authority. As a result, the development was able to proceed without the need for a public referendum. Ground breaking was achieved by a “fast track” process within nine months from project award. The facility was delivered under a design-build agreement, a month ahead of schedule and approximately $1 million under budget, five years sooner than it could have been completed under the traditional procurement process. This facility was designed to deliver up to 15 courtrooms, administrative offices, conference spaces, secure parking for the judges, an underground sally port to the new city jail, secure access controls and separate circulation for inmates, judges and the public.
To find out how your City can successfully build a courthouse to meet your City’s needs contact Garfield Traub.
The Durham Performing Arts Center (DPAC), a public/private development led by Garfield Traub Development of Dallas in partnership with Szostak Design of Chapel Hill, reported recently a net income of more than $4.5 million in fiscal 2011-12, with $1.8 million of these funds going to the City of Durham. Under its operating contract with PFM/Nederlander, the City receives 40% of the annual net income from the theater to use for amortizing debt and maintaining and paying other costs related to the City-owned Theater.
DPAC director Bob Klaus reported attendance to be over 417,000, with 25% of attendees being first-time patrons. Over one-third of the performances were sold out, and the SunTrust Broadway series has already counted almost 11,000 subscribers for the 2012-13 season.
DPAC’s largest attendance for the past season was the return performance of “Wicked”. 82,000 people attended 32 performances, just two years after a successful first run at the DPAC.
Projections for surplus cash flow after operations were originally conservatively estimated at $400,000 per year, with approximately $160,000 (40%) going to the City. Fortunately for the DPAC and the City of Durham, the actual results have exceeded the original, purposefully conservative projections by a factor of ten!
Bob Klaus, General Manager of the DPAC, commenting on the performance of the theater, said “the expectations were high, but we beat all expectations”.
Just last month, Pollstar ranked DPAC as #2 among the top 100 best-selling theaters in the world, second only to the Auditorio Nacional in Mexico City, and the #1 top-selling theater in the US, beating out widely-known theater markets like Los Angeles and New York City.
The reputation and performance of the DPAC continues to validate the vision and leadership of the City and its development team which worked so collaboratively throughout the development process. Public/private partnerships are now being aggressively promoted across the nation, and the Durham Performing Arts Center stands as a paradigm of success of public/private collaboration.
Contact Garfield Traub Development if you would like to see how they can help create your City a successful performing arts center like the DPAC.
DPAC also rated #2 top-selling theater in the world
The Durham Performing Arts Center (DPAC), developed by Garfield Traub in partnership with Chapel Hill architect Szostak Design in Durham, North Carolina, has proven itself yet again against the best of the best and is now rated #1 by trade publication Pollstar as the top-selling theater in the U.S. for the first half of 2012.
If that were not impressive enough, DPAC scored the #2 position in the top 100 selling theaters in the world, second only to Mexico City’s Auditorio Nacional. And since the rationale for the development of the DPAC was doubted by many prior to its opening in 2008, this is a very special achievement for all those involved in the DPAC from development to delivery.
“It all starts with great shows, and for us to have two big multi-week blockbusters in the same season really tipped the attendance scales”, said Bob Klaus, DPAC’s General Manager in the Durham News Service. “It’s a credit to Nederlander and PFM and the great shows they bring us, this will truly be a season to remember.”
Today the attendance statistics have been released for DPAC’s 2011-2012 season, which includes 200 performances bringing in a total of 417,180 guests and 67 total sellouts. The highest attended shows were Radio City Christmas Spectacular with 38 performances and Wicked with 32 performances.
“We at Garfield Traub are extremely proud of what the DPAC has accomplished,” said Garfield Traub Principal Greg Garfield. “It is an honor to be able to say we participated in the development of the project, and we could not be happier for all those involved.”
Since the opening of the DPAC in 2008, the theater has consistently ranked on the top of Pollstar’s top-selling theater rankings, but has also won other awards such as:
- Numerous local Reader’s Choice Awards
- The Independent Weekly’s “Best of” winner for Best Theater Venue – 4th Consecutive Year
- The Herald Sun’s Reader’s Choice Award for Best Live Entertainment – 4th Consecutive Year
- Raleigh’s Metro Magazine’s Standing Ovation for Best Theater – 3rd Consecutive Year
- Durham Magazine – Best Place for Live Music and Best Place for Live Theater – 2nd Consecutive Year
- And #3 in gross ticket sales among venues with a capacity of 5,000 or under in the soon to be published July 28th mid-year charts for Billboard Magazine.
Since the DPAC’s opening in 2008, 520 ticketed events have been presented drawing in more than one million attendees. For more information about the DPAC and how it was successfully developed, visit the Garfield Traub website.
4th June 1943 – 14th July 2012
This memorial article was created in the memory of Jerry Robert Thoele, a former member of Garfield Traub Development, who passed away at 69 years of age.
On Saturday, July 14, at 11:51 a.m., Jerry Thoele, a loved and respected former member of the Garfield Traub Development family, passed away at Baylor Medical Center. We send our condolences and deepest sympathies to his family, business associates and friends, and acknowledge what a special individual he was, and leader and mentor to so many of us in the real estate and hospitality industry.
In the time Jerry spent as President of Garfield Traub Development’s Hospitality Division, he built bridges to the most important hotel corporations in America and forged alliances that were so important to him and to our firm. Notably, Jerry introduced Garfield Traub to the Interlink Group in Puerto Rico, where he and the leadership of Interlink developed the Sheraton Puerto Rico Hotel & Casino, which serves as the headquarters hotel for the Commonwealth’s convention center in San Juan.
The Garfield Traub team remembers him to be one of the most knowledgeable, caring, honest and decent persons we’ve had the honor to know and to be associated with.
Jerry was born in Seymour, Texas. He graduated from Midwestern State University, and earned his MBA from the University of North Texas. Jerry served proudly as a Lieutenant in the U.S. Army. Jerry began his business career in 1968, as a CPA for Arthur Andersen LLP. After leaving public accounting, he began a career in the hospitality industry with the Registry Hotel Corporation where he led developments in Scottsdale, Arizona, Naples, Florida, and Dallas including the hotel now known as the InterContinental on the Dallas North Tollway. In the past decade, Jerry served as President of the Hospitality division for Garfield Traub Development, Managing Director for Hotels & Resorts with the Interlink Group in San Juan, Puerto Rico, and was responsible for developing many prominent hotel establishments including the St. Regis Bahia Beach Resort, Sheraton Puerto Rico Hotel & Casino, and San Juan Marriott. During his distinguished career, Jerry was President of several luxury hospitality organizations. He was an active industry leader and prominent speaker at numerous hospitality conferences in the US, including a visiting lecturer at the Harvard Graduate School of Design.
Jerry will truly be missed, not only by his family, but by so many of us that he mentored and influenced in our careers. His family has requested that memorial donations may be made to the Juvenile Diabetes & Research Foundation. This Memorial Donation offers you a thoughtful, caring way to remember a loved one while contributing to an important cause of finding a cure for diabetes. Once completed, you will receive an acknowledgement letter, and the person of your choosing will also receive a letter notifying them that you have made a gift in the honoree’s name (Juvenile Diabetes & Research Foundation does not disclose the amount of the gift).
What makes a city great? What sets a city apart from others in attracting new industry, new growth, civic pride, and robust economic development? We have found over and over that the magnet that draws business and tourism is most often found in the heart of the city, its convention center. Although the travel industry, like so many other facets of an economy, is vulnerable to the economic cycles that periodically impact the nation, it is vital for a city to be able to constantly attract conventions, association meetings, exhibitions, leaders of industry, and tourism in general.
Certainly, being located in an inviting climate and an accessible part of a region and the nation is important to a city’s success. So, too, is having modern infrastructure and attractions, such as museums, performing arts centers, sports, and entertainment activities to enhance the allure for business associations, as well as the casual traveler. Keep in mind also that the first introduction to a city for prospective business leaders who might decide to relocate headquarters or establish regional offices in your city may be their experience when they attend a conference or convention at your convention center.
When reviewing the top reasons for choosing a particular event location, group planning experts determined some years ago that second only to a city having a modern convention center with the available meeting space needed by its group,
is the number of quality hotel rooms attached or adjacent to the convention center. If your city has no modern and attached or adjacent headquarters hotel with “room blocks” available for a majority of convention delegates, planners are likely to select another city that offers that critical combination. This is supported by numerous exit interviews of groups that cite the lack of a dedicated onsite hotel as the reason they selected one convention destination over another.
Approximately 50 cities have successfully built, expanded, or modernized their convention centers and developed connected headquarters hotels over the past decade, and about half of them have used public private partnerships to accomplish those developments. Surprisingly, about another 50 cities have tried
and failed to develop the headquarters hotels so essential to ensuring the success of their convention centers. Those cities that succeeded in completing their developments have several characteristics in common, just as those that have failed have very similar stories about why they are still on the outside looking in. What separates success from failure in funding this vital economic engine for a city?
First, this undertaking can be highly politicized and controversial. The public must be informed as to the benefits to the city of the development, and all-too-common disinformation campaigns by narrow interests opposing such a development should be addressed head-on. There is room for debate about the right approach for a city to take in funding, developing, operating, and maintaining the facilities given political, legal, and economic factors, but there is no denying the benefits of having competitive, modern public assembly facilities and related headquarters hotels. Those cities that have recognized this and value their ability to “sell” their city as a convention destination, know they must build and maintain their public assembly facilities, which must include a headquarters hotel, to be successful.
Tangible benefits of such a development include tens of thousands of new annual visitors, who stay two or three days in the city and spend money on hotels, transportation, dining, entertainment, and shopping. Millions of dollars in annual visitor spending creates jobs, generates substantial tax revenue, and stimulates development of related, private mixed-use development. The incremental travel-related tax revenue is more “profitable” than property taxes, due to the limited burden of visitors on city infrastructure—like police and fire departments, schools, and hospitals—when compared to community residents. Increased tourism-related tax revenue bolsters other revenue to operate the entire city and reduces reliance on resident property taxes.
Returns to the public from a development of this nature are real and substantial—but public investment is required to realize the benefits. Too many cities, however, have failed to recognize or have tried to deny the obvious—the substantial cost of designing and constructing a full-service, first-class headquarters hotel including all the extra meeting space required, versus the limitations on adequate revenue to pay the mortgage and provide an appropriate return to the owner. Those cities too often succumb to the “best sounding” solution—the promise of little to no public financial support asked by developers,
who hope to be selected and to amend their low-budget targets by asking the
city for more money once plans and pricing show the real costs. The loss of time associated with a failed procurement alone hurts the city immeasurably when conventions are lost for three, five, or ten years. But the loss of confidence in civic leadership can be even more devastating through dashed community hopes and aspirations and broken promises to develop those facilities.
Two recent examples of public private partnerships that have been boons to their cities are the Overton Hotel and Conference Center in Lubbock, Texas, and the Durham Performing Arts Center in downtown Durham, North Carolina. The Overton in Lubbock is that city’s first full-service, first-class conference hotel, situated across University Boulevard from Texas Tech University. It not only serves as Lubbock’s modern conference center, but is also the teaching facility for one of Texas Tech’s restaurant hotel investment management classes. The project financing included grants funded by foundations supporting Texas Tech, a Lubbock city bond issue, plus equity and debt raised by the private development team.
Since the Overton Hotel and Conference Center opened in August 2009, Lubbock has been able to attract associations that have either never hosted an event in Lubbock, or have not done so in many years. Examples of these groups are the Texas Apartment Association, the Texas Payroll Conference, and the Texas Hospital Association. In Fiscal Year 2010-2011, 17 of the top 20 room night-producing events hosted in Lubbock used the Overton Hotel and Conference Center as their headquarters facility. The Overton Hotel and Conference Center has allowed the Visit Lubbock staff to provide decision-makers with more options in facility space and facility features. Lubbock is also seeing an increase in repeat business from groups that experienced the first-class service provided
by the Overton staff.
Similarly, the Durham Performing Arts Center, or DPAC, is a public private partnership in which the capital necessary to finance the facility included Durham city bonds amortized by revenue from a portion of citywide hotel occupancy taxes, a grant from Duke University, and naming rights Theater operations and promotion of events and talent are handled by a private sector theater operator. Profits are shared between the operator and the city, with the operator guaranteeing a minimum number of annual events and no operating loss risk for the city. This award-winning touring Broadway Theater was ranked number 9 in attendance among U.S. theaters by Pollstar in 2010, and number 4 in 2011, and generates $28 million in annual economic impact to the City of Durham.
Financing public assembly facilities and related hotels is an activity that mayors and city councils, even city managers, may undertake only once in their public lives. The costs of designing and building these facilities are significant, and the economics of operating and paying for these facilities is complex to grasp. Hence the need for public private partnerships and the selection of well-qualified developers, consultants, and other specialists to help lead the city in understanding these facilities and their financial structures and to help ensure their successful completion. We are aware of a number of Texas cities that are wisely taking these steps in considering or planning public assembly facilities and headquarters hotels, following the example of cities like Lubbock and Durham.
Ray Garfield is a principal of Garfield Traub, a development services firm focused exclusively on essential public facilities. For more information, please visit www.garfieldtraub.com or e-mail firstname.lastname@example.org.
Click here for the original print out as seen in the April Edition of Texas Town and City Magazine: Private-Public Partnerships in the Travel Industry
In the interest of fair and balanced reporting, we thought this April 15, 2012 New York Times article by Ann Lee of Demos on “Visas-for-Dollars” is deserving of everyone’s attention. As our firm intends to be in the market later this year and into next year raising EB-5 funds for a portion of the financing of a new hotel and conference center for a California city, we want to do what we can to draw attention to the need for transparency in all transactions.
Making Visas-for-Dollars Work
By ANN LEE as posted in The New York Times
Published: April 15, 2012
AMONG the most popular tools for attracting foreign investment to the United States is the EB-5 program. It seems like the perfect win-win: any foreigner who invests between $500,000 and $1 million here, and creates at least 10 domestic jobs from that investment within two years, gets a green card.
Given how many high-worth investors are clamoring to enter the United States, the EB-5 program could have a significant effect on American unemployment. Indeed, it has brought in some $1 billion over the last fiscal year, and the President’s Council on Jobs and Competitiveness has called for the EB-5 program to be “radically” expanded over the next few years.
Unfortunately, the program is so rife with fraud and corruption that it could actually have the opposite impact and deter investment. To regain its credibility, the program must make a number of changes to enable more transparency and demand more competence from its operators.
The most egregious problems with the EB-5 program can be found in its 218 regional centers, which work with private-sector brokers to identify local investments and direct foreign participants to them. Examples abound of centers and brokers playing down risky investments and misrepresenting how the program works, including a promise that EB-5 investments are guaranteed by the federal government — when the government in fact does nothing of the sort. Many investments have failed to create the required 10 jobs and even gone bankrupt, leaving the investor without his money or his green card.
While many EB-5 regional centers have solid records, a disturbing number have directed investor money to risky projects and companies that pay little to no return, overseen by brokers who get a commission regardless of how the investment plays out.
Aside from accusations of outright fraud, there is also a clear lack of understanding among government administrators about how to manage an investment program. As a result, they often approve businesses that are simple to understand, like a condo development or a grocery store, but whose business models don’t generate enough profit to hire workers, while rejecting more sophisticated businesses that stand a greater potential of generating profits and jobs.
For the time being, these problems haven’t turned the tide of interest in the EB-5 program. But that could change: recent high-profile investigations by Reuters and Businessweek, as well as a warning against fraudulent brokers by the Chinese Supreme People’s Court, could start having a significant deterrent effect, especially since other countries, like Canada, are following America’s lead with their own versions of the program.
Fortunately, the solutions are straightforward. The federal government needs to rein in freewheeling brokers with heavier penalties for misrepresenting investments, hire more business-savvy administrators and make the entire process more transparent, so that applicants know why their money was accepted or rejected.
The EB-5 program has a lot of promise to reduce unemployment, and the White House is right to call for its expansion. Rather than end it, let’s fix it.