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Tuesday, February 26, 2019

Road trip of Louis Kahn’s greatest East Coast hits

Louis Kahn established himself as a prolific architect even during his relatively short career. The University of Pennsylvania’s architectural archives holds more than 6,000 drawings by Kahn, who designed everything from monumental buildings to master plans to public housing developments. Though many of them were unbuilt, those that did come to fruition cemented his role as one of the most influential modern architects the world has ever known.
Although his built projects are scattered far and wide across the globe, Kahn, who lived in Philadelphia, designed a long list of projects in the Northeast region. Here are 10 of his projects, big and small, that have withstood the test of time in Pennsylvania, New Jersey, New York, and Connecticut.
Kahn also designed nine homes throughout the Philadelphia region, which are privately owned and not open to the public. Take a tour of all of them here.
Note: In honor of what would be Kahn’s 118th birthday last week, we are updating some of our most well-read pieces on the prolific architect. Find more here.

Richards Medical Research Laboratories

Melissa Romero
Revered by architects and reviled by the scientists they were designed for, this collection of medical labs at the University of Pennsylvania was built in 1962 and designed by Kahn, who at the time was an architecture professor at the School of Design.
The labs, now considered a National Historic Landmark, were groundbreaking: They were Kahn’s tallest project at the time, as well as the first ever to use precast concrete. Though heralded by architecture critics, Kahn’s decision to use open floor plans was met with great hostility from folks who actually had to work there: the lab scientists.
Penn recently completed a restoration and renovation of two of the four towers, transforming Richards Medical Research Laboratories “into the building Kahn always wanted it to be,” as the Philadelphia Inquirer’s architecture critic Inga Saffron put it.

Erdman Hall at Bryn Mawr University

Located on the edge of Bryn Mawr College’s bucolic campus is Erdman Hall, a female-only dormitory designed by Kahn and built in 1965. Designed as a modern Scottish castle, the dorm consists of three diamond-shaped concrete boxes whose facades are clad in slate.
Notably, it was the last project that Kahn worked on with partner Anne Tyng, and their dueling visions for the dormitory resulted in what biographer Wendy Lesser called “at best a partial failure” in You Say to Brick. Ultimately, Kahn’s vision for Erdman Hall took precedent over Tyng’s, who then refused to continue working on the project.

Wharton Esherick Museum

Courtesy of the Wharton Esherick Museum
Wharton Esherick was one of the most notable sculptors and furniture designers of his time—and a close friend of Kahn’s. While Esherick designed his own studio and home in the woods of Malvern, he turned to Kahn to co-design his workshop. Their competing visions for the space are on display in the final result, with Esherick’s trademark curved details matched by Kahn’s straight and angular walls.
This wasn’t the only time the two worked together: Kahn also designed Esherick’s niece’s home in Chestnut Hill, while the uncle was responsible for her kitchen. Today, the museum is a National Historic Landmark that’s open to visitors. The workshop, while on the grounds, is now closed and used as a private residence for Wharton’s daughter and her husband.

Trenton Bath House

In 1952, the Jewish Community Center in Trenton hired Kahn to design their new community center. Ultimately, the only two buildings that ever came of that were the Trenton Bath House and a pavilion. Kahn designed the bath house with his partner Anne Tyng, creating four rooms that all connect to the central, open-air atrium in the shape of a cross. A black, white, and orange geometric mural, also created by Kahn and Tyng, adorns one of the exterior walls of the bath house.
Though aspects of Tyng’s symmetrical geometries are on full display here, the Trenton Bath House is considered Kahn’s first step toward the monumental projects he would go on to design, including the Richards Medical Laboratories three years later. In fact, it’s been said that while the Richards Medical Laboratories is when the world discovered Lou, the Trenton Bath House is when Lou discovered himself, according to the documentary My Architect.

Jersey Homesteads

Library of Congress
Today, Roosevelt, New Jersey, is a quiet town full of modernist homes that have drawn a steady stream of artists to the area. But Roosevelt originally started out as the Jersey Homesteads, a community of simple, modern homes built during the New Deal era to resettle Jewish garment workers living in tenements in New York and Philadelphia and provide a community with affordable housing, a farm, a factory, and retail.
Though architect Alfred Kastner took the lead on the project, he hired Kahn as his assistant. Kastner and Kahn designed 200 cinder-block homes, originally painted white, with flat Bauhaus roofs. Today, some of the homes have been altered, but the community is now the only town in New Jersey that is on the state and national registers of historic places.

Franklin D. Roosevelt Four Freedoms Park

Nathan Kensinger
Four Freedoms Park on Roosevelt Island has the distinction of being the last-built work of Kahn and his only New York City project. Although Kahn was hired as the architect in 1973, he would never see it come to fruition, as the triangular park didn’t make its debut until 2012, nearly four decades after his death.
Kahn partnered with landscape architect Harriet Pattison, and as with Tyng, the two had contrasting ideas about FDR Park. Kahn wanted a more enclosed space while Pattison argued for a long, open approach. Ultimately, Pattison’s idea of including a long alley of trees was picked by the clients.

Yale University Art Gallery and Design Center

Enzo Figueres/Getty Images
One of Kahn’s most significant works was also one of his first: The architect designed the Yale University Art Gallery and Design Center, which opened its doors in 1953. Located next to a series of neo-Gothic structures, Kahn’s building stands out as the first modernist building on Yale’s campus in New Canaan, Connecticut.
The box of a building is made of glass, masonry, steel, and concrete. Kahn’s building was heralded for its geometry and use of light, a trend that would continue in the architect’s design of the Kimball Art Museum in Texas. The Yale University Art Gallery is largely considered the building that kicked off Kahn’s career.

Yale Center for British Art

View Pictures/UIG via Getty Images
Just across the street from the Yale University Art Gallery sits the Yale Center for British Art, the final building that Kahn designed before his untimely death in 1974. The four-story museum was designed to house the art collection of Paul Mellon. The exterior features matte steel and reflective glass, but the interiors are awash in light and natural materials.
When it opened in 1977, it became the first museum in the U.S. to include retail shops in the design. A 2005 recipient of the AIA Twenty-Five Year Award, the Yale Center for British Art opened its doors again after undergoing a 16-month-long restoration in 2016.

Phillips Exeter Academy Library

Library of Congress
When the iconic library in Exeter, New Hampshire, opened in 1971, it was to great relief for the academy, which had spent nearly 15 years working with a number architects before finally hiring Kahn. The library, built for the class of 1945, was famously designed by Kahn with an emphasis “on housing readers using books.”
The result is a building whose function is immediately understood upon entering the library. The main entrance provides a clear view of the library’s spaces, from the circulation desk to the book stacks.

First Unitarian Church of Rochester

When it came to designing for religious institutions, Kahn had some big heartbreaks, like the failure of the proposed Mikveh Israel Synagogue in Philadelphia. But whatever loss Kahn experienced from those let-downs he put toward designing the First Unitarian Church of Rochester, which today is a National Landmark.
Kahn was hired by First Unitarian to design its new church in 1959, just a few years after completing the Yale University Art Gallery. Interestingly, he wasn’t the only architect considered for the job: Frank Lloyd Wright was an obvious candidate, though his fees were too expensive for the congregation. Eero Saarinen didn’t have time to take on another project. The congregation chose to work with Kahn, whose philosophical and Unitarian beliefs seemed to jibe well with theirs.
He ultimately designed what is considered one of the most significant religious structures in America, a church whose brick exterior is characterized by multiple light towers. Inside, the sanctuary is the highlight, with indirect light flowing in via the towers and a complex, vaulted ceiling highlighting the space.

Frank Furness-designed South Philly church on track for demolition

Photo by Melissa Romero
A 150-year-old Frank Furness church in South Philly could be the next Philly church to be torn down.
Landmark Architectural Design, a firm working on behalf of the 19th Street Baptist Church, just received a permit to demolish the historically registered building last week, PlanPhillyfirst reported. The church, which sits off 19th Street, between Wharton and Titan streets, has started falling into a state of disrepair in recent years, with its green serpentine stone facade crumbling into the street.
The permit gives permission for a full demolition, and states that the site will remain an empty lot following that, PlanPhilly wrote. Before tearing down the building, the firm would need to obtain a building permit and permission from the Historical Commission.
The fate of the church, which was designed in 1874 by Furness and George Hewitt, has been up in the air for years. Back in 2011, the building was on the brink of demolition, but remained safe for the next few years. Then, in September, church leaders started looking for a buyer, and announced plans to move their congregation out by the end of the year. At the time, they hoped to find someone who would preserve the historic building, The Philly Tribune wrote.
If the 19th Street Church is demolished, it will be the latest in a series of Philly-area churches that have suffered the same fate over the past couple of years. One of the most talked-about churches last year was the Christian Street Baptist Church, another South Philly structure that was torn down amid controversy in the summer.
It would also mark the latest of Furness’s works to be eradicated. Since the architect’s death in 1912, many of his Philly-based buildings fell into disrepair, and faced the wrecking ball—largely over the first half of the 20th Century.

Investment group plans 60-townhouse Philly project along Delaware River

Add another project to the growing list of housing developments going up along the Delaware River lately: this time, it’s a 60-unit rowhome complex.
The project, which is planned for 1121-41 Delaware Avenue, would occupy over 190,000 square feet of space between the avenue and the river, sitting just north of the popular Sugarhouse Casino. Designed by Cecil Baker + Partners, the development would include 60 townhouses, each with four stories, a roof deck, and parking space. Some of the houses would include ground-floor office space, and the whole complex would include 10 spaces for visitor parking, according to plans posted on the Civic Design Review (CDR) website this month.
Shovel Ready LLC, an investment group that’s overseeing the project, will bring the plans to the CDR for review and feedback at a monthly meeting next week.
This is the latest in a series of similar projects that have tapped that portion of the riverfront for development in the last few years.
Just to the north is the Views at Penn Treaty—a luxury development with 19 townhouses—which was sold by Shovel Ready to New York developer Gotham Bedrock LLC in 2017. A few minutes to the south, at 709-717 North Penn Street is Pier 35 1/2, a 41-townhouse development, which was designed by Cecil Baker + Partners. That project was sold to Philly developer Carlos Herrera last fall.

A Guide to Smart Home Tech for Pets

Smart homes are going to the dogs—and cats. Developers have been hard at work designing devices to bring greater comfort and convenience to the lives of both pets and their owners.
Below are a few of the latest gadgets for your furry friends.
The Little Cat
Not every cat can be an outdoor cat, but that shouldn’t stop them from getting the exercise they need to lead happy and healthy (nine) lives. The Little Cat is an app-connected, Internet-of-Things-based smart treadmill for your fitness-needy feline. A vertical-standing circle, inset with a revolving, paw-friendly padded ring, The Little Cat cajoles your kitty into running through the use of an LED light that will have your feline feeling like it’s playtime. Owners can set the pace for their pet or leave it up to The Little Cat, which will determine your cat’s body mass-index and personalize an exercise regimen for them.s. Owners can keep track of their cat’s progress through the accompanying app, and even offer encouragement to their tiny trainer via recorded voice messages that can be played on demand.
The Little Cat, which will be available in four jewel-themed colors in March, is expected to retail for about $1,800.
PetNet SmartFeeder
Like exercise, diet is an important factor in providing your pet with a happy, healthy life. Unfortunately, every pet owner isn’t a licensed animal nutritionist. And now, thanks to the PetNet SmartFeeder, they don’t need to be. An internet-connected, intelligent pet feeder, SmartFeeder will automatically calculate your pet’s optimal daily calorie intake using your animal’s age, weight, activity level and food type, and then dispense the appropriate meal portions, automatically, on a schedule determined by you—allowing you to keep your beloved friend fed, but not overfed, from across town or across the world. Via the associated PetNet app, users can get alerts when their animals finish their meals and when they are running low on food.
The PetNet SmartFeeder is available for $179.
Wagz Smart Door
A Guide to Smart Home Tech for Pets
If your pup is given the freedom to frolic in your yard unsupervised, then the hours you’re away from home can seem, to their precious canine cortex, like unending torture.
With the Wagz Go Smart Door, however, you’ll be able to give your four-legged friend the freedom of the great outdoors even if you’re miles from home.
Working in conjunction with the Wagz Pet Pendant (a collar attachment; think smart charm), the Go Smart Door will unlock as your pup approaches, granting them access to outside, and then automatically relock once they are a far enough away, protecting your home from entry by other animals or unwanted intruders. Owners can override this automated function as well, via the Wagz app, to grant outdoor access only at scheduled intervals during the day. In addition to giving the gift of freedom, the Wagz Go Smart Door comes with a host of other helpful features, including a motion-activated HD video camera to keep you up to date on your dog’s comings and goings and a smart home integration, allowing you to pair your doggie door with your doggie food dispenser for example.
The Wagz Go Smart Door is available for $549.
LavvieBot + Purrsong
There’s no debate of what is the worst part of cat ownership—cleaning the kitty litter. The LavvieBot leverages high-tech design and intelligent automation to make this thankless chore as painless as possible. Looking like a miniature washing machine, this Wi-Fi-enabled water closet for cats will automatically sift soiled litter into a lower, scent-containing, bag-lined chamber that can be easily emptied without assaulting your senses. Better still, the LavvieBot will make sure your feline friend won’t track any litter into your living room, via a shifting grid system that shakes any litter residues from their paws before they exit. With the accompanying Purrsong app, users will be alerted when they are running low on litter (and that they should order more) and can even track their animal’s regularity should they—or more likely their vet—need that information.
The LavvieBot will launch an Indiegogo campaign in May to finance its production, with unit orders starting at $379.
InuBox
Of course, dogs also require regular bathroom breaks, and for city dwellers who may not have ready access to a yard, this can be a bit more laborious of a task—one that can be required at all times of day.
Looking like a mix between a dishwasher and a printer, InuBox is the the world’s “first fully automated dog toilet.” And by automated, they mean automated. InuBox’s front door, when open and flat on the floor, operates as a platform for your canine to deposit waste. Once InuBox detects waste—and no dog—it closes onto itself, solidifies the waste and seals it in a closed bag, allowing owners to dispose of the mess without ever sniffing it. InuBox has the potential to become dog’s new best friend—and a dog walker’s worst nightmare.
InuBox will launch a Kickstarter campaign to finance its production, with unit orders expected to starti at $1,200 and delivery to begin in October.

IStar To Sell $500M in Property for Push Into ‘Revolutionizing’ Ground Leases

A New York-based publicly traded real estate firm is embarking on a dramatic strategic shift, selling nearly $500M in properties to finance growth in a niche type of investment it claims will transform commercial real estate ownership.

IStar, a REIT with a market capitalization of nearly $700M, has already reduced its portfolio of land, offices, apartments and hotels from $3.5B to $1B over the last three years. It has now identified 42 assets with an estimated value of $485M that it plans to sell over the next 12 to 24 months, iStar announced Monday.
The move is designed to allow iStar to aggressively grow its ground lease business through Safehold, a REIT iStar manages and in which it owns a controlling interest. Safehold — until recently named Safety, Income and Growth — buys the land underneath a building, called the fee interest, and collects income on a long-term ground lease with the building’s owner.
“We are narrowing our focus to really strategically build around this ground lease innovation,” iStar CEO and Chairman Jay Sugarman told Bisnow in an interview. “We think we are revolutionizing how real estate is owned.” Sugarman is also the CEO of Safehold.
While operating properties and land and development will be de-emphasized, the firm’s lending business will co-originate leasehold loans alongside Safehold ground leases, and its net lease business will continue. Land and buildings are two very different investments, Sugarman said, and separating them is a more effective way to do business.
round leases have burned tenants in the past, and Sugarman knows the company has a stigma to overcome.
“The general perception of ground leases, historically, has been ‘No thanks,’ [but] we are going to change that perception to, ‘Wow, my peers and competitors are using it … I need to pay attention to this,” he said.
While it hopes to reduce its portfolio of legacy assets significantly, iStar plans to keep three projects — with a total value of around $515M — that do not make economic sense to sell. But by the end of the year, iStar is aiming to have reduced that side of the business, which includes the Ilikai Hotel in Honolulu and the 469-unit apartment building at 1000 South Clark in Chicago, from 20% of its portfolio to less than 15%. It has already sold a 60-acre development site, Highpark development in San Pedro, California, and a master-planned community, Spring Mountain Ranch, in Riverside last year.
Reducing those investments frees up human resources and capital to dedicate to locking down what Sugarman calls modern ground leases with real estate owners.
“Right now we are the only one doing it, in conjunction with Safehold,” he said. “It is a reinvention of a business sector that nobody else is involved in.” Sugarman said ground leases have been damaging to value in the past because they often include “fair-market value” provisions, which allow the landlord to hike up rents seemingly overnight because of escalated land values.
The arrangements often require building owners to seek approval from the landlord anytime they want to make a change. Safehold’s leases don’t include such provisions, Sugarman said.
“We don’t have fair market value resets … you know what your rent is going to be for the duration of that lease term, plus or minus a very small margin, so you can plan, your lenders can plan, your future buyers can plan,” he said. “Anything that creates uncertainty is bad.”
IStar launched Safehold in 2017 as the only publicly traded REIT to focus solely on ground leases. Since its initial public offering a little over a year and half ago, the company has built up a $1B portfolio of ground leases. It now plans to grow Safehold’s ground lease portfolio to as much as $5B, Sugarman said.
“The first 18 months, it was us banging on doors, saying ‘We think there’s a way to do this’ … It took us a while to educate the market,” he said. “In about six months we started to get the first customers who said ‘I want to do more with you.'”
Safehold has grown by teaming up with buyers looking to purchase a property. Its first purchase was the land underneath two multifamily properties at Hollywood Boulevard in Los Angeles. Late last year, it joined PRP Real Estate Investment Management to buy the land underneath 1111 Pennsylvania Ave. NW, providing $150M on the $338M purchase. Safehold expects to close on a deal in the New York metropolitan area soon, though the company declined to provide to further details.
To a lesser extent, the REIT also looks to buy existing ground leases — it attempted to buy the fee interest on 635 Madison Ave. last year, but lost the bid to L&L Holding Co., which had right of first refusal — and to approach owners of existing brick-and-mortar buildings and pitch them on selling off the land beneath the structure in the event of recapitalization.
Safehold has closed deals in 18 markets so far, and wants to be in the top 25 cities around the country. It targets most asset types with value of between $15M and $500M.
There are several high-profile cases of ground leases causing major headaches for the tenants in New York City. At the Chrysler Building, for example, the Abu Dhabi Investment Council and Tishman Speyer reportedly paid $32.5M in annual rent to fee interest owner Cooper Union, four times what it paid the year before. Cooper Union has owned the land since 1859, according to The Real Deal, and the ground lease payment will transfer to whoever Tishman Speyer and ADIC sell the building to. The lease expires in 2147.
SL Green pays $4.6M in ground rent to Ashkenazy Acquisition Corp. right now at 625 Madison Ave. — but is likely to see a steep increase in 2022. RFR Realty has faced difficulty refinancing Lever House at 390 Park Ave., which it ground leases from the Korein family. The lease expires in 2023 and rent could increase threefold at renewal.

“The tenant gets screwed coming and going,” Fried Frank Real Estate Litigation Practice Group co-head Janice Mac Avoy said, adding these types of deals are most prevalent in New York City and London. She said many of the ground leases coming up for fair value reset or renewal in New York City right now were signed in the 1960s and 1970s, a time when there had not been dramatic land value jumps. The fair market value is typically assessed on the “highest and best” use of the land — which is often condominiums that ground lessors are not able to build, Mac Avoy said.
“These fair market-value resets have in essence become ticking time bombs,” Cushman & Wakefield Capital Markets Group Chairman Doug Harmon told the Wall Street Journal last month.
But Sugarman said those deals are examples of an outdated model, and real estate buyers and developers are coming around to the idea that modern ground leases are a far more efficient way to build, develop and operate a property.
“In the early 1990s, [we] helped create the mezzanine lending market, and we really did change the way people thought about net leases when we bought the largest publicly traded net lease company and fundamentally changed the way we went about that business,” Sugarman said. “This is an opportunity to do something similar: to take an enormous market and say, ‘We have something better for you’ … The more we transact, the more other people will see it.”

Home rental demand growing as flexibility, mobility become priorities

Rising home prices have led many Americans to become renters. John Kobs, co-founder and CEO of rentals website Apartment List, believes that a growing number of people don’t want to be tied down to a specific place when making career and life choices.
Kobs spoke with The Associated Press about the outlook for the U.S. home rental market. Questions and responses have been edited for length and clarity.
Q: What changes do you expect in the market for rental housing?
A: High level for us, the next 30 years in the renting economy is going to be very different from the last 30 years. We’ve seen 2 million households with $100,000 income becoming renters. Demand for renting single-family houses has increased by 40 percent since 2000.

The dream of homeownership has kind of been tainted a bit over the last decade with the millions of foreclosures we saw. It’s shifted the mindset of Americans for preserving flexibility.
Q: Why are you thinking in terms of decades, rather than years or quarterly?
A: This is one of the largest classified categories that hasn’t been won by a startup. We try to skate where the puck is going. For us, when you’re trying to solve pain points for such a large audience, you have to think of decades so that there is a solid foundation to help renters transition for years to come.
Q: How did your business change since your founding in 2011?
A: There are two chapters of Apartment List. For the first several years, we were primarily focused on building a search program. But because we were working with aggregators, we couldn’t achieve success in terms of listings.
After getting additional venture funding in 2013, we shifted the business model in 2014 to a two-sided marketplace where we could match tenants and landlords. Now, we have 5 million listings.
It was critical that we were surfacing accurate information directly from landlords.
For us, the supply of listings comes from landlords. Renters are the demand side. Our primary goal is to have a liquid supply of rental listings. Further, our model is such that we’re only paid by landlords when we successfully match the tenants with a home.
Q: What’s the challenge for a business such as yours?
A: Renters are only in the market for a home every two or three years. Their average duration is 23 months. So how do we stay at top of mind with consumers when they’re not in the home discovery phase? This means finding a way to create a community beyond the transaction.
Q: What trends do you see as shaping the housing market?
A: Fifty-four percent of workers say they would switch jobs if they had flexible work hours. It continues to underscore how important mobility is becoming for professionals these days.

Sunday, February 24, 2019

Suit on $2.5B Times Square Project Pits Billion-Dollar EB-5 Fund, 2 Feisty Critics

For the past decade, some of America’s biggest real estate projects have been built with hundreds of millions of dollars borrowed from foreign investors.
The EB-5 visa program encourages foreigners to fork over $500K a pop and be rewarded with green cards for their whole families. Intermediaries bundle the funds and loan them out to developers, pocketing fees along the way.
For as long as it has existed, the EB-5 program has faced criticism and nearly annual threats of cancellation because of its inherent flaw: The program is highly susceptible to abuse and fraud.
“Fraud risks in the EB-5 program are constantly evolving,” the Government Accountability Office wrote in a 2015 report on the program. Two years earlier, the Securities and Exchange Commission had to take emergency action to curtail fraud in the program. U.S. Citizens and Immigration Services officials “continually identify new fraud schemes,” according to the GAO.
Last year, one of the biggest money-raisers in the business, the U.S. Immigration Fund, alleged that a “desperate, bankrupt” Chicago attorney named Doug Litowitz and a Chinese-American woman named Zoe Ma, engaged in “wonton [sic] fraudulent behavior,” defaming USIF’s projects and scaring off potential investors in order to earn legal fees. USIF is suing them for $23M.
Litowitz and Ma contend that USIF is the fraudulent one. They told Bisnow the case illuminates how Wall Street players exploit unsophisticated foreigners for profit, and that USIF is using the courts to bully and embarrass them. The two are fighting back in a legal saga that winds from Hong Kong to Chicago, right through two multibillion-dollar developments in Times Square.
The case is tied to New York’s 20 Times Square — a project that includes a 452-room Marriott Edition hotel, 76K SF of retail and an 18K SF LED billboard — and TSX Broadway, a 46-story tower that encompasses the Palace Theater, 669 hotel rooms, 75K SF of retail and another 18K SF LED sign.
“They are sewer people,” Litowitz said of USIF. He has asked the Manhattan Supreme Court to dismiss the lawsuit. Ma, whose full name is Xuejun Makhsous, vowed that the lawsuit would backfire and expose USIF’s misdeeds. She has filed a counterclaim, as well as a whistleblower complaint with the SEC.
She said she would expose “the grandfather of EB-5 fraud” in the process. “[USIF] just sued the wrong person, because I have a lot of evidence,” she told Bisnow.
USIF says that it has operated legally and that the EB-5 program has been a success. “[USIF] is the unquestioned leader in immigrant investor programs,” said Richard Haddad, USIF’s attorney. “Every one of its projects has complied with the immigration regulations, tens of thousands of American jobs were created, and thousands of investors are achieving their immigration dreams.”
Ma wrote in court documents that the lawsuit portrays “USIF as Santa Clause [sic] while in fact USIF is Mafia with iron fist.”
The EB-5 Program
The EB-5 Immigrant Investor Program began in 1990, and lets qualified foreign investors obtain U.S. green cards and eventually citizenship — for themselves, their spouses and their single children younger than 21 — if they invest $1M in a new commercial enterprise that creates at least 10 jobs. The investment amount drops to $500K in certain “targeted employment areas,” or TEAs, defined as rural areas or places where the unemployment rate is at least 150% of the national average.
The EB-5 program, administered through U.S. Citizenship and Immigration Services, was intended as a win-win-win: Businesses could borrow capital more easily and cheaply than from a bank. Regular Americans would get jobs. Foreigners could get citizenship legally and, ideally, get their funds back plus interest.
Stephen Yale-Loehr, a professor of immigration law at Cornell Law School, explained that it was established as a part of a bigger overhaul of legal immigration in the early 1990s, “in part because Australia and Canada had similar programs.”
It was enacted as a pilot program, and still needs to be periodically reauthorized.  The process from investment to green card takes  years. An investor files a petition to be deemed an alien entrepreneur and waits for approval, then asks for conditional permanent residency (CPR) and waits for that to be approved. The investor can live in the U.S. for 21 to 24 months conditionally, after which time she would file a petition proving she had created jobs and kept funds at risk, and ask for the conditions to be removed and get permanent residency in the form of a green card.
About five years after that, she could apply for citizenship.  Architects of the program, conscious of being seen as offering visas for sale to the rich (a criticism that persisted anyway), built in a requirement that stipulates the project’s funds remain “at risk” while the immigrant investor goes through the two years of CPR in the U.S. Typically, deals would be structured for the foreign investors to get their money back in five to seven years.
All over the world, people moved to make the most of the program. In the U.S., privately run “regional centers” like USIF formed to pool investors’ capital, sometimes from hundreds of people, and facilitate the loans. Maps were gerrymandered so that even affluent areas qualified as TEAs. Regulators were generous and let EB-5 regional centers count jobs that had been created both directly and indirectly toward applicants’ visas.
Abroad, new industries sprang up to connect investors with U.S. projects. Developers would fly to China to promote their projects at networking events. Videos on YouTube show drummers firing up the crowd at a 2013 summit in Shanghai.
At a 2016 event, USIF founder Nicholas Mastroianni was joined by former New York Gov. George Pataki, who offered “calming messages” to the Chinese worried about changing visa rules as Donald Trump assumed office as president. Chinese law allows citizens to move only $50K out of the country at a time, according to Bloomberg, so investors enlist friends, family and even strangers to make a series of transfers to invest the required $500K. Deals that match Chinese investors with American projects are massaged by intermediaries called “migration agents” who earn five-figure fees for every investor who signs on (or “subscribes”), plus a percentage of the interest earned on each investment.
Fraud has dogged the EB-5 program. Sometimes developers would mislead foreign investors with confusing documents or omissions, or take the money and simply never build the project they’d advertised. In 2013, the SEC warned that fraudsters may use layers of shell companies managed by the same individuals to control all aspects of a project, which can lead to conflicts of interest.  In the May 2015 GAO report, USCIS had told the watchdog group that it was preparing a new system to better track fraud, but the GAO found “the system is nearly four years delayed.”
“In the meantime, USCIS does not have a strategy for collecting additional information, including some information on businesses supported by EB-5 Program investments, that officials noted could help mitigate fraud,” the GAO report found. In 2016, USCIS Immigrant Investor Program Chief Nick Colucci told EB-5 stakeholders in Miami that “due diligence, monitoring and oversight are the obligations of the designated regional center entity,” such as USIF. Colucci said when USCIS is made aware of regional center violations, it may issue a termination notice.
“The bad news about improprieties in the EB-5 Program can overshadow good news about creating jobs and putting capital into our communities that really need it,” Colucci said in 2016. “And that’s not just a shame, in some of these cases, it’s a crime.”
Problems plagued high-profile projects like an SLS Hotel in Las Vegas and the planned New York Wheel. In the biggest EB-5 fraud to date, developers who planned to expand the Jay Peak ski resort in Vermont commingled investor funds in what investigators say amounted to a Ponzi scheme.
Litowitz outlined such flaws in an article titled “The EB-5 Program Is Legally Defective And Has Become A Scam.”
The EB-5 program started off quietly, but boomed in popularity following the 2008 housing crisis, when banks tightened lending. Now, the U.S. gives out the program’s allotted 10,000 visas every year, and because the allotment is divvied up among countries, the wait for Chinese investors, who account for about 85% of applicants, to receive their visas is now about 15 years.
Some groups of investors, dismayed by both the fraud and the wait times, are suing to get out of deals. With critics on multiple sides calling for reform, the EB-5 program has limped along, continually getting reauthorized by Congress for months at a time and leaving uncertainty as to its future. It was most recently extended until Sept. 30 as part of the broader spending bill President Donald Trump signed last week.
Despite the program’s flaws, titans such as Bill Gates and Warren Buffett support it. An industry trade group called IIUSA, which stands for “Invest In the USA,” says the program resulted in more than $37B contributed to the U.S. gross domestic product between 2010 and 2015, creating 276,000 jobs during that time.
The Rogue Lawyer
During the eight years he taught at various law schools, Litowitz wrote a book about why lawyers are miserable and dashed off the occasional article, such as “Are Corporations Evil?” and “Investing: A Pretentious Word for Gambling?”
Despite the anti-capitalist bent, in 2005, Litowitz found himself needing more money than a visiting professor’s salary allowed, so he went to work as in-house counsel for his brother’s $14B Chicago-based hedge fund, Magnetar Capital. He told a newspaper reporter that the career move was “a contradiction that I hope to be able to resolve someday.”
A decade later, a cousin recruited him to work in Hong Kong, Litowitz said. Litowitz’s wife is Taiwanese, and he had learned to speak Mandarin at an intermediate level.
“I had never heard of EB-5,” said Litowitz, now 55. “I thought, ‘This is nice. People get their green cards.’”
In Hong Kong, Litowitz said he managed an $80M EB-5 fund run by Brook Lenfest, chairman and CEO at NetCarrier Inc. who is also a real estate investor and a well-known philanthropist in Philadelphia
“They had sent me to China full of lies,” Litowitz said.
He claims that, as manager of Lenfest’s $80M EB-5 fund — which is being used to build two hotels in Philadelphia — he was asked to make misrepresentations to the Chinese about particulars of the financing, such as whether other loans were already in place.
Litowitz said he soured on the work. Wait times for green cards were growing. He doubted investors could fully understand 300-page contracts written in English. He said he wanted to hire an auditor to provide transparency to the Chinese, but Lenfest objected, so he quit.
Reached by phone, Lenfest disputed Litowitz’s account of their split.
“None of that’s accurate,” Lenfest told Bisnow. “He’s a lawyer. He knew the exact structure of the investment raised in China from the beginning. Later on, he acted like he had amnesia about the structure. I really can’t say anything good about him.” Lenfest said his fund used a standard EB-5 structure with “nothing untoward or uncommon about it.”
The hotel project is being built and investors will be repaid, he said. He sympathizes with Chinese facing long waits for visas, but said the government could solve that by making more visas available.
“I encouraged [Litowitz] to resign,” Lenfest said. Litowitz then went to work for the Hong Kong offices of SBI Securities, an offshoot of SoftBank, and then global advisory firm Duff & Phelps, but hated the work and admittedly had “personal issues.”
USIF says he was fired from both jobs.
“I realized the Chinese were being ripped off,” Litowitz said. “What they need is their own lawyer.”
The Thorn In The Side
In China in 1989, thousands of students gathered for weeks in Tiananmen Square to protest the Communist government and call for democracy, facing off against soldiers with tanks and guns. Ma, now 49, said she was there.
“Fighting for justice runs in my blood,” she told Bisnow.
Ma said she came to America from China as a student in 1994. She became a real estate agent and mortgage broker. She said she used the EB-5 program to team up with a few Chinese investors and open two senior living facilities in Wisconsin.
That work led her to discussion forums on an app, WeChat, where Chinese involved in EB-5 projects would solicit advice and swap horror stories, all in Mandarin. From Chicago, Ma warned of deals that seemed shady, including a competitor’s senior home. For this, her company was sued for libel in California, and although some people in that case testified that she had an “online reputation as an unreliable source of information about EB-5 projects,” a federal judge sided with her.
Wisconsin officials cited her senior homes for violations; she fired back with a lawsuit alleging the state had discriminated against her; that case is ongoing. Meanwhile, she took on part-time work for a Hong Kong-based company called Reviv-East, performing due diligence on U.S. projects for the Chinese.
In 2017, one Chinese woman had asked Ma for help getting out of her subscription with Lenfest’s fund. Ma helped prepare a demand letter alleging the fund should have been required to register with the SEC as an investment company, and thus be subject to greater scrutiny, but had wrongfully claimed an exemption.
The demand reached Litowitz, who by then had left Lenfest’s fund. He wrote back, explaining, “I could not longer trust that the Chinese were being protected, and that was very upsetting to me … I am happy to talk and to help your client the best I can.”
They began a loose working relationship, with Ma referring Chinese clients to Litowitz, and doing translations and research for him.
The Money-Raiser In The Middle
USIF, whose offices are in Jupiter, Florida, has helped put together funding for some of the biggest projects in America: the $6B Atlantic Yards, now Pacific Park, in New York, and renovations of Nassau Coliseum and the Brooklyn Public Library.
In Manhattan, USIF is currently raising money for two other Manhattan projects: a two-tower project designed by Bjarke Ingels at 76 11th Ave. and a LEED-certified Class-A office building at 29th Street and Fifth Avenue.  A company website says that, all together, USIF has raised $2.9B in EB-5 capital in 25 funds.
In court documents, USIF says it has helped 6,000 clients.  But the regional center has also been dogged by some unflattering reports: A 2014 article in Fortune magazine explored founder Mastroianni’s “tangled past,” which included bankruptcy, four felony arrests for drugs and various legal challenges over his business dealings.
USIF made mainstream news in 2017, when it was working with the family of White House senior adviser Jared Kushner and his sister played up her family connections while recruiting Chinese investors, drawing criticism that access to the White House was for sale. After Sen. Chuck Grassley asked the SEC and Homeland Security to investigate, USIF sought help from Trump’s then-personal attorney, Michael Cohen
Last year, a group of Chinese investors filed a lawsuit against USIF over the center’s Harbourside Place project in Florida, alleging that the deal structure positioned entities controlled by Mastroianni as both the borrower and the lender, and was set up to disadvantage the Chinese — an alleged $99.9M fraud.
USIF fired back that “the allegations are baseless, factually incorrect and totally ignore the economics and legal structure of the Harbourside investment.” USIF pointed out that the majority of the investors in that fund did not sue.
The Parties Clash
With help from the well-known Chinese recruiting agency Qiaowai, USIF raised $200M from 400 Chinese investors for what it called “the 701 Project.” This money would eventually be pooled with other funds to build 20 Times Square. The EB-5 loan for the 701 project was supposed to be payable to the Chinese in May 2020, according to court documents.
USIF was also raising funds for another project across the street, TSX Broadway. The $2.5B project would replace a DoubleTree hotel with a major mixed-use project encompassing the Palace Theater, luxury hotel rooms, 170K SF of retail and another huge LED sign. USIF called this “the 702 Project.”
“The two projects have been planned to complement each other in a way that establishes this corner of Times Square as the new ‘must-see’ location in New York City,” a USIF press release stated.
In February 2018, when construction on 20 Times Square was almost complete, “the developer informed [USIF] that it had decided to sell the 701 project and prepay the 701 loan,” USIF’s lawsuit against Litowitz and Ma reads. USIF moved to reinvest Chinese investors’ funds into the 702 Project — redeployment was necessary, USIF contended, because of the “at-risk” requirement.
But USIF alleges that Litowitz and Ma “came up with a plan to make money by nefarious means” — by steering Chinese clients away from the redeployment, arranging their refunds and charging them fees.
Ma said she got suspicious, believing that the redeployment was a bid to “save” the TSX project. She said USIF’s fund for it was undersubscribed — according to USIF’s website, the project is seeking 600 investors and still open for investment — and the project, she wrote in court documents, “had failed to obtain a construction loan from JP Morgan for 2 years,” which she says she deduced while doing due diligence for a separate client.
Litowitz, who had returned to Chicago in 2017, would call USIF, cursing and demanding clients’ money back. Ma wrote in Mandarin on WeChat that TSX Broadway would be a “bloodbath” for investors and that it was “a shitty project,” according to USIF’s translations in court documents.
In total, about 70 of the Chinese from the 701 project objected to the redeployment; some hired the firm Reid & Wise to stop the maneuver. Others hired Miami attorney Ronnie Fieldstone. Those attorneys declined to comment for this story. Ten hired Litowitz to represent them.
Among the parties, there were disagreements over whether to sign revised agreements and whether withdrawing investors would have to wait for the whole group to get their green cards before getting refunds.
Yale-Loehr, the Cornell professor, says redeployment has become a contentious issue as processing times for visas have grown. Contracts can be structured various ways, he said — with all the money from a group being moved together at one time, or in tranches.
USCIS’ EB-5 chief, Colucci, said in 2016 that moving funds between projects improperly is one of the program’s main potential areas for fraud.
“Sometimes, the improper movement of money can signal the beginnings of a Ponzi-like scheme,” Colucci said. “This harms not only investors and communities but also, I would add, could jeopardize the very existence of the program.”
USCIS did not respond to requests for comment for this story as of press time. As the 701 investors worked out a settlement in New York courts, Litowitz was shown confidential documents deemed for “attorney’s eyes only.” USIF saw in chat rooms that Ma mentioned details gleaned from the “eyes-only” documents. Believing Litowitz had shared the documents with her, USIF’s lawyers sent her a cease and desist letter. When Ma told Litowitz, he advised her to write back “and say, ‘I don’t know how I can hurt USIF’s reputation because it is lower than whale shit. You should worry about ripping off Chinese investors instead of your firm’s reputation, which is about the same as a whore in church. Good luck suing me for defamation. I’m in Chicago. Come sue me here if you have the balls. Otherwise shut up.’” Ma forwarded the email to USIF.
The Fallout
Using that comment to argue Litowitz and Ma acted with malice, USIF filed suit against them in New York in October. The complaint alleges fraud, defamation, breach of contract and tortious interference with a business relationship.
USIF alleges the pair also violated securities law by acting as investment advisers. The complaint includes Litowitz’s recent bankruptcy filing as an exhibit, showing that he owned little beyond $63 in a checking account, and that he had fraudulently run up his credit card right before filing. It said Ma’s Wisconsin court case had depleted her of her life savings. USIF also filed a complaint against Litowitz with the Illinois bar. Litowitz and Ma each contend that USIF has the facts wrong: Ma never lived in Hong Kong, they never started a company there, and Ma obtained the eyes-only document from a worried Chinese investor, not Litowitz. They are each representing themselves in court. They have filed separate motions asking that the case be thrown out. The judge’s decision is pending.
“These are the dumbest people you can imagine,” Litowitz said. Since 2017, Litowitz has published the book “Franz Kafka’s Indictment of Modern Law” and represented Chinese trying to get out of other EB-5 projects, including funds used toward the Home Plate Center office complex in Seattle and Century Plaza in Los Angeles. Last fall, Litowitz and Ma registered for a conference held in Chicago by the pro-EB-5 group IIUSA, where Litowitz tweeted that he intended to confront USCIS officials there and “personally request that certain Regional Centers be shut down by USCIS for fraud and securities violations.” He was denied entry to the conference. Ma protested by herself on a street outside, holding up a sign that said “No Redeployment, No CPR” — meaning that she objected to investors’ funds being held until they completed their conditional permanent residency. IIUSA’s McKenzie Penton, Director of Events & Business Development, confirmed the incident and said their registration fees were refunded.
“Doug’s holding himself out as some sort of protector, or savior, to Chinese investors,” Lenfest said. “Doug’s trying to make himself a name, or profit from this somehow.”
USIF’s attorney, Haddad, maintains that “the complaint shows how the signed agreement was breached and how these successful projects were defamed — and USIF is committed to enforce its rights under those agreements, for its benefit and the many happy investors.”
The Edition Hotel is scheduled to open this month, and TSX Broadway is slated to wrap up construction in 2021. A spokesperson for TSX declined to comment.  Ma and Litowitz have since had a falling out, which USIF’s attorney has pointed to as more evidence that their claims are dubious. She said some Chinese clients had retained him to sue USIF over another project, 855 Avenue of the Americas in New York. Litowitz ultimately advised them not to sue. Ma said he “chickened out.” She also never liked his cursing.
Ma in January filed a counterclaim against USIF. Her filings say the Chinese investors in 701 were misled from the beginning, with omissions and “doctored” agreements. She accuses USIF of malicious prosecution and defamation. She is asking for a $50M award on each count.  Ma says she updated her whistleblower complaint with the SEC. In court documents, both Litowitz and Ma alluded to working with investigators from the SEC and the FBI. Last year, a whistleblower won $14.7M for providing a tip in a successful EB-5 fraud investigation in Chicago. Ma — whose Hong Kong employer recently shut down because of the litigation (it, too, is named as a defendant) — would welcome such an award, but says she does this work out of righteousness.
“I’m the Moses of EB-5 fraud,” she said. “Leading the Chinese out of Egypt.”