Former Mayor Richard M. Daley and his son are aiming to cash in on a federal program that offers green cards to wealthy foreigners with a deal that could bring their company $15 million, records obtained by the Chicago Sun-Times show.
Tur Partners — which Daley formed with his son Patrick Daley after leaving office — is seeking permission from the U.S. Department of Homeland Security to solicit $150 million from foreign investors to help finance construction of a downtown skyscraper through a controversial visa program known as EB-5.
The Daleys hope to land as many as 300 foreign investors, most likely from China, according to the application Patrick Daley submitted to the U.S. Department of Homeland Security on Sept. 22, 2015. Each would put up $500,000 for the skyscraper project and also pay a $50,000 administrative fee that would bring the Daleys’ company $15 million, the application shows.
In return, the foreigners would be eligible to be granted visas allowing them and their immediate families to move to the United States and live here forever.
The Daleys would then lend the money put up by the foreigners to Magellan Development Group, a Chicago company that’s building Vista Tower, which would be the city’s third-tallest skyscraper, on Wacker Drive near Lake Shore Drive. Magellan also has plans for another tower nearby.
Many of the details of the plan aren’t clear. The federal agency released the Daleys’ application four months after receiving a request for the records from the Chicago Sun-Times under the Freedom of Information Act. But the 933 pages of documents were heavily redacted.
The application focuses on providing financing for a proposed skyscraper at 195 N. Columbus Dr. — a project that’s been on Magellan’s drawing board for years, with no indication that construction will begin in the foreseeable future.
But the application also includes a one-page document that refers to a planned skyscraper at 383 E. Wacker Dr. That’s where caissons are being sunk for construction of Vista Tower, a $1 billion project largely being bankrolled by Wanda Group of China. Magellan is providing part of the financing for the tower, which is to include condos and hotel rooms.
Magellan — which wrote the $6,230 check to cover Daley’s EB-5 application fee to the homeland security agency — and Patrick Daley say Tur Partners isn’t involved with Vista Tower, the latest skyscraper to rise on Magellan’s 28-acre Lakeshore East campus that former Mayor Daley approved more than a decade ago.
Asked why the EB-5 application has addresses for two different skyscrapers — the one under construction and the dormant project, called “Site O” — David Carlins, Magellan’s president, says, “The application was only meant to apply to Site O.
“No final decision has been made with respect to the use of EB-5 funds for either project,” Carlins says, “though Vista is much further along and is more likely to use EB-5.”
Patrick Daley’s application included a letter from the Illinois Department of Employment Security certifying that the Vista Tower site lies within an area of high unemployment.
That certification makes it cheaper for foreign investors to obtain one of the 10,000 visas the federal government can issue each year. The EB-5 program allows foreigners to obtain visas for themselves and their immediate families after investing $1 million in a development project that creates at least 10 permanent jobs. But they have to invest only half that amount — $500,000 — if the project is in an area of high unemployment.
To get that designation, the Daleys argued in their application that Vista Tower, which is being built in one of the city’s wealthiest neighborhoods, sits in an area of 9.4 percent unemployment stretching from the gleaming lakefront all the way to North Lawndale, one of the city’s poorest communities.
“The application was not for the Wanda Vista site,” the former mayor’s son says in an email. “We have no business relationship or affiliation whatsoever with the Wanda Tower and never did.”
Daley’s lawyer, Rohit Kapuria, says both Magellan projects are in the same census tract, so the state letter citing Vista Tower is “similarly applicable to Site O.”
The Department of Homeland Security has yet to approve Tur’s application, according to Kapuria, so it hasn’t been able to start raising money from foreign investors.
Homeland Security officials declined to discuss the Daleys’ application.
Created in 1992 to provide economic development in rural communities and downtrodden neighborhoods, the EB-5 program has come under fire from two powerful U.S. senators, Patrick Leahy, D-Vermont, and Chuck Grassley, R-Iowa. They say EB-5 should be reformed or ended because the program has “little oversight” despite allegations of abuse and fraud, as well as concerns about the foreigners who have been allowed entry to the United States.
“The enforcement arm of the Department of Homeland Security wrote an internal memo that raises significant concerns about the program,” Grassley said on the Senate floor last month. “Members of the working group made recommendations to reform the program . . . due to crippling fraud and national security vulnerabilities.”
Some foreigners have been granted visas “despite security warnings,” Grassley said, raising concerns about the source of the money they used to obtain a visa through one of more than 800 authorized EB-5 “centers” — including Tur Partners.
“It is obvious that foreign corporations and foreign governments are increasingly taking advantage of the . . . program to establish ownership in U.S.-based real estate projects,” Grassley said. “I am concerned that this may allow foreign corporations and foreign governments to profit from marketing U.S. green cards to their citizens.“
The senators said some foreign investors have been defrauded and charged excessive administrative fees and that there is little follow up by the federal government to verify those foreign investments create the promised jobs.
Grassley and Leahy maintain that developers have co-opted the EB-5 program by gerrymandering their project boundaries to include impoverished neighborhoods.
“Affluent areas now dominate the program by exploiting incentives intended for underserved areas, a practice . . . described as gerrymandering,” Leahy said in a speech on the Senate floor last month. “Only in the world of EB-5 is Beverly Hills considered economically distressed.”
The EB-5 program was set to expire Sept. 30 but has been extended by Congress until December.
Daley’s company applied to become an EB-5 regional center in November 2013, more than two years after he left office as Chicago’s longest serving mayor. Its application — based on raising money to build a “hypothetical” skyscraper on Magellan’s property at 195 N. Columbus — sought permission to raise money to finance economic developments in 13 counties, stretching from Kenosha, Wis., to Valparaiso, Ind.
President Barack Obama’s administration approved the application on July 17, 2014, allowing the Daleys to raise money from foreign investors for projects approved by the Homeland Security Department.
Fearing that Congress might end or change the EB-5 program, Tur began preparing its application for its first project in the summer of 2015, according to Kapuria, who says the Daleys hoped to get in before that happened.
“Tur filed the September 2015 application, under the Site O project, in an effort to preserve the option for the developer to potentially utilize EB-5 capital in the event the developer later opted to proceed with the Site O project,” Kapuria says. “Making a preapproval request allowed Tur and the developer to hopefully grandfather the Site O project under current EB-5 rules.”
They asked the Illinois Department of Employment Security for a letter certifying that the project is in a “targeted employment area” with unemployment of at least 9.4 percent, using Vista Tower’s address rather than that of Site O. Both Magellan projects are in the same census tract, which has 1.7 percent unemployment, far below the national average.
But the Daleys followed a common practice by expanding the project’s geographic area by stringing together 14 additional census tracts that together have an unemployment rate of 9.4 percent — the minimum needed for the Daleys’ foreign investors to be required to put up $500,000, rather than $1 million.
The Illinois Department of Employment Security certified the unemployment rate for the area in a Sept. 1, 2015, letter to Lori Healey, who’d been a top City Hall aide to Daley and had been TUR’s chief executive officer. According to emails obtained by the Sun-Times, the state had been directed to address the letter to Healey, even though she says she left Tur in April 2015 to become CEO of the Metropolitan Pier and Exposition Authority, the government agency that owns McCormick Place and Navy Pier.
Healey says she knew nothing about Tur seeking approval to raise foreign money to help finance a skyscraper for Magellan.
The so-called “Targeted Employment Area” letter from the state became part of Daley’s application. That letter cites the property at 383 E. Wacker, though the remainder of Daley’s application refers to the Magellan-owned property at 195 N. Columbus.
“We believe this was simply an unintentional error” by an economist Tur hired to work on the project, Kapuria says.
The Daleys’ application includes two separate public offerings, unregulated by the U.S. Securities and Exchange Commission, to raise $150 million from “non-U.S. individuals,” who are warned “it is possible that the . . . members could lose their entire investment.”
According to the documents, the investors would be helping Magellan finance a 53-story skyscraper with 31 floors of apartments, 624 hotel rooms, commercial space and a public parking garage, all south of Magellan’s Aqua skyscraper designed by architect Jeanne Gang, who is also designing Vista Tower.
The Daleys’ application says they were hoping to raise all of the money from foreign investors by Dec. 31, 2016, but they can extend that date by a year.
The Daleys are to collect an additional $50,000 from each investor to “cover the costs of the offering, migration services and marketing fees.”
Three months after Daley’s son submitted the application, he sent a letter to the Homeland Security Department last Dec. 8, saying Tur might also seek foreign investors for other projects involving Magellan and other developers.
Tur “has been in discussions with other leading developers within the Chicago region regarding future projects,” the former mayor’s son wrote, and “has developed a strong pipeline of potential projects within the designated geographic area.”
Contributing: Data Reporting Lab editor Darnell Little