Two years ago, the city of Seattle sold off the historic Alaska Building at Second and Cherry to a developer that said it was going to turn the 1904 structure, previously full of bureaucrats' offices, into downtown housing. But those plans have changed. The developer is now looking to convert it into a Marriott hotel instead, and wants the city to allow additional floors on the structure—more than current zoning allows—for what the developer says are necessary seismic upgrades.
Today (Wednesday), a somewhat peeved City Council is scheduled to hold hearings on the proposal, which has also attracted the ire of Unite Here!, a national union representing restaurant and hotel workers (among other trades). None of the three dozen Marriotts in Washington state are unionized, says Stefan Moritz, a research analyst with Unite Here! He contends that the seismic issue is something of a smokescreen for extra, revenue-producing rooms.
"I think developers should be held accountable to the regulations," says Moritz.
But while Moritz and some City Council members seethe over the alleged bait and switch, the less-noticed effect of the proposal is not on housing but on immigration.
Thanks to a 1990 act of Congress, rich foreigners can gain an "EB-5 investor visa," jumping ahead of the huddled masses, by investing in purportedly job-creating businesses. The program buys an affluent immigrant (plus spouse and unmarried children) two years' residency on a green card and, ideally, a glide path toward full citizenship.
The country's largest beneficiary of this program to date is a Seattle real-estate fund called American Life Inc., which has purchased numerous properties in SoDo with EB-5 money and is now looking to fund the $85 million conversion of the Alaska Building in concert with the developer, Kauri Investments.
"It's probably the biggest EB-5 project in the country," says Henry Liebman, an immigration attorney and head of American Life. He estimates about 85 EB-5 investors would be involved.
The irony is that these investors will secure their own green cards by investing in an industry known for its reliance on undocumented workers.
An investment can qualify for the EB-5 program if it's at least a half-million dollars and being made in a so-called Regional Center—defined by the U.S. Citizenship and Immigration Service as an area "that has experienced unemployment of at least 150 per cent of the national average rate." The investment also must "create full-time employment for not fewer than 10 qualified individuals."
But does downtown Seattle really qualify as an area in need of additional employment, especially low-wage hotel jobs?
The hospitality industry's trade group, the American Hotel & Lodging Association, says it already can't get enough people to fill the jobs it has. "The mounting labor shortage is probably one of the most troublesome problems facing the hotel industry today," said David Kong, president and CEO of Best Western International, in an AHLA press release a year ago. "We still cannot find enough Americans to fill critical positions at many of our hotels," said Loews Hotels CEO Jonathan Tisch in the release. The industry is supporting immigration reform efforts in Congress that would allow "guest workers." (See related story, p. 17.)
Unite Here! doesn't track how many of its workers are properly documented. "We don't ask the question," says Moritz. "There are definitely people who don't have documents who work in the industry. There's a large group."
The Alaska Building lies beyond Yesler Street anyway, and therefore out of the EB-5 territory that American Life got approval for in 1996, Moritz contends. "We are just confused about the Regional Center," says Moritz. "It's hard to find out the definition of where this Regional Center ends."
Speaking by phone from an immigration lawyers' conference in Orlando, Fla., Liebman responds, "The Regional Center includes part of Pioneer Square. There's two designated zones. One is the state empowerment zone, and then there was a federal HUD-designated zone. And the Regional Center is both of them. They mostly overlap, except the federal one includes Pioneer Square."
Liebman says roughly 150 people would be employed by the hotel, but they aren't the only ones who'd benefit. "There's the ancillary employment, like the parking," he says. "Half of the first floor will be rented to something like a Starbucks. You've got the shoe-shine guy....There's a ton of employment that comes out of that. Pioneer Square merchants really like the idea of the hotel. They don't have economic drivers in that area. Pioneer Square is always limping along."
The 15-story Alaska Building was the tallest in Seattle, and was the city's first steel-framed skyscraper, when it was completed in 1904. The city acquired it in 1988 as part of a land swap with Aetna Life Insurance, and city staffers occupied the space until the municipal workforce was consolidated in what used to be called Key Tower. The city then sold the structure for $8.5 million in 2005 to a partnership between Kauri Investments Ltd. and Ariel Development.
Liebman says Kauri and Ariel then struck the deal with Marriott. They'll join his new partnership, which will be split 50-50 between domestic and EB-5 investors, according to Liebman.
Who are those investors, and where do they come from? "Western Europe, Japan, Canada, Korea, and India," he says. "From Europe, it's retired baby boomers selling out the business. Usually self-made. Generally, the profile for our investors would be late 40s and older, they made money somewhere else, and they need to diversify their portfolio. They want the cash flow to retire on." He says virtually all his foreign clients gain full citizenship after two years' residency, and estimates that about 15 percent of his investors have settled in the Northwest to spend, work, and otherwise contribute to the economy.
How many and what kind of U.S. jobs are created via the EB-5 program? A 2005 report by the Government Accounting Office concluded, "We could not determine a reliable estimate of the number of jobs created by immigrant investors." Liebman says he, like other Regional Center operators, must provide an annual report to the USCIS detailing job creation and other investor data. The GAO estimates that through 2004, immigrant entrepreneurs invested about $1 billion through the EB-5 program.
That's a lot of money to invest, and a lot of advantage over your average penniless immigrant. "It shows how class and wealth play such a major role in the visa process," says Matt Adams, legal director of the Northwest Immigrant Rights Project. He's fighting an uphill battle to get the family members of documented foreign workers lawfully admitted to the U.S.; the EB-5 alien just has to write a check.
"The program is obviously saying that it's in America's interest to recruit big-money investors," says Adams. For him, the EB-5 program is consistent with a policy he characterizes thusly: "The people with money and advanced degrees, the ones who already have things going their way—these are the people we want in." (Bill Gates and other local tech executives would likely agree, since they're desperate to gain new brains from abroad with an expansion of the H-1B visa program.)
This wouldn't be the first time that EB-5 money was used to create lodgings for business travelers. The GAO reports: "Hotels and motels make up an estimated 19 percent of all businesses created by immigrant investors granted permanent resident status." Other EB-5 money goes into "manufacturing companies, real estate companies, domestic sales companies, farms, import/export companies, restaurants, and technology companies." But it's left to the EB-5 fund manager, such as American Life, to choose where to invest.
So, couldn't the EB-5 program do better than jobs for hotel maids and bellhops that already go begging? Couldn't it be applied to help capitalize, say, our local biotech boom? "There's no reason we couldn't," Liebman answers. "I have to understand it. I'm not a scientist, and I don't know how to evaluate a biotech company. We do have an investment in a biotech, ProteoTech [formerly in SoDo, now based in Kirkland]. And we had an investment in a bank that was sold. We're open to anything."
As for the Alaska Building, "If you want anything other than an office, you need an earthquake retrofit," according to Liebman. "It's another 30-odd rooms," he admits, "but the main purpose of it is earthquake. And that's the silly thing about what they're objecting to."
And what if the council shoots down the plan; does the project no longer pencil out? "No, it could still work. You could leave it as an office, and it still pencils very well. Believe it or not, there's still a shortage of office space [in Seattle]."