Relevant Group, one of Hollywood’s most ambitious hotel developers, is under scrutiny over its use of EB-5 financing.
Unite Here Local 11, a union representing hotel workers, has asked U.S. Citizenship and Immigration Services to investigate whether Relevant Group has complied with the EB-5 program, according to a Wednesday letter obtained by The Real Deal.
The federal agency oversees the EB-5 visa program, which allows foreigners who invest at least $900,000 into a business to apply for visas granting permanent residency––often called “green cards.”
The developer said it raised financing from 180 Chinese investors for its Dream Hollywood hotel, according to the union, citing statements from Relevant managing partner Grant King in 2017.
Relevant Group declined to comment.
Given that the EB-5 program requires each investor to invest a minimum of $900,000 to “create full-time positions for at least 10 qualifying employees,” Relevant would have had to hire 1,800 full-time employees for Dream Hollywood to meet the threshold for green cards for 180 investors.
Sometimes derided as the “crack-cocaine of real estate financing,” EB-5 was used to fund large real estate projects across the country, drawing criticism for being vulnerable to fraud. The EB-5 program expired in June after lawmakers failed to come to an agreement on an extension.
Unite Here said it does not know how many people Dream Hollywood currently employs, but noted that Relevant obtained two paycheck protection program loans totaling $3.75 million for its Dream Hollywood in connection with 183 employees. Relevant disclosed that the proceeds of the loans were to be used for payroll.
Firms must disclose the “the total number of employees, including part-time employees” over a 12-month time period when applying for a PPP loan, according to the Small Business Administration, which manages the program.
The letter from the union also asked USCIS to disclose how Relevant Group was connected to Tom Barrack, the former CEO of Colony Capital who was arrested over the summer on federal charges tied to illegally lobbying.
The union claims Barrack was a managing director for Relevant Group’s Hollywood International Regional Center — an EB-5 fundraising company –– and that the developer received a minority investment from Colony Capital in 2016. Tom Barrack’s cousin, Scott Barrack, has also been listed as Relevant’s managing director in China.
Unite Here Local 11 asked USCIS to provide information of how Tom and Scott Barrack were “involved in fundraising for the project, including any interactions with Chinese government officials.”
Relevant Group opened the 169-room Dream Hollywood in 2017 and obtained $61 million in refinancing from Wells Fargo in 2019.
The firm is building out a mini-empire of hotels on a few blocks between Sunset and Hollywood Boulevards — but not without some snags.
Facing pandemic-related cost increases and construction delays, the company landed $72 million in “rescue” mezzanine financing in April on its Tommie and Thompson hotels, as a $136 million construction loan was coming due. Relevant co-founder Richard Heyman left the firm this year.
Relevant is moving forward with opening its hotels. The Thompson hotel officially opened in August, after it was first set to open in 2019, while the Tommie hotel is accepting reservations for December.
The post Hotel union asks feds for answers on Relevant’s EB-5 appeared first on The Real Deal Los Angeles.
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