Opening Doors to Foreign Funding
The EB- 5 immigrant investor program can provide brokers access to a wealth of new clients
the eb- 5 iMMigrant-investor pro-
gram, overseen by the U.S. Citizenship
and Immigration Services (USCIS), attracts foreign investment funds into
the United States with the offer of fast-track permanent residency. Most of the
funds that have entered the country via
this program in the past 20 years have
been invested in real estate. In the
years ahead, however, recent improvements could make the EB- 5 program an
increasingly important source of capital
for a range of development, acquisition
and renovation projects.
For commercial mortgage brokers,
EB- 5 can bring a surge in new referrals for investors in mixed-use high-rise projects containing restaurants or
retail opportunities. These investors
can include immigration attorneys,
foreign retirees in the U.S. and foreign
students. The same is true for potential
clients looking to invest in office and
light-industrial parks, which can qualify
for EB- 5 status from the number of construction jobs created and employees
working for companies renting space.
EB- 5 centers on two forces: attracting wealthy foreign investors and creating new jobs. Fearing regime change or
economic dislocation, many foreign individuals who have the means to invest
significant funds in the U.S. are seeking ways to emigrate from their home
countries. Other individuals want their
children to grow up in the U.S. By combining these efforts with the U.S. government’s focus on job creation, EB- 5
should create tremendous synergies
within the commercial market.
The program, now entering its 21st
year, has brought in more than $2 billion worth of investment capital to date
and has created more than 50,000
jobs, according to the Chicago-based
Association to Invest in the USA. Program beneficiaries extend beyond the
immediate jobs created. A growing
number of real estate developers, real
estate brokers, and attorneys with real
estate and immigration practices are
becoming actively involved.
A Residential Option
Foreign nationals wishing to obtain green cards in the United
States via real estate investment may soon have another
avenue to pursue in the residential market. This past October, Sens. Charles Schumer (D-N. Y.) and Mike Lee (
R-Utah) introduced the Visa Improvements to Stimulate
International Tourism to the United States of America
(VISIT-USA) Act, a bipartisan bill that would grant
three-year visas to foreign investors who spend a minimum of $500,000 on residential real estate.
If passed, the VISIT-USA Act would cover purchases of
single-family homes, condominiums or townhouses. Applicants would have the choice of spending $500,000 on one
property or spending $250,000 on a single home and investing
the rest in other residential properties, including rentals, provided
the taxes are paid and the applicant occupies the properties for at
least 180 days each year. For more information, go to sctsm.in/visitusa.
“EB- 5 centers
on two forces:
that building a regional center from
scratch is more trouble than it’s worth.
EB- 5 capital brings additional benefits, which can offset the administrative
costs and hassles. First, EB- 5 and international funds are available — something that traditional debt and equity
sources can’t always claim. Fundraising companies in China and elsewhere
amalgamate investor candidates interested in American projects — EB-5-re-
lated or not. Second, EB- 5 funds have
few covenants compared to other struc-tured-financing vehicles, such as bonds.
The program also allows for flexibility:
Funding can come in the form of debt or
equity, without senior-lien priorities or
minimum interest rates.
jobs can double or triple actual job-creation head counts.
Within two years after receiving their
conditional green cards, EB- 5 applicants must prove that the funds have
been invested and that 10 jobs have
been created for each $1 million invested. Investors working through a
regional center do this by showing that
the material terms of their business
plan have been met: The project has
been built and is operating, and the
funds have been invested.
Investors not working through regional
centers must pass through a narrower
gate. In such cases, income projections
from a business plan would not suffice.
To have green-card restrictions removed,
investors would have to produce W-2
forms for each employee of the business
to show that 10 actual jobs were created
for each $1 million invested.
EB- 5 basics
Initiated in 1992, the EB- 5 program
(short for “employment-based im-
migration, fifth preference”) offers
permanent residency in the U.S. for
those who invest in job-creating or
job-saving businesses in the country.
Applicants who invest at least $1 mil-
lion in enterprises that are projected
to create 10 or more new jobs within
two years can receive conditional
green cards for themselves and their
families. Once it has been determined
that the funds have been invested
and the minimum number of jobs has
been created, the conditional status
can be removed.
For developers, the advantage of EB- 5
regional centers extends beyond boosting job count, lowering investor risk
and easing investment. Centers oversee the ongoing administrative chores
and coordinate the visa documentation
and processing requirements for each
project. They also frequently provide
fundraising and marketing functions on
developers’ behalf and act as a liaison
with local and state governments. The
assistance comes at a price, in the form
of management fees and equity participation, but developers often benefit by
leaving these elements to specialists.
Developers have been known to go it
alone, forming their own regional centers for projects, but there is currently a
significant delay in processing time for
new regional applications. Most find
A wide range of commercial real estate
development projects have qualified
for the EB- 5 program, including senior-housing properties, retail and mixed-use
properties, master-planned communities,
restaurants, and real estate companies.
Hotels seem particularly well-suited
for the program. Some key reasons hotels are attractive to EB- 5 investment
• hotels are a familiar concept for domestic and foreign investors. Operational metrics and accounting are
well-established, so investors often
can monitor a hotel’s health from a
distance. Flagged properties come
with an additional layer of oversight
from the brand itself.
continued on page 42 »
Richard Zahm is a private lender, investor and
commercial real estate attorney. Reach him at
firstname.lastname@example.org or (203) 962-5770.