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EB-5 Immigrant Investor Visas: The Fundamentals of EB-5

EB-5 is an immigrant investor visa category created in 1990 for foreign nationals who invest in a new commercial enterprise that will benefit the U.S. economy and create at least 10 full-time jobs. The name comes from the fact that this visa is the 5th category of employment based (EB) visas. Ten thousand visas are set aside annually for investors and their immediate family members under the EB-5 visa program. An EB-5 applicant will receive a visa for himself or herself, his or her spouse, and all of their children under the age of 21.

The U.S. Citizenship and Immigration Services (“USCIS”) will issue a conditional visa within about five months of application by an EB-5 investor, as long as the investor and the project they invest in are qualified. If the investment project fulfills the job creation criteria after two years, the investor can obtain permanent resident status, and can apply for U.S. citizenship in five years. This makes the EB-5 program a very attractive means of obtaining a U.S. visa for foreign investors.

What are the basic criteria required for an EB-5 Visa?

In order to qualify for an EB-5 Visa, an investor must invest at least $1,000,000, or $500,000 for a project in a “targeted employment area” (as discussed below), in an enterprise that will create at least 10 new full-time jobs for U.S. citizens and legal residents. The entire amount invested by the EB-5 investor must be invested in the business within two years, and all fees must be paid from other funds of the investor.

If the project is an existing business, the 10 new jobs have to be in addition to the existing jobs in the business. The investor usually purchases a limited partnership interest in a limited partnership made up of multiple investors seeking EB-5 visas. Limited partnerships are almost always used, because EB-5 regulations require the EB-5 investor to control the business, unless the investor is a limited partner in the business. Each limited partnership generally invests in a single project, either as an equity investor in or a lender to a special purpose entity established for the project controlled by the developer.

How are jobs counted for the EB-5 Visa?

The jobs requirement must be met by the direct employment of at least 10 full-time employees for each EB-5 investor, unless the project is part of an approved Regional Center, in which case both direct and indirect job creation within the designated geographic area of the Regional Center will be counted. Approximately 90% to 95% of all EB-5 visa investments are made through Regional Centers.

What is a regional center?

A Regional Center is an entity created by either a public or private group to sponsor projects for EB-5 investors. There are currently about 150 approved Regional Centers, but many more applications are pending with the USCIS and are expected to be approved if their business plans are considered feasible and meet the job creation criteria. According to the trade association IIUSA, Regional Centers have invested over $2.0 billion of foreign capital, creating over 50,000 jobs in the U.S.

Any business owner can create their own Regional Center for one or more projects within a designated geographic area, but it currently takes at least nine months for the USCIS to approve each application. However, the USCIS has issued a proposal to provide “premium processing” for Regional Centers for “shovel-ready” projects, and we anticipate that this proposal will be approved relatively soon.

When premium processing is made available, it will take only a few weeks to obtain approval for a Regional Center – provided that it has a solid and sufficiently detailed business plan that shows what projects will be undertaken, what the costs will be and what direct and indirect jobs will be created as a result of the Regional Center’s projects.

How do you find EB-5 investors?

EB-5 investors can come from any country outside the U.S., and can even include people who are in the U.S. legally under a temporary visa. In the first three quarters of fiscal 2011, over 70% of all EB-5 investors have come from mainland China. There is a well developed network of brokers and licensed emigration agents in China who work with U.S. business owners to raise financing for EB-5 projects, usually through seminars attended by individual Chinese investors in cities throughout China.

What are EB-5 investors looking for in an EB-5 investment?

Most importantly, EB-5 investors are looking for assurance that the project they invest in will qualify them for a permanent U.S. visa, which means that the project must be able to prove that it created the number of jobs promised in the business plan. For a Regional Center, rather than counting the actual direct and indirect jobs that have been created, the USCIS requires evidence that the Regional Center actually carried out all of the material aspects of the business program it proposed in its approved application.

The second most important feature of an investment for the EB-5 investor is a reasonable likelihood of receiving a return of his or her original investment within a period of about five years. The EB-5 investor is not looking for a high return on their investment–some investments offer only a 1% return on the investment–just a return of their original capital. Almost all EB-5 investors will want to invest at the $500,000 level, which means that a hotel owner or developer will have to have a project in a “targeted employment area.”

What is a targeted employment area?

A targeted employment area is any city, county, census tract or other geographical area accepted by the USCIS that has an unemployment rate over 150% of the national average rate, or a “rural area.” A rural area is an area outside a metropolitan statistical area or outer boundary of any city or town having a population of 20,000 or more. Since most EB-5 investors are looking for investments at the $500,000 level, this means that for purposes of finding investors, a project will generally need to be located in one of these targeted employment areas.

What is the maximum size of the EB-5 investment available for your hotel?

While most investors want to make the minimum $500,000 investment required to get their green card, that is too small an investment to be of much use for most hotel developments, acquisitions, or renovations. Fortunately, there is no limit on the number of investors who can be aggregated into a limited partnership or other appropriate investment vehicle in order to make a bigger investment. And as a result there is no limit on the size of the EB-5 investment that can be made, as long as solid deal structuring and documentation are prepared, and as long as 10 jobs are created for every EB-5 individual investor.

That’s how our W Hotel and Residences project was able to raise $20 million in EB-5 financing, and even bigger EB-5 financing projects have been done and are now underway.

Cathy HolmesCatherine DeBono Holmes is the chair of JMBM’s Investment Capital Law Group, and has practiced law at JMBM for over 30 years. She specializes in EB-5 immigrant investment offerings and hotel and real estate transactions made by Chinese investors in the U.S. Within the Investment Capital Law Group, Cathy focuses on business formations for entrepreneurs, private securities offerings, structuring and offering of private investment funds, and business and regulatory matters for investment bankers, investment advisers, securities broker-dealers and real estate/mortgage brokers. Contact Cathy at or 310.201.3553.