EB-5 Program Regional Centers Have Been Re-authorized until 2015. EB-5 Regional Centers play an important role in raising EB-5 financing for new business development, and there has been some concern among investors and project developers that the federal regulations authorizing EB-5 regional centers were set to expire on September 30, 2012. We have been expecting that this portion of the EB-5 program would be reauthorized for some time, but we are now able to announce that an important step in the reauthorization has now been accomplished. Yesterday, the U.S. House of Representatives passed S. 3245 (412-3) – which includes a three year re-authorization of the EB-5 Regional Center Program through September 2015. The U.S. Senate previously approved the reauthorization on August 2, and the bill will now be submitted to President Obama for signature. Continue reading →
The Governor’s Office of Business and Economic Development is actively communicating with EB-5 stakeholders to address concerns raised with the new procedures for designating “Targeted Employment Areas.” We met with Brook Taylor and Mather Kearney of the California Governor’s Office of Business and Economic Development (known as “GoBiz”) on May 18, 2012, to discuss our suggestions for refining the new procedures announced by the State of California for designation of “Targeted Employment Areas” or “TEAs”. Economists Jeffrey Carr and Ashleigh Sewell of Economic and Policy Resources, Inc., also participated in the meeting by telephone.
As our readers know, our concern with the new California TEA designation procedure that became effective on May 1, 2012 is that it does not include the ability to designate TEAs within dozens of cities throughout California, including San Francisco, San Diego, San Jose and Anaheim, that do not qualify on a city-wide basis. In our meeting last week, the representatives of the Governor’s Office expressed a willingness to work with stakeholders in the EB-5 program to address these concerns. The Governor’s Office also made clear that the State of California strongly supports investments for projects throughout California using the EB-5 immigrant investor program and that the change in procedure was based on policy and resource considerations, not on a desire to reduce the ability of cities and project owners to obtain EB-5 financing. Continue reading →
Since the release of its “Tenant Occupancy” Notice on February 17, 2012, the U.S. Citizenship and Immigration Services (“USCIS”) has begun issuing Requests for Evidence on pending regional center applications and exemplar I-526 petitions that involve “tenant occupancy models”. These Requests for Evidence articulate a new USCIS policy to reject “tenant occupancy” job creation models for employment created by tenants under leases in certain cases. Such Requests for Evidence have also been issued recently with respect to hotel projects that do not have any leases or tenants and that are operated under the industry-standard hotel management agreement. Apparently the USCIS may be questioning whether hotel operators operating a hotel under a hotel management agreement are similar to tenants operating a business under a lease. The answer is no, as explained further in this article. Continue reading →
Why EB-5 financing is important to hotel developers now: Financing for new hotel development is still in short supply, even for experienced hotel developers. As a result, many hotel developers are exploring the EB-5 financing program as an alternative to traditional financing sources. The EB-5 investor visa program offers non-U.S. persons the opportunity to receive U.S. visas in return for an investment in a U.S. business that creates new jobs. In prior articles, we have discussed the basic requirements for EB-5 financing (See “How to use the EB-5 immigrant investor program for financing hotel development”; “Why a “regional center” may be the key to financing your next hotel development”; and “10 things you can do to win the “race” for EB-5 capital for your hotel development project”). If you want to know more about the basics of EB-5 financing, we encourage you to read those articles.
Beyond the basics of EB-5 financing: Once you understand the basics of EB-5 financing, you know that you will need to work with a United States Citizenship and Immigration Services (“USCIS”) approved regional center in order to be able to count indirect job creation that will result from your project. You also know that you will need to generate at least 10 new jobs per immigrant investor, and that almost all EB-5 investments are offered at the $500,000 investment level, which requires that your project be located in a Targeted Employment Area (“TEA”). You know too that you have two choices if you want to have your hotel financing sponsored through a regional center: you can establish your own regional center, or you can find and negotiate with an existing regional center to sponsor your financing. Continue reading →
An immigrant investor has two primary objectives when shopping for an EB-5 project — to minimize the immigration risk and to minimize the investment risk.
No immigrant wants to move to the U.S. under a conditional green card (that requires them to generate jobs in the U.S.), buy a house, enroll children in school, and then be put in the untenable position of losing their entire investment and their green card two years later if the project fails both as an investment and as a jobs generator. Immigrant investors are understandably choosy about the investments they make under the EB-5 immigrant investor visa program.
There are 150 existing regional centers in the U.S. and 83 new regional center applications pending approval, all with projects trying to receive EB-5 funding. How do developers make their projects stand out from the rest?
How can you differentiate your project and make it more attractive than other EB-5 projects vying for the same money? A strong project will always trump a weaker one, but what does that mean for EB-5 projects?
Here are ten ways you can make your project stand out to immigrant investors in the competitive EB-5 marketplace:
1. Make sure your project is in a Targeted Employment Area (TEA)
To be competitive in the marketplace, a project must be located in a Targeted Employment Area (TEA). A TEA is a high unemployment area (150% of national average) or a rural area. Having a TEA designation permits the minimum qualifying investment to be reduced from $1 million to $500,000. There are too many $500,000/investor projects in the marketplace for a $1 million/investor project to be competitive. Work with your State agency to determine if your project location qualifies for TEA designation. Continue reading →
This article appeared in the September 19, 2011 issue of Hotel Business and is reprinted with permission.
With hotel development financing still in short supply, the EB-5 investor visa program is an alternative financing source worth exploring . The EB-5 program allows foreign investors to obtain a U.S. visa for themselves and their families by investing in a business that will create new jobs in the U.S. Hotel projects are one of the most popular types of investments among EB-5 investors. EB-5 financing is raised through an offering of limited partnership or membership interests, and the partnership or LLC then invests the money into the hotel development entity, as either debt or equity. It is estimated that EB-5 investors will invest an aggregate of $1.25 billion in U.S. businesses in 2011, and more in future years.
A number of hotel development projects are being developed now using EB-5 financing, including a new 377-room Los Angeles hotel that will house a Residence Inn by Marriott and Courtyard by Marriott, a new 200-room Milwaukee Marriott Hotel, and three new Marriott Hotels in Washington, D.C., including a 1,167 Marriott Marquis, 250-room Residence Inn by Marriott and 250-room Courtyard by Marriott.
So, how does a developer decide if a hotel project will qualify for EB-5 financing, and what is the process for getting that financing? Here is the step-by-step guide:
Step 1. Find out if your hotel project is in a Targeted Employment Area.
Virtually all investors in the EB-5 investment program are looking for projects that will qualify them for a visa with a $500,000 investment. For the hotel owner or developer, that means that your project will need to be in a Targeted Employment Area (or “TEA”), defined as an area where unemployment is at least 150% of the national average unemployment rate, or certain rural areas. Even in a city that would not qualify as a whole for TEA status, there will be areas within the city that can be a TEA area, even in cities such as New York, Los Angeles and Chicago. Continue reading →