If you are looking for foreign investors to fund your real estate project, one option to consider is the EB-5 visa program offered by the US Citizenship and Immigration Service.
Since 1992, the US CIS has offered permanent citizenship to foreign nationals who invested a minimum of $1 million into the US economy and created at least 10 permanent jobs for US workers. The minimum $1 million investment can be lowered to $500,000 if the investment is made in high unemployment or rural areas.
This program has been used by some real estate developers as the carrot needed to attract foreign money into their projects. But while it can be a great source of funding, navigating the EB-5 visa process is anything but simple.
Projects Must Be Qualified
There are two ways foreign investors can invest in a real estate project through the EB-5 visa program. The first is through direct investment, which only makes up about 5% of such deals. The other way is through a “regional center” investment.
With a regional center investment, the project must be in an area that has been designated by the US CIS to have high unemployment. The regional center is then considered to be a private business with the authority to accept funding from foreign investors for projects that benefit previously identified areas and industries.
A fund is then set up that makes loans to projects within that particular regional center. Foreign investors then supply the funding for the loans.
For real estate developers, the regional center approach requires a lot of due diligence in selecting a regional center in which to develop. This is especially true because the rules governing the EB-5 program are frequently revised. For the developer,the best approach is to direct investors to a regional center that already has successfully developed projects using EB-5 funding in the past.
Picking the Right People
Most of the money that is invested into the US economy through the EB-5 visa program is in real estate projects, about $1 billion annually; however, the process of administering the program requires developers to hire attorneys who are familiar with several different types of law.
That’s because EB-5 deals generally include securities, general corporate finance, alternative finance, securities, immigration and other legal specialties.
At their most basic, EB-5 deals are about immigration. Unfortunately, that’s something most real estate developers and their attorneys know very little about. That’s why it’s so important to include an immigration attorney in the process.
It’s also a good idea to have a labor attorney involved because one of the goals of the program is to create jobs. You will need a securities attorney or corporate law specialist involved because the EB-5 investments are considered to be securities purchases.
Finally, you will want to have an economist on board because all parties must comply with the programs specific interpretation of what kinds of jobs the project must create in order for it to qualify.
It should be apparent that it takes a team to create a successful EB-5 real estate project. It’s too complicated to be handled by one single individual.