EB 5 Capital Offers Attractive Financing Option for Developers

After the last recession, developers have had more difficulties financing projects through traditional methods and have turned to alternative sources of capital such as EB 5 capital from wealthy foreign investors.

Through the EB 5 Immigrant Investor Visa Program, foreign investors seeking to secure green cards invest $1,000,000 or sometimes $500,000 in new commercial enterprises that boost the U.S. economy and create jobs for U.S. workers. Developers who affiliate their projects with regional centers are able to attract this EB 5 capital, allowing them to fund large projects.

Of the 10,000 visas available in the EB 5 Program, 3,000 are allotted specifically for investments in the Regional Center Program. However, over 80% of EB 5 investors choose to invest in regional center projects due to the decreased minimum investment, the indirect job creation, and the lack of day to day management requirements.

When a developer seeks affiliation with a regional center, they can attract thousands of EB 5 investors who are interested in the indirect job creation that will make securing a green card easier. In the traditional EB 5 Program, only direct jobs counted, but through the EB 5 Regional Center Program, indirect or induced jobs count toward job creation requirements.

Additionally, Regional Centers typically work with developers whose projects are located in targeted employment areas (TEAs) or areas of high unemployment. TEAs lower the EB 5 investment requirement from $1,000,000 to $500,000, which attracts a great number of foreign investors. Developers invite and market to foreign investors at this attractive reduced amount.

Foreign EB 5 investors have three concerns, in this order, making them extremely attractive financial sources to developers:

  1. Attaining green card status for themselves, their spouse and their unmarried children under the age of 21.
  2. Recovering their investment.
  3. Return on their investment.

As you can see, the primary concern is securing a green card. This is much different than the concerns of a private lender, who would be more interested in #3, or the return on their investment. Many EB 5 investors, while they would be happy to see a return on their investment, are not primarily concerned with it. They're primary concern is I-526 petition approval and then I-829 petition approval, which would allow them to attain lawful permanent residency. 

 

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