Popular Jobs-For-Green Cards Program Could Bring An Annual $5B In Construction Financing and Other Foreign Investment to U.S. Shores
It turns out there is at least one federal stimulus program that Congress can support almost unanimously — the Immigrant Investor Program, which allows foreign nationals to obtain a so-called EB-5 visa in exchange for investing in U.S. real estate development and other job-creating ventures.
The House of Representatives voted 412-3 last week to reauthorize the EB-5 Regional Center Program, administered by the U.S. Citizenship and Immigration Services agency, for at least three years through Sept. 30, 2015.
As reported by CoStar in April, the program has become an increasingly popular matchmaking and financing tool for pairing foreign investors with U.S. developers and completing projects hampered by lack of construction capital and financing.
The program grants permanent resident visas to foreigners who invest $1 million, or $500,000 in high unemployment areas in a U.S. business that generates at least 10 jobs over two years. Similar legislation cleared the Senate just before the August congressional recess. President Barack Obama was expected to sign the extension into law this week, said Rick Spees, chair of Akerman Senterfitt’s National Government Affairs & Public Policy Practice Group.
Deals already using EB-5 financing were at risk of going into limbo, but will now be able to move forward, as well as a number of new transactions, said Steve Polivy, who chairs Akerman Senterfitt’s Economic Development & Incentives Practice.
“The sense in the EB-5 community has been that there would be a renewal, but with the uncertainty, there were a large number of transactions that couldn’t proceed,” Polivy said. “There are also a fair number of deals in the pipeline that will now be able to proceed.”
Going forward, “EB-5 will attract a great deal of capital, particularly in times like this where conventional capital is still very reluctant to make loans for new projects on favorable terms,” Polivy said.
As the number of real estate companies that have tapped into EB-5 has grown, extending the EB-5 program has drawn strong support from CRE industry advocacy groups such as Real Estate Roundtable, which see the program as a creative means to assemble funds for a variety of types of development projects.
Roundtable President and CEO Jeffrey DeBoer urged Congress to extend EB-5 beyond September 2012 during testimony before the Senate Energy Committee in June. Along with other measures, EB-5 capital could help jump start financing for job-creating energy efficiency retrofits, bring more foreign investment into U.S. real estate and help address the equity gap that is complicating efforts to refinance commercial mortgages.
“A signature element of The Roundtable’s agenda is to enable policies that bring more foreign investment capital into U.S. real estate,” said DeBoer. “Extending the EB-5 program is a major step in the right direction.”
The bipartisan Senate bill extending the program was introduced by Sen. Patrick Leahy, D-VT, and Sen. Chuck Grassley, R-IA.
The U.S. provides 10,000 visas each year for this program, which when fully subscribed has the potential to direct $5 billion in foreign capital investment into American communities each year with the potential creation of 100,000 American jobs and strengthen local communities and economies, Leahy said on the Senate floor Sept. 13.
The extension of the program “will allow the U.S. Citizenship and Immigration Services to continue to improve and grow the program administratively and will give me and other interested lawmakers, agency officials, and private citizens the time needed to consider and find consensus on lasting statutory improvements to the program so that it may continue as a permanent and vital part of our immigration system,” Leahy said. “Most importantly, it will allow American entrepreneurs to continue building job-creating development projects around the country.”
The program welcomes people from around the world who devote substantial investment capital to American businesses to invigorate American communities at no cost to the American taxpayer, Leahy added.
“Moreover, those who immigrate through this program will purchase real estate and other goods, enroll their children in our schools, colleges, and universities, pay taxes, and enrich the communities in which they will live and work.”
In Dallas, a collaborative effort between Mayor Mike Rawlings and the Civitas Capital Group, which manages the city’s regional center, has attracted more than $120 million in capital from foreign investors which has funded projects such as affordable assisted-living facilities and building renovation initiatives, said Congressman Eddie Bernice Johnson, a Texas Democrat, before last week’s vote.
The money invested by immigrants in EB-5 ventures “is the tip of the iceberg,” said David Hirson, an attorney with Fragomen, Del Rey, Bernsen, and Loewy LLP. Most of the EB-5 investors come to the U.S. and make multi-million dollar purchases of homes, cars, furniture, and services.
“This additional stimulus is often overlooked when the EB-5 program is discussed. Many of the investors also open or purchase businesses separate from their EB-5 investments, thereby creating and preserving additional jobs and further stimulating the economy,” Hirson said in a press release by EB5investors.com, a site that promotes the program and its regional centers.