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EB-5 Spells Opportunity

Visa Program Luring Foreign Investors, Buyers

By Kevin Brass

International Property Journal

After languishing in obscurity for 20 years, the EB-5 visa program is suddenly a hot commodity in the U.S. real estate business.

“There’s massive interest compared to a few years ago,” said Stephen Parnell of WhichEB5, a consultancy that started as a relocation service and now focuses almost exclusively on EB-5 visas.

While the name suggests the sequel to a bad sci-fi film, EB-5, in concept, is relatively simple. Foreign investors and their families are offered a fast track to permanent green cards if they invest in projects that create jobs.

The number of immigration visas issued under the so-called “investor’s green card” more than tripled in 2009--from about 1,400 in 2008 to 4,200--in large part due to the unique attributes the program presents the property business.

To developers, EB-5 offers a new track to raise money, appealing to foreign investors who see residency status as an extra bonus for stashing money in U.S. property. At the same time, agents and service companies view the program as a new source for wealthy international clients already committed to moving their families to the U.S.

Rendering of Sky Hotel and Residences

Outside Seattle, Steve Smith of Twin Development LLC is using EB-5 to raise $235 million to fund construction of the Sky Hotel and Residences, a 45-story mixed-use tower, including 400 condominiums. With little “conventional” funding available, he says EB-5 is a way to “broaden access to foreign capital sources while providing a lucrative opportunity for international investors.”

No bank financing will be involved in the project, Smith says. Twin Development is working with partners in Korea, where he expects to raise the bulk of the money from investors eager to jump the long waiting list for U.S. visas. About 70 percent of the EB-5 visas issued in 2009 went to investors from China and Korea, according to State department statistics.

Although EB-5 originally required a $1 million investment, the program now allows a $500,000 minimum, as long as the project is located in a designated “regional center,” typically an area hard hit by the economic crisis.

The number of “regional centers” has more than doubled in the last year, often focusing on real estate projects, anything from office buildings to ski resorts in Vermont.

“It’s very cheap money,” said Chaim Katzap, chief executive of Lion’s Property Development, which has offices in New York and China. “I think it is the best way today to raise equity.”