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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   November 2014

Guide Foreign Investors Through the EB-5 Maze

Commercial financing prospects emerge from the Immigrant Investor Program

Guide Foreign Investors Through the EB-5 Maze

The EB-5 Immigrant Investor Program, administered by the U.S. Citizenship and Immigration Services, is attracting increasing media attention while its popularity soars among foreign nationals seeking green cards, as well as developers looking for new sources of financing for their U.S. business ventures.

Many of these foreign investments are in the commercial real estate sector — everything from multifamily to office and retail developments. That is why now is a good time for mortgage originators and lenders to become more familiar with the EB-5 program, which has the potential to provide opportunities for new business in today’s highly competitive marketplace.

When credit tightened after the financial crisis, many commercial real estate developers realized that funding from EB-5 investors was a viable alternative for raising funds for their business ventures. Some have even made recruiting trips abroad to woo wealthy foreign investors by dangling the carrot of a green card for these investors and their family members if they invest in U.S. ventures that create jobs.

Until recently, however, the employment-based fifth preference category, or EB-5 for short, was low-key and low-volume. In fact, during the height of the housing and financial crisis, comparatively few of these visas were awarded: just 806 in fiscal-year 2007 and 1,360 in fiscal-year 2008.

Today, the EB-5 program is entitled to about 7.1 percent of the annual employment-based immigrant visas issued worldwide, according to the U.S. Department of State. For fiscal-year 2014, which ended this past Sept. 30, the EB-5 limit was 10,667.

Interestingly, EB-5 visas have become so popular among Chinese investors that China’s residents were cut off from the program for the remainder of this past fiscal year on this past Aug. 23, when that country reached the maximum number of EB-5 visas allowed to its citizens. China has accounted for about 85 percent of EB-5 visas this past fiscal year, according to government data. Availability of these visas to Chinese investors was scheduled to reopen with the Oct. 1 start of the federal government’s new fiscal year. This temporary shutdown is just one example of the program’s rising popularity.

Origin and controversy

Established in 1990, the EB-5 program promotes the immigration of foreign investors who may create jobs for U.S. residents through their investment of capital into the economy. The program makes about 10,000 conditional resident visas available annually, which may be converted into permanent status after two years if certain conditions — such as job-creation requirements — are met. The petitioner must submit proof of the jobs created to gain permanent residency.

To qualify for the visa, the petitioner must, in most cases, invest $1 million and create 10 jobs. If the foreign national invests in a targeted employment area —  described as an area of high unemployment or a rural region — the investment requirement drops to $500,000.

In recent years, EB-5 investors have been tapped to help finance everything from high-rise office buildings in Manhattan to swanky hotels in California. Others have funded smaller enterprises, existing troubled businesses or entrepreneurial ventures.

Originators should be aware that the program has attracted controversy over the years. Some detractors believe developers have misused it as a “cash-for-visas scheme,” as the New York Times put it in a 2011 article. That article contended that some developers have gerrymandered districts in otherwise wealthy areas to create zones of high unemployment in order to qualify for the targeted-employment-area investments of $500,000 each per EB-5 investor.

EB-5 visa applicants are pouring money into many of these
commercial real estate developments. 

Indeed, abuses of the program have occurred. For example, earlier this year, the U.S. Securities and Exchange Commission announced a settlement involving a fraudulent offer that targeted EB-5 investors. The settlement recovered about $147 million in EB-5 funding for a project to construct a Chicago convention center that never got off the ground.

Growth and wait times

In 2005, the U.S. General Accountability Office (GAO) reported that the EB-5 program had been offering only a fraction of its nearly 10,000 visas available annually. During the 13-year span from 1992 through 2004, fewer than 7,000 visas were issued to foreign investors, and only 653 investors (excluding dependents) had met requirements and received permanent legal resident status as of June 2004, according to the GAO.

Part of the problem, reported the GAO office, was a cumbersome and lengthy application process and a failure to implement regulations to adjudicate applicants in conditional visa status. Some applicants had remained in limbo with only a conditional visa for as many as 10 years, which had deterred immigrant investors from applying for EB-5 visas, according to the 2005 GAO report.

Since then, the EB-5 program has undergone streamlining to make it more efficient. To be sure, its rise in popularity since then has sometimes caused delays in the approval of visas. Department of State sources say wait times may increase in the future because of procedural changes, and could increase from a minimum of a few months to as much as two or three years.

The advent of EB-5 regional centers that develop capital investment projects in specific geographies has helped the process move forward by connecting developers and foreign investors. The United States has about 579 regional centers around the country.

The regional centers also allow the counting of indirect jobs toward the job requirements of the EB-5 program. They have been a good option for EB-5 investors whose main goal is a green card. Some EB-5 investors prefer to run an actual business venture in the United States and don’t have a need to tap into the regional centers.


The commercial real estate market has heated up as a stronger economy and improving employment picture boost investor confidence. EB-5 visa applicants are pouring money into many of these commercial real estate developments.

Although many originators may not be aware of immediate business opportunities through the EB-5 program, it behooves them to stay on top of this emerging trend, especially with the number of lenders now providing financing to foreign nationals, a group that doesn’t easily fit into a traditional credit box. Lenders may hedge the risk of lending to this group by offering a slightly higher interest rate and providing only nonrecourse loans.

Savvy originators are wise to add the EB-5 program to their arsenal of potential business sources. When talking to clients who are foreign nationals or are connected to them, it helps to know how the EB-5 program works so you can be a resource when the opportunity arises. Get the word out that you are available to work with foreign nationals — or with developers who are seeking financing for their projects beyond what is available from EB-5 investment infusions.

We live in a global world. The increasing popularity of the EB-5 Immigrant Investor Program in commercial real estate investment is proof that business doesn’t stop at the border. 


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