REPOST: EB-5 Investor Visa Demand Is Booming, Dominated By Chinese Plying Cash Into US Real Estate Projects

The Chinese nationals are dominating the EB-5 investment program. Read more about it from this International Business Times article by Angelo Young.

A man carries bundles of 100 yuan Chinese banknotes to a store after counting it at a bank in Taiyuan, Shanxi province. An EB-5 immigrant investor visa allows wealthy foreigners to gain permanent U.S. residency. | Image Source: ibtimes.com

A popular method used by wealthy foreigners to acquire permanent residency in the United States has been to simply buy it. A $500,000 investment can get would-be immigrants an EB-5 immigrant investor visa and an alternative way to acquire permanent residence. 

But the program is not without controversy. Not only do foreign investors sometimes get bilked by sketchy real estate deals in the U.S., but the program itself has mixed results in its intended purpose: to invite foreign job-creators to participate in the American dream, and create work for natives along the way. The program aims to generate economic growth, especially in economically depressed areas of the United States. New findings by real estate services firm Savills Studley shows just how much demand from Chinese investors for the visa has grown in recent years as the number of millionaire Chinese households has taken off; so much that demand for the visa exceeded supply for the first time last year. 

“It is likely that visas for Chinese investors will become unavailable for all applicants during Q2 2015 as demand for EB-5 visas surpasses annual supply,” said the report released Monday. Nearly 10,700 EB-5 visas were issued last year, with 85 percent of them going to wealthy Chinese investors.

Image Source: ibtimes.com

EB-5 applicants favor commercial real estate development because it easily creates the jobs needed to qualify for permanent residency, the report added. Investments in hotels, restaurants and resorts also allow applicants to easily generate service jobs. Developers prefer cash from EB-5 visa applicants because there’s no expected investment return and it costs less than bank financing. Plus, in most cases EB-5 investors don’t care if they lose the money; the green card is the target.

Companies including hotel chain Marriott International have used funds from EB-5 investors to build hotels in Seattle, New York City and Los Angeles. New York-based Silverstein Properties, which develops high-end residential real estate and office buildings in downtown Manhattan, advertises EB-5 investment opportunities on its website.

The visa allows foreign investors to ply $1 million into the U.S. economy, or $500,000 in an economically depressed part of the U.S., in exchange for conditional permanent residency for applicant an immediate family members.

But the program has problems.

A Seattle Times report earlier this month found that the way economically depressed areas are defined, Seattle gerrymandered sections of their cities to attracts EB-5 investors (who could pay $500,000 instead of $1 million for a shot at green cards) to luxury commercial real estate development under the guise of uplifting economically depressed parts of town. Some $2 billion in local development, largely for the booming Puget Sound region, has been raised by eager EB-5 investors.

A Brookings Institution report from last year called on reforms to bring the program back to its intended goal: to lure foreign investment and to create jobs in areas that aren’t already booming with development projects. It also found little follow-up in the program to measure the effects of EB-5-funded projects.

The program also can turn foreign investors into fraud victims. A damning Reuters exclusive in 2010 found that nearly half of all EB-5 investors since the program began failed to win permanent residency thanks to a “unregulated industry paid to fill the EB-5 pipeline with rich foreigners.” The program was tweaked in 2011, but only to make it easier for EB-5 investors to get the visas, a factor that most certainly has played a role in the spike in approvals since then.

The program is set to expire in September, but Congress is likely to reapprove it. One proposal is to exempt EB-5 investors’ immediate family members (spouse and children) from the visa cap. The move would effectively triple the number of visas available.

The U.S. has an annual cap of 10,000 for these visas, but last year was the first time the limit had been reached since the policy was started as a pilot program in 1993. Now it appears the annual cap will be hit much earlier this year, indicating that demand for the visa is rising fast.

After two years, if the visa holder can prove he or she invested the appropriate sum and managed to “create or preserve at least 10 full-time jobs for qualifying U.S. workers,” the applicant and immediate family members can begin paths to citizenship.

Get the latest news on the EB-5 program by following this Shalom Segelman Twitter account.

The difference between a conditional and an unconditional green card

Image Source: jcsimmigration.com

Foreign investors looking to build a business in the United States need to apply for an EB-5 visa, which allows them to invest money in certain locations in exchange for residency. It is a way for investors to obtain a green card and apply for permanent residency.

Green card is a proof that the holder has been granted immigration benefits such as permission to reside and get employment in the United States. It has two classifications – conditional and unconditional – depending on the validity.

Conditional green card is only valid up to two years. Holders must file another application (I-829, which takes a processing time of five months) at the U.S. Citizenship and Immigration Services (USCIS) three months before the conditional green card expires to verify investment and creation of employment. When the temporary status has been lifted, the holder will receive full residential status.

Image Source: immigration-lawyer-ct.com

Unconditional or permanent green cards offer the same privileges as conditional green cards but are valid for 10 years. Failure to renew after the card expires will not result in loss of the holder’s permanent residency status, but he or she may have difficulty getting a job, benefits, or re-entry to the U.S. after traveling abroad.

Aside from employment and investment, green card benefits include travel, education, and sponsorship of a spouse and unmarried children under 21 years old for U.S. residency. Foreign investors should comply with the requirements and obligations set by the USCIS to ensure residency status and enjoy the benefits of a law-abiding U.S. citizen.

Image Source: jamaicaobserver.com

Shalom Segelman is an EB-5 visa specialist who promotes the Immigrant Investor Program. Learn more about his work by subscribing to this Facebook page.

REPOST: Chinese developers use EB-5 to fund their own U.S. projects

The number of Chinese foreign investors in the U.S. have increased through the EB-5 investment program. Learn more about the issue from this Seattle Times article by Sanjay Bhatt.

Yareton Investment, a local EB-5 investment center owned by a Shanghai real-estate developer, has a tentative deal with Tacoma to develop a hotel and residential tower. | Image Source: seattletimes.com

Tacoma’s City Council, seeking to invigorate the downtown area with a big hotel next to its convention center, recently struck a development deal with the U.S. subsidiary of a Shanghai real-estate firm.

The proposal for a 350-room hotel and a 200-unit residential tower was the only one of five bids that sought no city subsidies or incentives.

“Seems too good to be true,” one city councilman gushed.

One reason Chinese companies can raise capital from Chinese investors for such U.S. projects on attractive terms is an extra benefit: green cards for the investors to live in the United States.

A growing number of the firms raising capital through the federal EB-5 visa-for-investment program are China-based, say experts such as Elizabeth Peng, founding partner of Peng & Weber, one of Seattle’s leading immigration-law practices.

That has set off complaints from U.S. EB-5 promoters who had been the only channel for well-to-do foreigners eager to enter via the visas. They warn darkly about the possibility of fraud.

And U.S. developers using EB-5 money say it’s not a level playing field: China-based enterprises can use the visa program here, but U.S. companies themselves can’t solicit investors there.

“I can’t recruit investors directly in China,” fumes Lobsang Dargey, CEO of Bellevue-based Dargey Development, which operates Path America, an EB-5 investment center that funds his building projects around the Seattle area. “That’s why I have 40 agents in China.”
And billboards at Beijing International Airport.

Dargey buys large ads there that show a view of downtown Seattle, with the headline “Path America / The Path to your American Dream.”

Peng says about half the applications her firm is handling to establish new EB-5 investment centers come from China-based individuals or companies. The U.S. promoters’ concern is really about competition, she said: Chinese companies can have lots of cash, as well as deep personal networks in China to raise capital and cut out the middleman.

“You have cash, you have power in this market,” Peng said.

Shanghai to Tacoma
Tacoma’s deal is with Yareton Investment Funds, an EB-5 funding operation in Des Moines that’s owned by Shanghai-based Minqiang Investment Group (MIG).

Yareton received federal approval last year. Its principals are Albert Sze, a U.S. citizen, and Chun Yang, a Chinese national who founded MIG and has a home in Medina.

Sze, Yareton’s manager, said that without the EB-5 visa program, Yareton might not be able to pull off the convention-center hotel project.

The company has two years to obtain permits and sign a hotel operator.

After that, it will be able to buy city land next to the convention center for the project.

Sze says half the $170 million project will be funded by 190 EB-5 investors, mostly from China, with the balance coming from MIG and a bridge loan.

Yareton already has begun construction in Des Moines on a 235-room Four Points by Sheraton hotel it expects to open in August. Nearly 60 EB-5 investors are contributing just over half the capital needed for that $50 million project.

Sze said Yareton hopes to open the convention-center hotel in 2018. The project would create more than 1,000 jobs locally, he said.

The main headwinds facing Yareton in pulling off the project are the limited availability of EB-5 visas for investors from China as well as the sheer number of U.S. projects jockeying for them — the same challenges for regional centers owned strictly by Americans.

“There’s too many competitors, too much product out there,” Sze said.

Follow this Shalom Segelman Twitter account for the latest in foreign investments in the U.S.

EB-5 investments spur growth in the hospitality industry

Image Source: empirestateregionalcenter.tumblr.com

As markets struggle to regain stability, hoteliers and commercial property developers in the hospitality industry are increasingly looking to the EB-5 program as an alternate source of funding.

Introduced in 1990, the EB-5 Visa for Immigrant Investors Program allows foreign nationals to apply for a green card under the condition that they invest at least $1 million in a new or existing commercial enterprise, or a minimum of $500,000 in a Targeted Employment Area (TEA), a rural area or an area experiencing an unemployment rate of at least 150 percent of the national average.

Milwaukee's Third Ward will soon see anew, nine-story luxury hotel rise amidst the art galleries, boutiques, and restaurants in the city's historic fashion and art district. The ambitious project will be funded in large part by Indian investors through the EB-5 program. Real estate magnate Lorenzo Doumani has recently imploded his hotel, the Clarion in Las Vegas, to make way for a new mixed-use, non-gambling entertainment complex that is expected to cost between $500 million and $1 billion. Doumani is also looking to the EB-5 program for funding from international investors. In Miami, up to nine investors from the Gulf have agreed to invest in SkyRise Miami, a $430 million entertainment center and observation tower to be built on the shores of Biscayne Bay.

Image Source: lasvegassun.com

Despite uncertain economic times, the hospitality industry general has thrived, thanks in large part to international tourism. Hotel owners who wish to take advantage of the opportunities offered by strong tourism but are having difficulty accessing traditional sources of capital can now ensure that their businesses remain healthy while helping create meaningful employment for qualified workers in their areas through the EB-5 program.

Image Source: cloudseedfund.com

Shalom Segelman is a real estate industry veteran and EB-5 specialist. Like this Facebook page for news and updates on the EB-5 program.

REPOST: Foreign Investment In U.S Real Estate

Foreign investments in U.S. commercial real estate has achieved record numbers and big headlines. China as well as the the other foreign countries were reported to have invested billion in the U.S. over the last 24 months. This article has the details.

In Mid-March of 2014, foreign direct investment in real estate sector in the United States reached up to approximately $9 billion, with several billion-dollar agreements still in process. Since the Chinese economy has gradually slackened and the Canadian market has become more saturated in the real estate cycle, foreign investors are turning their attention to the U.S. market now more than ever. Dan Fasulo, the Managing Director of Real Capital Analytics, stated that there has been an enormous inflow of investment in the commercial real estate sector over the last 24 months. In 2013 the cumulative inflow from foreign investment in direct commercial real estate was close to $40 billion according to the Commercial Real Estate Development Association.

Image Source: asianfortunenews.com

According to Jones Lang LaSalle (JLL), an investment firm, 10% of all capital real estate investment comes from foreign investors. The major source of investments in 2013 is coming from Canadian real estate buyers using pension funds. The Wells Fargo Center, one of the tallest buildings in downtown Seattle, was acquired by Canadian pension fund group Caisse de Depot et Placement du Quebec’s real estate unit Ivanhoe Cambridge in June 2013. Closing in on Canada’s exploits, other vital investor companies from China, Australia, United Kingdom, Norway, Singapore and South Korea have also been busy with their own efforts to penetrate the American market. According to reports by Deloitte, Chinese investors climbed up into being a significant contributor in the U.S. by investing $5.8 billion in a 15-month period. Many foreign companies are seeking partnership opportunities to explore high-profile deals, like the Chines real estate subsidiary Cindat Capital Management Co. that partnered with Chicago based Zeller Realty Group to purchase a 65-storied office tower in the area for around $304 million in March of this year. The most attractive cities for such investors are New York, Brooklyn, San Francisco, Houston, Florida and Los Angeles because of large quantity of existing commercial property. There are other countries like the UAE, Italy, France, and Switzerland whose prospective rate of growth has been increased tremendously and are considering making a move in the U.S.

The large number of foreign investors entering the U.S. real estate scene has not only impacted the country’s overall economic growth but has also had a singular effect on both U.S. citizens and foreign immigrants. While there is no direct relation between FDI and housing for students, FDI is having a positive impact on the communities by empowering strong networking among them which is supporting the international students housing. Real estate owned by foreign direct investors are more willing to extend their support to foreign students by finding them apartments to rent, or even sub-letting their homes. In some cases people sharing the same nationality tend to support these non-immigrant students by acting as their financial guarantor, which makes it easy for students to find renting options without having to suffer from unreasonable conditions.

The good news is, in the United States,care available for both citizens and lawful permanent or non-permanent residents. Many loan providing programs, such as Fannie Mae, Freddie Mac and the FHA, offer similar rules and the verification requirements are also under the same mortgage programs at comparable rates and terms. There are no extra costs, fees or even high interest rates for a non-immigrant borrower. This made the demand for houses soar to even higher levels than expected. According latest data from the National Association of Realtors, by the end of 2013 foreign buyers had increased to $68.3 billion of single-family homes, which is about 7% of total population in the U.S.

As a result of high demand for houses among foreign buyers, the prices have been increasing rapidly, with an estimated rise by about 10.9% nationwide. According to Jonathan Miller, president of appraisal firm Miller Samuel, the average one-bedroom apartment rents for more than $2,600 a month in Brooklyn, NY. This rise in house price has had an undercutting impact in the U.S real estate industry as a whole. There are many non-immigrants, especially students, who have resorted to sharing homes and even rooms. Due to increase of house rents, whereas the individual income levels remain constant, sharing homes is becoming a growing trend in many cities especially in metro areas. Not only are the international students, but also many locals are now pairing up to share houses to reduce their monthly expenses. Moreover due to high housing prices, many young-adults return under their parents’ roofs as they are trying to conserve enough money to pay for other accommodations. In addition to that, increased cost of housing is also affecting the businesses in not so positive way, especially the small and median enterprises as well as startups. Small businesses produced 46 percent of the private GDP in U.S but increase in house rent made the business difficult to operate eventually having a negative impact in the economy as a whole.

As an EB-5 visa specialist, Shalom Segelman has been promoting the Immigrant Investor program to investors around the world. To know more about the EB-5 program, visit this Facebook page.