Created in 1990 to stimulate economic areas with high unemployment, the EB-5 visa is also known as the Immigrant Investor Visa Program. The program allows eligible foreign investors to invest in US companies and projects. In return, they and their families are able to start the process for permanent residency with a green card. As a program of the US Citizenship and Immigration Services (USCIS) within the Department of Homeland Security, there are several requirements. There is a minimum investment of $1,000,000 into a US business. If the investment is made in a targeted employment area (TEA), the amount is lowered to $500,000. These are primarily rural areas with unemployment levels that are 150% higher than the national average. The investment capital can include cash, equipment or property. Investors must also demonstrate that the company created ten new jobs. These positions must be filled for at least two years as a result of the financial support. Many of the projects that qualify for inclusion in the EB-5 program are real estate projects. Initially, commercial real estate projects create jobs in the construction industry. This is followed by service and hospitality jobs later on. Some of the larger hotels and multi-use development projects have included Hyatt and Marriott locations. EB-5 projects have also been used to build stadiums and sporting facilities.
When Congress created the program, the goal was to provide a way for new jobs to be created during the recession and bring new capital into economy. Foreigners have the option to invest individually into a project or through a regional center. Regional centers are third party companies that have been approved by the US government. These centers pool project funds from multiple foreign investors. While this is attractive to many because they are very stable, the return rate is lower for the investor due to the commissions charged by the regional center. The benefit is that the investor is freed from having to be involved in the day to day business management. Approximately 80% of EB-5 visas are issued to investors from just four countries. This list includes China, United Kingdom, Taiwan and South Korea. However, investors have also come from countries around the world.
From its origins during the banking crisis the 1990s, the program has steadily grown. Today, there are currently 883 EB-5 regional centers operating in the US. The program’s growth is directly attributable to the growth of China’s economy. As they have experienced economic development, the numbers of Chinese millionaires have also risen. They are now seeking to invest in American companies. This program gives them the opportunity to do so and benefit from having a green card for themselves and their children. This has been a motivating factor for most of the Chinese investors.
Advocates for the program argue that it has created thousands of jobs and brought billions of dollars into the US economy at no cost to taxpayers. This has been a tremendous source of capital for developers, particularly those in the real estate industry. An indirect stimulate to the economy is that these investors, while supporting large projects, are also buying property in the US.
Others have cited certain abuses of the program. It has even been suggested that foreign government operatives and criminals who cannot go through normal immigration channels have used the program to gain entry into the US. USCIS vets both investors and all proposed projects to protect all parties. The Securities and Exchange Commission (SEC) monitors all EB-5 projects for signs of fraud and misuse of investor’s funds.
Since its inception, the program has slowly evolved to encourage more foreign investors to participate. Initially, investors were required to create a new commercial entity. The development of regional centers as an option has increased the number of investors. For many, working through a regional center is a much more attractive path. This has also allowed “troubled” businesses to get fresh support to reorganize and recover from period of loss.
While the EB-5 program may not be good every project, the real estate industry has greatly benefitted from the infusion of capital. For the foreign investors that are accepted into the visa program, they have a secure investment opportunity and access to permanent residency.