Chinese nationals who invest at least $1 million in The Barn project in Auburn will secure visas to permanently live in the United States with their families.
It's called an EB-5 visa, the heart of a little-known but quickly growing U.S. program that grants foreign investors green cards — and sets them on the path to U.S. citizenship — in exchange for a significant business investment on U.S. soil.
Although complex, the 25-year-old program boils down to this: A foreign investor sinks $500,000 or $1 million into a project in America. If that project saves or creates at least 10 jobs, the investor gets a green card, as does that person's spouse and unmarried children under 21 years old.
EB-5 visas have skyrocketed in popularity since about 2008, when the U.S. economic downturn made bank loans virtually impossible for many entrepreneurs, businesses and construction projects. They turned to foreign investors.
Project developers get $500,000 or $1 million in capital from someone who, unlike a bank or other lender, doesn't care about a return on investment.
Foreign investors get a quick, all-but-guaranteed way to move to the United States. Unlike tourist visas, student visas and other more common visas, which allow people to stay in the U.S. temporarily, EB-5 visas allow the holders to live here permanently and later apply for citizenship.
EB-5 visas are especially popular among China's increasingly wealthy citizens, who like the idea of living in America or see residency as a way to help their children attend U.S. colleges .
In 2014, about 85 percent of the 10,000 EB-5 visas went to people from mainland China.
Although the Department of Homeland Security's U.S. Citizenship and Immigration Services handles EB-5 visas, it's the business project — not the federal government — that gets the foreign investor's money.
Investors need only contribute $500,000 if the project helps a rural or high unemployment area — deemed a "targeted employment area" by the state. Otherwise, investors must contribute $1 million.
Most investment projects find a way to be counted as serving a targeted employment area, making it uncommon for investors to pay $1 million. However, Auburn does not meet the criteria for a targeted employment area because it is not rural and its unemployment rate is lower than the national average.
The Chinese investment group behind The Barn project told the Sun Journal Thursday that it will be seeking investors willing to contribute at least $1 million.
"We're going to obviously attract a lot of customers to the facility, and out of those customers, we'll be very selective in choosing some people from that group to become, officially, partners," said Shi Qi, chairwoman of the investment group, through Michelle Xu, translator and director of overseas investment.
Across the U.S., the vast majority of EB-5 hopefuls invest through regional centers, organizations created to pool investments and provide capital to projects in targeted employment areas. Most of the 689 federally approved regional centers are private, with no ties to local or state government. Although the federal government grants them approval to operate, they face few requirements or standards under the EB-5 program.
The federal government lists three regional centers approved to do business in Maine. One is USA Lifestyles Inc., which was formed in 2012 and is based at Saddleback Mountain near Rangeley.
Although USA Lifestyles has had no investments or projects, it is "working on a couple of things we hope will come to fruition in the next four to six months," Chris Farmer, president of USA Lifestyles and Saddleback general manager, said recently.
According to Auburn Economic Development Director Roland Miller, the state has said it will form a new regional center to help The Barn project and its potential investors navigate the EB-5 process. Although the project will use that regional center — and regional centers typically funnel money into "targeted employment area" projects — Auburn still won't qualify as a targeted employment area. Investors in The Barn project will still have to contribute at least $1 million rather than the discounted $500,000.
Supporters of EB-5 say it's a good way to bring investment to the U.S., providing billions of dollars in badly needed capital to projects and creating tens of thousands of jobs.
Critics say it's a shortcut to residency for the wealthy, a way to all but sell U.S. citizenship. There have also been incidents of fraud, including developers who scammed foreign investors by promising projects that never materialized and misusing investors' money. The U.S. Securities and Exchange Commission has issued an alert to potential foreign investors, advising them to thoroughly research any EB-5 investment opportunity.
The EB-5 program is up for re-authorization in the fall. In June, U.S. Sens. Patrick Leahy, D-Vermont, and Chuck Grassley, R-Iowa, introduced a bill that would make some significant changes to the program, including increasing the amounts investors would have to contribute, tightening regulations on regional centers and requiring more oversight of projects.
Current projects may be able to apply for exemptions.