What the future is for the US EB-5 investment visa?

What the future is for the US EB-5 investment visa?

The United States EB-5 investment visa is currently being debated. Democratic and Republican negotiators in the House of Representatives and the Senate are discussing the reauthorisation of the EB-5 Regional Center Program.

Any update to the current regulations must be agreed by both before the end of the month, although an alternative is that it will be given a temporary extension as part of the larger Continuing Resolution, which is being introduced to keep parts of the government open beyond 30 September.

Under the current rules, entrepreneurs and their spouses and unmarried children under 21 are eligible to apply for a green card if they make the necessary investment in a commercial enterprise in the United States, including real estate projects and plan to create or preserve 10 permanent full-time jobs for qualified US workers.

Despite any mooted changes that may take place, many US agencies say the EB-5 has been a major factor in boosting real estate investment, particularly from the Chinese, who make up 90% of the visas issued.

OPP.Today talked to Tim Lobanov, Managing Director of international real estate development firm, Verzasca Group, which is based in South Florida, and started by asking how the EB-5 program has benefitted foreign investors

“Under the EB-5 program, the foreign entrepreneur/investor can become a lawful permanent resident of the U.S. with a $500,000 investment of capital in a designated target employment area or in an EB-5 regional center where the investor is a limited partner and therefore not responsible for managing the business or creating the jobs. Entrepreneurs may also use EB-5 direct investments to start new businesses.

“Because investments pledged via the EB-5 program cannot have any guaranteed rate of return (otherwise the capital invested is not considered “at risk”), from a developer’s perspective, terms are greatly preferable to more traditional bank financing and are less dilutive than equity financing. This program will also serve as a catalyst for economic development and job creation within the city of Miami.

“Given fears over a slowdown in China (and in particular, in China’s property market) it is likely that foreign appetite for US investment will remain strong. One would expect the list of EB-5 projects to continue to grow, particularly given demographic changes in the U.S. (Healthcare projects, such as hospices, long-term care facilities, medical centers and public housing for seniors could all see increased EB-5 investment.) Thus, limiting the number of applicants will not affect the demand.”

With the current debate going on, what changes are likely for the EB-5? “Proposed legislation seeks to redirect investments to low income and rural communities and would make it tougher for developers to access funds in big cities such as Miami. However, the program is expected to be renewed, but it is not clear if Congress will make the program permanent. Given that immigration has become such a hot-button issue, making the program permanent might be difficult. Areas where there might be change in EB- 5 are: raising the annual visa quota, modifying targeted employment areas, adding more regulatory oversight, and raising the minimum investment threshold.”

So, will foreign buyers stop investing in the United States if the green card incentive is taken away? “Even though the EB-5 program is an attractive option for immigrant investors, it is unlikely that the absence of such program will decrease or stop foreign investments in the United States. The United States remains a safe haven for investors from all over the world which is considered to be a thriving marketplace with stable political, economical and legal structures. For those investors who are looking to live in the United States permanently, EB-5 program certainly offers the ultimate incentive, the Green Card, but the program itself limits the amount of applicants to 10,000 a year which is relatively insignificant comparing to many more that invest in the United States without filing for the program and consider the US an attractive destination for their investment capital. With $500,000 being the required amount of investment through EB-5 program, it is typically the average of client’s investment in any EB-5 project.

Rounding off the interview, we asked Mr Lobanov why Miami is a good place for EB5 real estate investment.

“Miami has become a truly world class and internationally recognized city. Its thriving real estate market is just one of many reasons that more and more of immigrant investors are choosing Miami as the destination for EB-5 project of their choice. This global hub, also known as ‘Gateway of the Americas’, has everything that EB-5 investor might want besides a growing number of EB-5 approved projects; largest concentration of foreign banks and multinational corporations, rated Number 2 in Business Friendliness and Number 3 in Foreign Direct Investment Strategy by FDI Intelligence (a division of Financial Times), and is undoubtedly one of fastest growing urban centers of the world in commerce, finance, culture, media, arts, entertainment and international trade.”



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