"In the case of the EB-5 investor, the non-monetary return is the visa."
Does EB-5 funding make more sense for some product types than others? Does it create opportunities we haven’t considered on the affordable housing front? Do the incentives go beyond the promise of residency?
GlobeSt.com caught up with Steven Klein, partner with law firm Gerson Preston, to get answers to those questions in part two of this exclusive interview. You can still read part one: Are EB-5s the Answer to Affordable Housing?
GlobeSt.com: Are there other developments that EB-5 funding makes more sense for, such as mixed-use projects, that creates substantial job opportunities as well as housing for workers?
Klein: Mixed-use projects are an excellent means for creating jobs and allowing for the EB-5 investor to receive a return. The larger scale a project is, the more jobs it will create. By incorporating or requiring an affordable housing component for mixed-income developments, one also creates housing for the workers.
GlobeSt.com: What, in your opinion, does EB-5 funding create in terms of opportunities for all types of projects including affordable housing?
Klein: EB-5 provides a vehicle to fund important projects that serve a community. Without that funding, the project would not necessarily be viable from a profitability standpoint.
There are important projects throughout the city that local governments do not have the dollars to fund and build on their own but through EB-5 financing there is an incentive for the private sector to come in and help fund and build them. EB-5 funding is a valuable form of funding that allows for developers to look for the “greater good” of the community while not investing in a project that with normal funding mechanisms be doomed to fail.
GlobeSt.com: Those who apply for the EB-5 get a ROI of 0.5 to 2 %. versus those who are not interested in immigrating to the U.S. see ROI as high as 6% to 8 %. What are the key incentives of participating in the EB-5 investor program? Is the promise of residency the driving force since investment does not yield as high a return as investing without plans to become a U.S. resident?
Klein: We should be realistic when discussing the EB-5 program. The investor receives the return on his investment through a monetary return and sometimes through a non-monetary return.
In the case of the EB-5 investor, the non-monetary return is the visa. The greater the value placed on the non-monetary return, the lower the monetary return will need to be for the investor. In summary, the EB-5 program provides a win-win scenario, where the community benefits from projects that otherwise might not be built and the investor benefits from the value of the visa obtained through this program.