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As a necessity to survival during the global economic downturn, many developers have looked to non-traditional sources of capital to finance their projects, including investments by foreign individuals under the EB-5 Program. Congress created the EB-5 Program in 1990 to encourage the flow of capital into the country from foreign investors and promote the employment of U.S. workers. As administered by U.S. Citizenship and Immigration Services (USCIS), foreign investors who make qualifying investments in U.S. companies are eligible to receive EB-5 visas, 10,000 of which are allotted by the federal government annually.

An EB-5 visa entitles the investor (and certain family members) to conditional permanent U.S. residency and, eventually, the opportunity for unconditional U.S. permanent residency, which ultimately gives rise to eligibility for U.S. citizenship. Several requirements must be met for an investment to qualify under the EB-5 Program, including the amount of the investment, the type of business in which the investment is made, and the number and type of jobs created by the investment.

Shortly after the introduction of the EB-5 Program, Congress created the Immigrant Investor Program, which allows investments made in enterprises located within a “regional center” to meet the 10 jobs requirement if the investment will create 10 qualifying jobs directly or indirectly through revenues generated from the investment.

A regional center is any economic unit, public or private, that is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation and increased domestic capital investment. Regional centers must submit proposals and be approved by USCIS before they can participate in the pilot program. A developer can take advantage of the benefits afforded to regional centers by having a regional center be a sponsor or partner on the developer’s project. Such an arrangement would typically involve payment of a fee to the regional center. 

Each investor seeking an EB-5 visa must file a petition on Form I-526.1 with USCIS. The petition must be accompanied by documentation that three major qualifications have been met. If a project meets the requirements for investments made under the EB-5 Program, the developer may be able to take advantage of certain benefits, including the relatively low cost of capital. EB-5 investors typically see very low returns, in many cases less than 1 percent. While they are cognizant of the capital at risk, the main benefit to investors is the prospect of U.S. residency.

EB-5 Program Qualifications
The first major qualification under the EB-5 Program is that the investment must be at least $1 million, unless it is made in a targeted employment area (TEA), in which case the minimum investment must be at least $500,000.

A TEA is an area that, at the time of investment, is rural or has experienced unemployment of at least 150 percent of the national average rate.

The second major qualification deals with business eligibility. There are three types of businesses in which an investment may be made: 
  • the creation of an original (i.e., new) business; 
  • the purchase of an existing business and simultaneous or subsequent restructuring or reorganization such that a new commercial enterprise results; or
  • the expansion of an existing business through the investment of the required amount ($1 million or $500,000 if in a TEA), so that a “substantial change” in the net worth or number of employees results from the investment of capital. Substantial change means a 40 percent increase in either the net worth or the number of employees, so that the new net worth or number of employees amounts to at least 140 percent of the pre-expansion net worth or number of employees.
Establishment of a new commercial enterprise in this manner does not exempt the petitioner from the required amount of capital investment and the creation of full-time employment for 10 qualifying employees.

The third major qualification is that the investment must create full-time employment for at least 10 U.S. citizens, permanent residents or other immigrants legally allowed to work in the country (not including the investor’s family members). Full-time employment is defined as a position that requires at least 35 hours of service per week.

As the economic recovery continues to gain momentum in the construction industry, developers looking for an additional piece to their capital stack should consider whether partnering with a regional center and utilizing EB-5 investments would be a good fit for their projects.  

J. Matthew Flower is an attorney in the Atlanta office of Taylor English Duma LLP, where he is a member of the Corporate & Business; Resort, Hotel & Hospitality; and Real Estate, Lending & Finance practice groups. For more information, email mflower@taylorenglish.com.

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