Hotel Lawyer looking at the EB-5 program
By Jim Butler, Chairman, JMBM’s Global Hospitality Group
By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
23 June 2014
Hotel Lawyer looking at the EB-5 program
Over the past 5 years, JMBM's team has helped clients with more than 40 EB-5 projects all over the U.S. The program is more popular than ever and the standards continue to rise for sponsors who want to advantage of this funding technique.
I asked Jonathan Bloch, a corporate partner and Senior Member of JMBM's Global Hospitality Group®, to put together an Executive Summary and Overview of the EB-5 Program for investors and developers wanting to explore the funding source for new projects.
Here it is.
An Executive Summary and Overview of the EB-5 Program by Jonathan R. Bloch | Senior Member of the Global Hospitality Group®
U.S. Citizenship and Immigration Services (USCIS) administers the Immigrant Investor Program, also known as "EB-5," created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. Under a pilot immigration program first enacted in 1992 and regularly reauthorized since, Congress has allocated 10,000 EB-5 visas for investors designated by USCIS based on proposals for promoting economic growth. Of the 10,000 visas available annually for immigrant investors, 3,000 are reserved for investments in Targeted Employment Areas and another 3,000 are set aside for investment through the Regional Center Program.
Up until very recently, the EB-5 Program has been both controversial and underutilized. However, as a result of some positive developments by the USCIS, the Program has been revised to make EB-5 investments more readily available and easier to obtain. In addition, due to the difficult financing market that developers have faced, the number of petitions has increased from 332 in 2005 to 4,156 in 2012, and the approval rates for the Program have risen from 53 percent to 79 percent.
What is the investment requirement?
Required minimum investments are:
- General. The minimum qualifying investment in the United States is $1 million.
- Targeted Employment Area. The minimum qualifying investment in the United States is $500,000.
If the foreign national investor's petition is approved, the investor and their dependents (spouse and unmarried children under the age of 21) will be granted conditional permanent residence valid for two years. Within the 90-day period before the conditional permanent residence expires, the investor must submit evidence documenting that the full required investment has been made and that 10 jobs have been maintained, or 10 jobs have been created or will be created within a reasonable time period.
What is a "Regional Center" and how is the designation obtained?
A Regional Center is defined as any economic entity, public or private, which is involved with the promotion of economic growth, improved regional productivity, job creation and increased domestic capital investment. The organizers of a regional center seeking the "Regional Center" designation from USCIS must submit a proposal.
A list of current Regional Centers can be found at www.uscis.gov/eb-5centers. There were approximately 532 Regional Centers on June 20, 2014.
What is a "Targeted Employment Area" and what does it mean for an investor?
A Targeted Employment Area (TEA) is defined as a rural area or an area that has experienced high unemployment of at least 150 percent of the national average. The EB-5 investment threshold in a TEA is $500,000, rather than the generally required $1 million.
If the investment is into a commercial enterprise located within a Regional Center and a TEA, the investment amount is reduced to $500,000, and the developer does not have to prove direct job creation. USCIS appears to show preference for these types of projects, and there have been several reports confirming the higher rate of approval for investments made under the program.
JMBM's EB-5 Experience and Capabilities
The lawyers at JMBM have worked on a rapidly growing number of projects with Chinese investment in U.S. hotels, real estate projects, and EB-5 immigrant investor visa projects. We help our Chinese investor clients seeking to purchase or invest in hotels and real estate in the U.S. to do the following: identify and evaluate hotel and real estate opportunities; perform due diligence investigation of properties; negotiate purchase and sale transactions; acquire debt and equity financings; obtain government approvals and permits; and plan for tax obligations.
For our hotel, restaurant and other commercial real estate developer clients seeking financing through the EB-5 program, we advise them on: EB-5 project viability and due diligence; qualifying for governmental incentives such as New Markets Tax Credits, and redevelopment agency funding; EB-5 regional centers; determining Targeted Employment Area (TEA) designation; job creation requirements; securing state and local governmental support for a project; federal securities laws with respect to the sale of limited partnership interests to EB-5 investors; structuring and documenting EB-5 investment programs; negotiating marketing contracts for EB-5 investment programs; and negotiating loan and inter-creditor agreements between EB-5 lenders and other lenders.
Jonathan Bloch is a corporate partner and a senior member of the Global Hospitality Group® at JMBM. He has more than 15 years of experience in venture capital, private equity and alternative investments focused on large institutional investors specializing in operations, sophisticated fund formation issues and legal and regulatory compliance.
Jonathan works with developers of hotel and other commercial real estate, as well as energy infrastructure companies, in negotiating, documenting and obtaining EB-5 loans. He was the founder and Senior Managing Director of a large fund-of-funds firm (over $700 million in investments), which was targeted at venture capital, growth equity, medium-size buyout funds and clean-tech investing. Contact Jonathan at 310.201.3531 or JBloch@JMBM.com.
This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We've done more than $68 billion of hotel transactions and have developed innovative solutions to unlock value from hotels. Who's your hotel lawyer?
Our Perspective. We represent hotel owners, developers and investors. We have helped our clients find business and legal solutions for more than $68 billion of hotel transactions, involving more than 1,500 properties all over the world. For more information, please contact Jim Butler at email@example.com or +1 (310) 201-3526.
Jim Butler is a founding partner of JMBM, and Chairman of its Global Hospitality Group® and Chinese Investment Group™. Jim is one of the top hospitality attorneys in the world. GOOGLE "hotel lawyer" and you will see why.
Jim and his team are more than "just" great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.