The Dirt Dictionary: E is for EB-5 Green Card
What do real estate and green cards have in common?
The Brooklyn Navy Yard, the Sky Hotel outside Seattle, Steiner Studios in Queens, Jay Peak Resort in Vermont and Gary Barnett’s Diamond Building on 47th Street all have something in common: EB-5 visa program funding.
With conventional financing unavailable or very expensive, this program gives access to very low-interest capital while providing foreign investors with a ready and mostly assured path to the highly coveted U.S. green card.
After languishing in obscurity for 20 years, the EB-5 visa program is suddenly a hot commodity in the U.S. real estate business. The concept is relatively simple: Foreign investors and their families are offered a fast track to permanent green cards if they invest in projects that create jobs. Nowadays, the most popular projects are real estate-related and are offered through regional center developments that have been certified by the Immigration Service (formerly INS, now USCIS).
The number of immigration visas issued under the so-called “investor’s green card” has grown exponentially over the past 10 years. In 2005, there were 332 EB-5 petitions filed, and that number jumped to more than 6,000 in 2012, with Chinese investors taking the overwhelming majority of visas. And, yes, real estate projects got the bulk of play in this area.
Technically, The Immigrant Investor Program, also known as EB-5, was created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors.
All EB-5 investors must invest in a new commercial enterprise, which, for the most part, is a business established after Nov. 29, 1990. Commercial enterprise means any for-profit activity formed for the ongoing conduct of lawful business, and so to answer upfront the No. 1 FAQ, it excludes owning and operating a personal residence. The two hallmarks of the program involve capital investment requirements and job creation requirements. The minimum qualifying investment is $1 million, or $500,000 for investments made in a TEA (Targeted Employment Area), defined as a high unemployment (150 percent of national average) area or a rural area.
Job creation requirements are at least 10 full-time (minimum 35 hours per week) jobs for qualifying U.S. workers. These jobs can be either direct or indirect. “Direct” employees are on the investor’s payroll; “indirect” jobs are collateral and what make the regional center so popular, an example being the commercial laundry job that spins off the resort hotel project.
Congress also specified a pilot program, one where groups of investors could pool their money into a project under the umbrella title of regional center. The regional center program was restricted to a TEA with high unemployment (thus the qualifying investment was at the reduced ($500,000 level) and also given another distinct advantage: proviso for both direct and indirect employment.
The program allows for a maximum of 10,000 visas per year, and many see that number being given a serious run now. Initial filing is done on USCIS form I-526. Level one is a conditional green card, valid for approximately two years and conditioned upon the investor filing another form (I-829), showing the investment remains viable and the job creation requirements continue to be met. Only then is a “permanent” green card issued. The spouse and children under 21 will also receive green cards.
While some have criticized the program as a pay-for-play visa program, it has managed to avoid the emotional and partisan debate over U.S. immigration policy.
Next week, I” be writing about how you, too, can have a regional center—or even rent one.