Development Magazine Winter 2010

Finance

First Look - Show Me the Money

With traditional sources of capital constrained or unavailable, a government program called EB-5 is attracting interest from commercial real estate developers. Many have chosen to form regional centers (RCs) to attract foreign investors willing to invest $500,000 for the opportunity to obtain temporary, then permanent visas for themselves and their family members. In fact, the number of RCs has expanded five-fold to over 100 in just the last couple of years.

Foreign investors prefer large-scale, glitzy projects such as hotels and entertainment properties but are also interested in restaurants, hospitals, medical buildings and assisted living facilities. The program’s goal is to generate capital and attract immigrants seeking to enter the United States to invest in a new commercial enterprise that will create at least 10 full-time jobs. NAIOP member, George Livingston, a current plan participant, overviewed the program in a Solution Series briefing entitled, "Attracting Foreign Capital to Create Jobs through the EB-5 Program."

Regional Centers (RCs) must be approved by the United States Citizenship and Immigration Service (USCIS). RC responsibilities include:

  • Closing the deal with the immigrant investor(s)
  • Qualifying the source of funds
  • Managing the immigration application and approval process
  • Investing the funds
  • Creating the jobs and accounting for them
  • Reporting to investors and the USCIS
  • Assisting in applying for and obtaining permanent Visas

It takes eight to 12 months to obtain RC approval and six months from approval to get cash flow. Livingston noted the importance of committing enough capital to get the project done right and finding someone who can travel. The consultant team should include corporate, securities and immigration attorneys, a CPA, translators, a back-office team and country-specific consultants and brokers.

In discussing which countries are the most attractive for consideration, Livingston commented, "Everyone goes after China. Other countries to consider are Brazil, Panama, Argentina and Europe. Each country is different and return expectations vary. Our experience has been that the process takes longer than expected, is more costly and not bureaucratically friendly. It’s not easy, but it’s worth a shot."

Other lessons learned include:

  • Marketing is the most time consuming portion of the process
  • The investor must have an in-country presence
  • Seek public-private partnerships and government support
  • Consider exit strategies for projects – three to five years
  • Provide support for immigrant investors
  • Learn the culture and foreign business environment
  • Be prepared to revise plans as conditions change 

For an archive of the Solution Series program, visit the E-Library

From the Archives: Finance Articles from the Previous Issue

Finance image

Avoiding Hard Money Loan Scams 

Industry experts weigh in on avoiding hard money loan scams and steps you can take to discern credible lenders from crooks.

finance graph

Strategically Green - Balancing Green With Financial Results 

Building owners and tenants are reminded of the high cost of energy every time they open their monthly utility bills. Energy costs are the largest operating expense for most commercial properties, accounting for 25-30 percent of a typical building’s annual operating budget.