Investing in real estate projects in exchange for legal immigration status has become big business in New York City. Through the EB-5 program, foreigners, more than 80 percent of them from China, are investing billions of dollars in Regional Centers that develop hotels, condominiums, office towers and public/private works Twelve-hundred foreigners have poured $600 million into projects at Hudson Yards; 1,154 have invested $577 million in Pacific Park Brooklyn, the development formerly known as Atlantic Yards; and 500 have put $250 million into the Four Seasons hotel and condominium in the financial district. The list of projects involving EB-5 investments also includes the International Gem Tower on West 47th Street and the New York Wheel on Staten Island.
For foreign investors who have the money, the program can be an easy way to gain legal residency in the United States, but you have to be very clear about the process and the project and how it is financed. If a Regional Center project fails, foreigners can lose both their investment and the opportunity to secure a green card.
Some investors in Regional Centers don’t want to live in the US, and that is not a problem. They want to obtain Green Cards for themselves and their minor children, so they invest in a Regional Center project.
In the New York City area, the EB-5 projects attract re for middle-class and upper-middle-class Chinese, and many are doing it for their children. For Regional Center developers, it is sometimes difficult to find investors who can prove that their $500,000 investment comes from legitimate endeavors, and who will survive close scrutiny by US Immigration. The hardest part of the EB5 process is showing proof of funds and proving that it was all legitimate and giving the right kind of records. These days, US CIS officers who oversee the EB5 process are very knowledgeable about business and economic matters and they sometimes ask for extremely detailed paper trails.
EB5 investors in Regional Centers are focused on securing green cards and are therefore willing to take smaller returns on their investment, typically earning less than 1 percent.
Several cases of fraud have occurred, involving developers who misrepresented themselves to investors and then failed to deliver a completed project. A traditional commercial bank pays close attention to construction schedules and dispenses funds as the project proceeds. In contrast, EB-5 investors deliver lump sums, so a developer could spend the money before the project is complete and wind up with a funding shortfall.
The main thing to remember about Regional Centers is that they are NOT connected with, and NOT guaranteed by the US government. They are private development companies that attempt to develop projects and create jobs.
The EB-5 investors are not guaranteed a green card. To get the Green Card, there is a lengthy process, and there is also the possibility that the project in which they invest could fail or undergo material changes. Investors must wait two years after they receive their investment visa. Then CIS will examine the project, and if it is satisfactory, a temporary Green Card will be issued. After two more years, the temporary Green Card may be replaced with a permanent Green Card. Five years later, the investor and his family can apply for citizenship.
An investor can also apply for an EB5 visa using the Direct Investment path. This requires the creation of the usual ten jobs and also requires the investor’s hands-on daily management of the business.
Q.1. Which is better, Direct Investment or investment in a Regional Center?
A.1. It really depends on whether the investor wants to control the business actively and be in control of his money, or whether he wants to allow a Regional Center to do everything for him, with no control over his investment. All Investments are at-risk. There is no guarantee that the investor will make a profit. If the business fails, the investor will have to start again, from the beginning.
Q.2. For EB5 investments, what is the biggest challenge that potential Vietnamese investors face?
A.2. Business and accounting procedures in the US and Vietnam are quite different, so the potential Vietnamese investor may have difficulty providing a complete paper trail for the money he plans to invest in the US.
Q.3. What about the dependents of Green Card investors?
A.3. An EB5 investor’s spouse and unmarried children under the age of 21 can be admitted to the U.S. with the investor. The spouse and children will be authorized to work or attend school in the U.S. If the investment receives final CIS approval after two years, the whole family can be approved for Green Cards.
Q.4. What if an investor transfers 500 thousand to a Regional Center, and after that, CIS does not approve his investment visa?
A.4. An honest Regional Center will keep the 500 thousand in escrow and return it to the investor if CIS does not approve his EB5 visa. A dishonest Regional Center will start using the money as soon as they receive it, and may not be able to return it if CIS does not approve the EB5 visa.