Investing in the American Dream: Immigration and the EB-5 Program
Immigration is back in the headlines — the Senate judiciary committee has just approved a new immigration law, propelled by the efforts of a so-called “Gang of Eight” bipartisan grouping of senators.
Lost in the doubtlessly shrill debate that will soon begin in the Senate is an existing, little known but highly innovative path for foreign nationals who want to contribute to the U.S. economy, and become permanent residents in return.
Created in 1990 by Congress, the “EB-5,” or the Investment Immigration Program, aims to incentivize foreign nationals to invest capital and create jobs in the U.S. To qualify, an immigrant must create or preserve 10 full-time jobs in a period of two years, and make a minimum investment of $1 million ($500,000 for specially defined areas), and invest in a commercial enterprise (from a sole proprietorship to a corporation).
Data from the Department of Homeland Security shows that the program has grown from granting 142 permanent residencies (PRs) under the category “employment creation (investors)” in 2002 to 806 PRs in 2007 and finally to 3,340 in 2011. Considering that the annual authorization under the EB-5 program is for 10,000 visas, clearly the huge potential of this program is yet to be tapped.
It’s not just potential immigrants who look at the EB-5 as a great opportunity; domestic U.S. businesses also have great expectations from the program’s ability to provide alternative sources of capital. George Olsen, who worked on the $228 million EB-5 financing of the Atlantic Yards project in Brooklyn, N.Y., is quoted in the Wall Street Journal as saying “In the past, you had to explain it to people–people didn’t believe that the program was around.” Now, two Manhattan-based residential projects are planning to use the EB-5 route to raise the $260 million required.
So what trends is one seeing from analyzing EB-5 immigrant data? A study done in 2010 by U.S. Citizenship and Immigration Services (USCIS) by sampling 295 beneficiaries showed real estate is overwhelmingly the No. 1 industry for investors. California was the No. 1 immigrant destination, with New York and Florida being other popular states to settle. The study also revealed that while South Korea, China, and Taiwan were the top three countries from where EB-5 beneficiaries came, the program granted permanent residency to nationals from 30 other countries, making it truly global.
The program has not been without its share of criticisms and pitfalls. Charles Lane savaged it as a “visa-for-dollars program” in a Washington Post article, saying that “EB-5 has created a lot of jobs — for consultants, brokers and other fee-seeking middlemen.” Worryingly, the Securities and Exchange Commission (SEC) recently indicted Illinois-based Anshoo Sethi for misleading about 250 Chinese investors by using the promise of EB-5 visas to sell $145 million in securities to finance a hotel-cum-conference center that had not yet received the necessary project clearances.
This makes the task of legitimate immigration consultants like Abbas Hashmi, and his firm, Long Island-based Green Card Capital, that much tougher. “Black Box investments with the promise of high returns where little is known about the people or the project where the money is going, is something we steer our clients away from.” The firm’s website also has a section on EB-5 fraud listing the various scams to educate potential EB-5 applicants.
Despite such issues, the EB-5 program has great potential. The Obama administration created Council on Jobs and Competitiveness has stated that, fully leveraged, the EB-5 program can generate 40,000 new jobs per year based on $4 billion in investment.
Maybe the future is indeed green.