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Amidst USCIS Backlog, CRE Industry Still Optimistic About EB-5 Financing

Hudson Yards under construction

For many immigrants, the road to American citizenship can be a bumpy one. Strict border protection zones and an application backlog at the U.S. Center for Immigration Services have made it difficult for many people to enter the country.

But green cards can be the golden ticket to entry. People are eligible for permanent residency if they meet specific qualifications. Lucky for foreign real estate investors, financing a large commercial real estate project is one of them. 

A foreign investor who wishes to become a citizen or permanent resident can do so through the EB-5 program. Created by Congress in 1990, the program allows foreign investors to obtain an immigrant visa if they invest at least $1M into a commercial project that creates full-time jobs for 10 or more employees. Investors who put $500K of capital into a project in a targeted employment area are also eligible. EB-5 helps developers attain alternative financing for their projects, and foreign investors take the next step toward citizenship. 

“EB-5 gives people an opportunity to invest in the U.S. in order to get a green card,” Mazars partner Arthur Adams said. “This means, essentially, you’re buying your green card, while generating U.S. jobs and stimulating the American economy by the development you invest in."

To be considered for green card status, investors need to be able to prove that the project they choose to invest in has long-term economic benefits. To meet these requirements, investors want stability. They look for projects that are most likely to generate employment and drive economic and population growth in a community. Income-driven developments, like hotels and residential and commercial rental property, are popular among EB-5 investors because they create several long-term jobs. 

Foreign investors who apply for EB-5 also prefer to finance developments in major urban centers. U.S. cities that are popular not only nationally, but on a global scale, are most attractive because they have a proven track record of successful development. The 18M SF Hudson Yards development in New York City, for example, raised over $800M from EB-5. Investors in the EB-5 program also helped finance Downtown Brooklyn's mixed-use and retail development City Point, with 42% of funds coming from foreign investors. 

Mapping EB-5 Projects Across New York City

Given the magnitude and reach of these projects, many rely on the program to receive the financing necessary for effective development and construction, especially in an expensive real estate market like New York. 

"It's a critical part of the puzzle," Related CEO Jeff Blau said to Bisnow about EB-5 at Hudson Yards. "It's so big, there's not enough capital from any one traditional source." 

While several investors and developers have seen success through the EB-5 program, it has come with some challenges.

“The biggest issue right now is that there is a large backlog in the number of visas that the USCIS can process at a given time,” Adams said. “Many people who decide to invest in the program do so in order to make it possible for their children to be in the U.S. during their childhood years. The problem is that getting processed through this backlog could take up to 10 years, so for some investors, that has become a deciding factor on whether they want to invest or not.” 

Several members of Congress have discussed a potential reform of the program. There has been talk of implementing quotas on foreign investment in an effort to diversify the program. This means there could be a cap on EB-5 applicants from a country like China, which accounts for the vast majority of EB-5 money. 

Despite these challenges, the commercial real estate industry remains optimistic about the impact of the program. 

“EB-5 money is a good alternative opportunity for developers to raise capital, especially when compared to traditional construction financing, which has seen rates inch up over the past few years,” Adams said. “My understanding is that this program will continue because it is still attractive to developers and benefits the overall economy.”

This feature was produced in collaboration between Bisnow Branded Content and Mazars. Bisnow news staff was not involved in the production of this content.