Ever since the economy took a nosedive, real estate developers have been on the hunt for alternative sources of financing for their projects. Consequently, interest in the EB5 immigrant investor program has increased considerably.
According to an article from the Multifamily Executive, the number of regional centers has increased from 11 to 147 since 2007 ? numbers that are unlikely to surprise anyone in the EB5 visa community.
?When the banks basically shut down during the recession, many people were looking for an inexpensive form of alternative financing,? said Chicago attorney Taher Kameli in comments to the publication. Kameli is also Principal of the Chicago-based regional center Chicagoland Foreign Investment Group. ?The program is very attractive right now," he said.
It?s no secret that a number of EB5-funded real estate developers have experienced great success with the program. Among the most ambitious projects to date, a large investment of $249 million recently collected through the EB-5 program will help fund the development of residential and office towers at Atlantic Yards, a Brooklyn project that includes a new stadium for the New Jersey Nets. The New York City Regional Center has raised money for the project.
The City of Dallas Regional Center also secured $30 million from EB5 foreign investors to help fund a 260-unit apartment complex built by Dallas-based developers Lang Partners in North Oak Cliff, Texas.
However, despite the many successes of the EB-5 Immigrant Investor Program, not all real estate projects seem to be a good match. Gary Gorman, president of Gorman & Company, Inc., a recognized leader in urban infill housing in Wisconsin, has experienced complications securing EB-5 funding for multifamily developments.
?Apartments don?t work well with EB-5 because they're considered low job generators relative to the capital invested,? he told the Multifamily Executive.
Historically, the EB-5 program has shown itself a better fit for mixed-use and seniors housing. The Chicagoland Foreign Investment Group has funded numerous assisted living centers, which are known to create a high number of permanent jobs.
Developers are also experiencing problems with the lengthy time delay associated with releasing EB-5 funds from escrow.
?It?s going to take the government between five months to one year to release that money,? said Kameli. ?But if a developer wants to build an apartment building, the land is available now, not a year from now. You need to have a bridge loan or a line of credit to pay the up-front expenses.?