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By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Authors of www.HotelLawBlog.com
28 March 2012
EB-5 financing is one of the few serious financing options available to hotel developers
EB-5 financing has become an important source of financing for hotel development in the past few years. And hotels have become a favored class of investment for foreign investors seeking to get their green card with the required investment of capital. Quite a few projects are being funded in this way, and some of the big hotel companies - but most notably Marriott - are encouraging their developers to look into EB-5.
The hotel lawyers at JMBM's Global Hospitality Group® have worked on (or are now working on) more than 40 such EB-5 hotel financing projects. We still seem to be at the early part of this wave, investor interest continues strong, and more people are getting on board. In addition, the construction and development financing part of hotel financing spectrum continues to be the most difficult to arrange, so EB-5 financing looks pretty attractive.
It also looks like these EB-5 deals are accomplishing their intended purpose well. They attract wealthy foreign investors, who bring fresh capital into the United States to invest it in building hotels and creating at least 10 jobs for Americans for each investor.
A new wrinkle being created by the USCIS
But a new wrinkle has recently been created by the U.S. government agency charged with monitoring the EB-5 process, the U.S. Citizenship and Immigration Services ("USCIS"). The USCIS is starting to question under what circumstances hotel jobs created by a new hotel development should be counted for purposes of EB-5 financing - - at least when the hotel operator hires the new employees under the industry-standard form of hotel management agreement. In so doing, it appears that the USCIS may be wondering if jobs with the hotel operator should be treated the same as jobs with tenants under an office or retail lease.
The article below from my colleagues, Catherine Holmes and Victor Shum, explains the latest issue and why hotel employees should be treated as employees of a hotel project, regardless of whether they are employed by the hotel owner or a hotel manager. We think this analysis will be of greatest interest to our friends in the EB-5 community who may not be familiar with the hotel industry.