Articles Posted in EB-5 Financing

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Hotel Lawyers | Authors of www.HotelLawBlog.com
7 September 2014

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EB-5 Visas and China “Retrogression” – What’s it all about?

by

Jim Butler and Jonathan Bloch
Partners, Jeffer Mangels Butler & Mitchell LLP

In the past, when China exceeded its 7% allocation of US Immigrant Investor Visas (EB-5 visas), Chinese applicants were permitted to take advantage of unused EB-5 visas allotted to other countries. But as of the last week of August 2014, the US State Department decided that the issuance of new EB-5 visas to Chinese applicants will be frozen or “retrogress” (move backward) until October 1, 2014, when the new fiscal year starts.

At that time, a new visa quota of 10,000 EB-5 visas (for all countries) will become available for the next fiscal year through September 30, 2015. China will again be allotted only 7% of these visas but most experts expect that Chinese investors will be permitted to access visas unused by other countries in accordance with practice over the past 3 years. This means that the 10,000 visa cut-off date likely will be reached much earlier in the fiscal year ending September 30, 2015, and this may significantly affect fundraising in 2014 and 2015.

EB-5 Visas and China “Retrogression” – What it means to you

If you have a new hotel development in the pipeline and you are on the fence about EB-5 financing, now is the time to act!

Why should this latest development in EB-5 financing concern you — a mere 5 week “freeze” on the issuance of EB-5 investment visas for China? If you want to use EB-5 financing as part of your capital stack for a project in 2015, it should concern you plenty for the following reasons:

  • China has been the dominant source of EB-5 capital for the last 3 years — more than a staggering 70% of EB-5 visa applications.
  • The freeze will only affect immigrants filing I-526 applications who are born in Mainland China. Of course, over time, other countries may fill any shortfall of investors from Mainland China but that may take 2-3 years or longer to develop the EB-5 infrastructure that makes foreigners aware of the program, motivates them to immigrate to the US and provides  EB-5 “capital delivery” system (marketing agents, immigration attorneys and the like) that can match China.
  • Anything that delays, retrogresses, or threatens the certainty of EB-5 financing from China creates uncertainty that is bad for all participants in the EB-5 financing world — the Chinese investors, US developers, and the communities that benefit from the realization of new projects, new jobs for US citizens, and economic stimulus.
  • If the EB-5 issues are not fixed quickly, an irreplaceable source of financing could be lost for US developers, communities may lose the benefit of major new projects (from hotels to conference centers and port facilities), Americans will forfeit hundreds of thousands of new jobs each year, and we will lose a critical source of highly-educated, wealthy immigrant talent as America faces a critical labor shortage of skilled workers in the near future.

Based on our experience of assisting developers with EB-5 financing for more than 60 projects, we are confident that there are both short term and longer term solutions to these problems which are discussed at the end of this article. But first, we need to recap the background and setting for the EB-5 program. CONTINUE READING →

Published on:

Hotel Lawyers | Authors of www.HotelLawBlog.com
4 August 2014

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Frequently Asked Questions about EB-5 project financing
for new hotel development

by

Jim Butler and Jonathan Bloch
Partners, Jeffer Mangels Butler & Mitchell LLP

 

Why is there so much buzz about EB-5 financing?

In the last five years, EB-5 financing has become extremely popular in development circles and is being widely used by mainstream, institutional players including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of the largest owners of hotels and restaurants. EB-5 financing has provided low-cost, non-recourse, five to six year term financing for construction and development of new projects and offers a number of advantages to developers.

What is EB-5?

EB-5 is a provision in the United States immigration laws. It is the fifth “Employment Based” immigration provision providing expedited visa processing (hence “EB-5″). The program is a win-win-win arrangement giving wealthy immigrants the opportunity to earn a “fast-track” for a US green card if they make an investment of $500,000 or $1 million, and create a minimum of at least 10 permanent US jobs. In return, communities get the benefit of economic stimulation created by this investment and the new jobs. And developers get a valuable source of financing for new projects that is otherwise more difficult to obtain.

Is EB-5 funding available for new development and new construction?

Because foreign investor money must create NEW US jobs, construction and development projects are the normal target of EB-5 financing investment. Although the law does not restrict the nature of the investment to real estate, foreign investors have demonstrated a clear preference for real estate-related projects, particularly hotels, restaurants and resorts. EB-5 financing can also be used to add new facilities to existing ones, such as a new tower of hotel rooms, a spa, a restaurant or nightclub. And, in limited circumstances, EB-5 financing can be used to rescue a bankrupt or failing business, but this exception is difficult to use. CONTINUE READING →

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Hotel Lawyers | Authors of www.HotelLawBlog.com
30 July 2014

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How should hotel developers go after EB-5 financing?

Although the EB-5 immigrant visa program has been around since 1990, the current trend of using this as a source of financing for hotel development began only three years ago. We worked on one of the first hotel EB-5 financings for the W Hotel and Residences in Hollywood, and have since worked on more than 60 EB-5 projects all over the country. Now, use of the EB-5 financing program has gone mainstream. Headline grabbers include the $400 million financing of the SLS Hotel in Las Vegas, the $100 million Ritz Carlton & JW Marriott in downtown Los Angeles and now the $1 billion Silverstein project to be built in New York City with a Four Seasons Hotel.

As a growing number of savvy hotel developers hurry to assess the EB-5 financing opportunity, they frequently receive conflicting advice as to the best way to pursue EB-5 financing. Many immigration lawyers and advisors tout the advantages of the developer forming its own regional center — basically to shave a few points off the all-in cost of EB-5 financing.

Although this advice may work well for the EB-5 advisors (in that they get $100,000 or more of fees), for most of the hotel developers we know, forming a captive regional center is a bad idea. This article should provide a note of caution for developers considering this course.

Based on our extensive experience with financing hotel development from EB-5 funding sources, we believe that the answer for most hotel developers will be to obtain “preferred” status for themselves and their projects — if they can do so — and to tap into the very best established EB-5 funding sources.  For more on this approach, see “Hotel development financing: How to win the race for EB-5 capital.CONTINUE READING →

Published on:

Hotel Lawyers | Authors of www.HotelLawBlog.com
29 July 2014

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A viable source of capital and now mainstream

The EB-5 Immigrant Investment Visa program offers an alternative means of raising capital for hotel development projects in the U.S., and the lawyers in JMBM’s Global Hospitality Group® and Chinese Investment Group™ have worked on more than sixty EB-5 projects all over the United States.

Over just the past 3 years, the EB-5 program has quickly gained the support of some of the largest, institutional-quality developers as well as major hotel brands. Perhaps a bit late, many developers have recently noticed the significant capital being raised through EB-5 and they are scrambling to catch up with those already far down the track.

Looming problem of limited bandwidth

Fortunately, EB-5 capital remains abundantly available. But unfortunately, there is limited bandwidth to tap into it. As a result, the competition of developers for access has become quite intense as they seek to gain the attention of the small number of players with the track record of success to complete their capital raise, and the increasingly discerning EB-5 investors who are much more careful today on who they trust with their immigration visa investment.

Why it is important to gain “preferred” status

Not surprisingly, the hotel developers who will win this race to receive EB-5 funding for their projects will be “preferred” hotel developers in every sense – preferred as to the excellence of the track record and experience of the developer, the quality of the project, the structure of the deal to satisfy EB-5 investor requirements and protect the developer, the experience and relationships with Regional Centers and sales teams, and experienced Counselors to advise on every aspect of the project.

The JMBM Global Hospitality Group® helps high quality developers with great projects achieve this “preferred” status and win the race for EB-5 capital. Some background on which developers and deals will be successful in raising EB-5 capital may be helpful in order to understand the importance of planning, structuring and positioning necessary to obtain the best result. CONTINUE READING →

Published on:

Hotel Lawyers | Authors of www.HotelLawBlog.com
25 July 2014

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EB-5 financing has gone mainstream for hotel development

The use of EB-5 financing has exploded over the past 3 years as an important funding source for new hotel development. It is clearly now part of the “mainstream” being used with great success by increasingly institutional companies. Marriott was among the earliest advocates for the program and has used it for many high profile hotels such as the Ritz-Carlton/JW Marriott and Marriott Courtyard/Residence Inn hotels in DTLA. But more recently, other major brands have come on board and encourage developer use of EB-5 financing.

As lawyers who have worked on more than 60 EB-5 projects all over the country, we have noticed that everyone who investigates EB-5 financing wants answers to 5 big questions about the EB-5 financing opportunity for their project. It should come as no surprise that most of our EB-5 projects involve financing for new hotel development, because hotels are the most popular type of project for EB-5 investors and we have one of the most prominent hotel law practices in the world. However, our team has also successfully used EB-5 financing for a number of non-hotel projects including senior living, restaurants and solar farms.

The 5 questions every hotel developer is asking
about EB-5 financing

by
Jim Butler and Jonathan Bloch

In seeking to access EB-5 financing, our developer clients have asked a lot of questions, but most of them can really be summed up in the following 5 questions:

1. Will EB-5 work for me on my project?
2. How much money can I get?
3. How much will it cost?
4. How long will it take?
5. How can I get certainty of execution?

CONTINUE READING →

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Hotel Lawyer looking at the EB-5 program

Over the past 5 years, JMBM’s team has helped clients with more than 60 EB-5 projects all over the U.S. The program is more popular than ever and the standards continue to rise for sponsors who want to advantage of this funding technique.

I asked Jonathan Bloch, a corporate partner and Senior Member of JMBM’s Global Hospitality Group®, to put together an Executive Summary and Overview of the EB-5 Program for investors and developers wanting to explore the funding source for new projects.

Here it is.

An Executive Summary and Overview of the EB-5 Program
by
Jonathan R. Bloch | Senior Member of the Global Hospitality Group®

U.S. Citizenship and Immigration Services (USCIS) administers the Immigrant Investor Program, also known as “EB-5,” created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. Under a pilot immigration program first enacted in 1992 and regularly reauthorized since, Congress has allocated 10,000 EB-5 visas for investors designated by USCIS based on proposals for promoting economic growth. Of the 10,000 visas available annually for immigrant investors, 3,000 are reserved for investments in Targeted Employment Areas and another 3,000 are set aside for investment through the Regional Center Program.

Up until very recently, the EB-5 Program has been both controversial and underutilized. However, as a result of some positive developments by the USCIS, the Program has been revised to make EB-5 investments more readily available and easier to obtain. In addition, due to the difficult financing market that developers have faced, the number of petitions has increased from 332 in 2005 to 4,156 in 2012, and the approval rates for the Program have risen from 53 percent to 79 percent.

CONTINUE READING →

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On June 21, 2002 Guy Maisnik will be a featured speaker at the 2nd Chinese Investment and EB-5 Finance Forum in Los Angeles.

This Conference is designed for everyone interested in taking advantage of foreign investment from China “inbound” for U.S. real estate. It features some of the most knowledgeable and respected experts in the country on this subject and will facilitate foreign investors and capital sources networking with U.S. real estate professionals, developers, and owners.

Guy Maisnik, an industry veteran with nearly 30 years of real estate and hospitality experience, will provide practical tips and insights from lessons learned in representing Chinese investors in the U.S. Maisnik says, “The more you understand the nature of your investors, their concerns and the issues, the greater your chances for success with your transactions.”

Maisnik is a vice chair and a senior member of JMBM’s Global Hospitality Group® and Chinese Investment Group, and is also a member of and is involved in more than 40 Chinese investments in the U.S. — EB-5 or otherwise. Maisnik notes that “Chinese investors are particularly interested in hotel and related hospitality investment as well as broader classes of real estate.”
For more information on Chinese investment and EB-5, please click here or go to: http://hotellaw.jmbm.com/eb5_financing.

For more information on the 2nd Chinese Investment and EB-5 Finance Forum, click here or go to :

http://www.attractasianinvestors.com/index.html.

Come join Guy at the Forum and take advantage of this opportunity.
Embassy Suites Los Angeles International Airport/North
9:00 am – 4:30 pm
June 21, 2012
Register Now

Published on:

Hotel Lawyers | Authors of www.HotelLawBlog.com
25 October 2011

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On Friday, October 21, 2011 I did a Q&A interview with the National Real Estate Bisnow about Chinese investment in U.S. hotels. Here is the full Question & Answer exchange, a portion of which appeared in the Biznow article.

There’s been an explosion of Chinese investment in the US, especially real estate. And many people believe it will surpass the Japanese investment of the late ’80s (estimated to have exceeded $120B).

There’s been an explosion of Chinese investment in US real estate. Who’s investing and where, and how much investment do you expect in 2011?

The increasing wave of Chinese investment in the U.S. is being fueled by the Chinese government (generally acting through construction companies, banks and other intermediary companies) and an exploding class of wealthy Chinese. The top .05% wealthiest Chinese have investible funds of more than $2.7 trillion, and there is a rapidly growing class of billionaires and more than 800,000 millionaires. Plus there is a huge rising middle class looking to travel and enjoy life.

Of course, in addition to Mainland China there are the Chinese in Taiwan, and everywhere else such as Hong Kong, Singapore, and Indonesia.

A recent Merchants Bank report estimates that rich Chinese individuals — those with assets of more than 10 million yuan — have about 3.6 trillion yuan ($564 billion) invested overseas. No reliable numbers are available for total Chinese foreign investment or Chinese investment in the United States. The investors are largely staying under the radar to avoid publicity and possible adverse reactions, and there seems to be no means to track the investments and get an aggregate investment number.

CONTINUE READING →

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Formation of the Chinese Investment Group™

Jeffer Mangels Butler & Mitchell LLP (JMBM) has announced the formation of the JMBM Chinese Investment Group™ to provide legal and business advice for the specialized needs of Chinese investors and Chinese investment in the United States for hotel, real estate, EB-5 and other U.S. investments. We have a dedicated team with great experience for this kind of work.

Here is more information about how this development might help you. Click here to download a PDF of this announcement about the Chinese Investment Group™.

CONTINUE READING →