The U.S.' EB-5 visa program allows foreigners to become U.S. residents if they invest in qualified business ventures—including hotels—under certain conditions. But with the program poised to expire on Dec. 11, industry insiders are petitioning Congress to keep it afloat and keep their projects moving ahead.
Under the EB-5 program, foreigners can receive a green card that grants them permanent U.S. residency if they invest at least $500,000 in a U.S. business or project and can show that the investment created or preserved at least 10 jobs here. The U.S. government issues up to 10,000 visas annually through the program, which is so popular that all the visas for the fiscal year ending Sept. 30 were gone by May.
According to the Sacramento Bee (citing a recent report by the U.S. Government Accountability Office), EB-5 has produced $11.2 billion in investments in the U.S. since its launch in 1990. The lion’s share of EB-5 investments come from China, accounting for about 85 percent of all visas granted through it last year, although the program is open to investors worldwide.
Chicago Business claims that many Chicago hotel developers have explored the program. EB-5 investors helped finance the Godfrey Hotel in River North, which opened last year, and the builders of the 93-story Wanda Vista tower along the Chicago River may raise more than $100 million in EB-5 money. The program, Chicago Realtor notes, also helped finance the SLS Hotel and Casino in Las Vegas. Last month, Gorman & Company President Gary Gorman and Rockford Mayor Larry Morrissey flew to Shanghai to meet with potential investors for Gorman's $67-million project to turn Rockford, Ill.'s Amerock building into a 160-room Embassy Suites hotel and conference center. Only about one third, or $8.3 million, of the company's $25 million target for foreign investment has been secured. (Gorman also reportedly plans to use state and federal historic tax credits to finance the project.)
Federal auditors have expressed concerns that the program is vulnerable to abuse and fraud. The GAO report said some investors may “be involved in schemes to fraudulently portray job creation or economic activity.” One example of this is the O’Hare Hotel and Convention Center, which was to be built on the now-vacant land located in Chicago just off of I-90’s Cumberland exit. In 2013, the Securities and Exchange Commission sued the project's developer, Anshoo Sethi, accusing him of scamming more than 250 EB-5 investors, most of them from China.
The process for securing funds is also lengthy: A developer may have to wait no less than eight or nine months before the funds become accessible.
Last week, 70 key stakeholders of the EB-5 industry, led by The Real Estate Roundtable, the U.S. Chamber of Commerce and the EB-5 Investment Coalition, sent a letter to Congress urging House and Senate Leadership to reauthorize the EB-5 Regional Center program for one more year, along with three other expiring immigration programs. The letter encouraged congressional leaders not to let the program lapse in the event consensus reform legislation could not be agreed upon by lawmakers prior to the program’s expiration date. It was signed by a diverse group of industry stakeholders, including regional centers, law firms, hotels, and a variety of trade and industry associations.