How a controversial immigration program can fill the funding gap
As banks tighten lending standards amid the economic downturn, proponents of a little-known – and somewhat controversial – program for foreign investors looking to relocate to the United States hope to fill funding gaps for projects ranging from office spaces, condos and even railroad lines.
The EB-5 immigration program grants conditional green cards to wealthy foreigners who invest at least $ 900,000 in projects that create and save jobs in the United States. The Hudson Yards in New York, Navy Yard in Philadelphia, and the Westin Hotel at the Texas Medical Center in Houston, Texas, are all projects that have received at least part of the funding from EB-5 investors. The program has been around since the early 1990s, but has undergone a few iterations in recent years, mainly increases in the minimum investment required.
Now, with high unemployment and fears that funding will dry up for ready-to-go projects, supporters of the program are calling on Congress to issue a long-term or permanent reauthorization of the program.
Banks, hampered by low interest rates and looming loan losses caused by the coronavirus, have been reluctant to lend. According to the recent Federal Reserve Senior Loan Officer Opinion Poll, which covers 75 U.S. banks, industry widely admitted that its lending standards were stricter in the second quarter. With the path of the economic recovery uncertain, but with rates almost certainly remaining low, banks are less likely to rush to issue riskier loans.
Of course, there is dry powder on the sidelines in the form of private equity firms, hedge funds and others that have weathered the crisis with cash ready to be deployed. A lesser-known type of player are the financial services companies that sponsor EB-5 investment funds.
CanAm Enterprises, based in New York, is one such company. He has invested money in more than 60 projects over the past 30 years and recently announced the repayment of $ 350 million for his All Aboard Florida project, which created a high-speed train from Miami to Orlando. He’s willing to put more money into the work, albeit a little more selectively.
“We want to be careful about how we do it and where we do it,” said Tom Rosenfeld, CEO of CanAm.
With trip down and a discussion on the future of the office as many white-collar workers continue to work from home during the pandemic, choosing the right projects – which will employ American workers and lead to the repayment of funds – becomes more of a balancing act. Rosenfeld said he is interested in some office projects, although a long-term stable tenant is already on lockdown.
“We are not looking for a risky project,” said Rosenfeld, noting that more than 3,500 investors in CanAm projects have been fully repaid.
The current climate reminds him in some ways of the last financial crisis when banks abruptly withdrew funding from projects that already had cranes in place. Without additional funding provided by EB-5 investors and others, some projects may not have been completed.
And this is where supporters of the program are pushing for its continuation, if not expansion. There are only 10,000 EB-5 visas granted per year, although the demand – as it fluctuates with economic and political conditions – often far exceeds that, meaning more money can be put in. to contribution. In the seven years since the 2008 financial crisis, the EB-5 program is estimated to have generated $ 20.6 billion in investment, leading to the creation – or safeguarding – of more than 700,000 jobs in the United States, according to a group analysis of the commerce industry, Invest in the United States
Always, the program is not without its detractors. While job creation in the United States – around 10 jobs per applicant – is a condition of the program, many criticize the program for allowing people to buy entry into the country. Concerns have also been expressed about the regulation of the program and whether funds are going to projects in areas where jobs are most needed.
The was a rule change in novemberr, which increased the minimum investment from $ 500,000 to $ 900,000 for so-called “target employment areas” and increased the minimum for non-TTAs from $ 1 million to $ 1.8 million. dollars. The latter group has always been more attractive to foreign investors, as it is believed that projects are more likely to be completed, especially in accordance with the program, providing a greater sense of security that the investment will be recouped.
Write to Carleton English at [email protected]