EB5 Challenges: Covid-19, New Regulations, and Higher Investment Amount.July 10, 2020
Immigration aspirations to come to the United States through the EB-5 visa program continue despite the Covid-19 global pandemic and increasing pressure to limit legal migration.
CMB Regional Centers announces the completion of another full EB5 capital raise, this time $26.7 million from CMB Group 69 for the Grand Bohemian Hotel in Greenville South Carolina a Marriott Autograph Collection Hotel from the Kessler group.
Despite the first quarter of 2020 showing filed EB5 petitions drastically down to a several decade’s low number, certain EB5 regional centers have been able to place investors in EB5 visa projects that qualify under the new regulations that were enacted last November (2019). The new higher required dollar investment amount of $900,000 in a targeted employment area (TEA), as well as the new very restrictive TEA criteria as expected has completely sidelined a vast majority of approved EB5 regional center projects. The demand for an EB5 visa is still there and many approved regional centers are struggling to “retool” their EB5 offerings to be in compliance under the new regulations.
The extreme change with the new regulations was not necessarily the higher dollar amount but rather, any EB5 project must qualify as located in a true TEA under the new regulations to be eligible for a foreign investor to invest the lower threshold amount of $900,000. EB5 Projects throughout the country that were raising EB5 visa capital at the $500,000 level have found themselves unable to qualify under the new regulations as a TEA and therefore are required to raise additional capital at the $1.8 million level.
Generally, if an EB5 regional center was actually following the law as it was intended under the old $500,000 program for a TEA they would qualify under the new regulations. The rise of the dollar amount from $500,000 to $900,000 certainly is an impediment to EB5 visa migration; however, considering investor immigration levels throughout the world, the $900,000 threshold for immigration into the United States is still a market rate. With the aforementioned stated, there are regional centers that did not have to retool!
The new regulations only posed a need to change the EB5 partnership and securities documents to reflect the higher dollar amount if the project being offered was a true high unemployment area and therefore qualified under the old rules as well as the new rules. A good example of how EB5 fundraising in this very tumultuous marketplace is still possible today is outlined below.
CMB Regional Centers is arguably the oldest regional center in existence having its origins in the EB5 space predating the regional center program. The founder, Patrick Hogan, began working in the EB5 programs in the early 1990s, and the first of 15 CMB Regional Centers was authorized in 1997.
CMB announced that it is possibly the very first regional center to complete a project fundraising that contained both $500,000 EB5 investors as well as $900,000 EB5 investors! This was possible because CMB, in its entire history, never gerrymandered an area to make it appear as if it qualified as a TEA; in every case it was a true TEA. Because CMB has always operated in true targeted employment areas, the new regulations are essentially nothing new to them and fit within all of CMB’s EB5 projects.
The CMB Group 69 EB5 partnership provided $26.7 million in EB5 funding towards the construction of the approximate $110 million Grand Bohemian Hotel Greenville, which is part of the noted Kessler Collection of Marriott Autograph Hotels. The Group 69 project is expected to create 1,418 new American jobs; although EB5 investors collectively only need to show 10 new American jobs for every EB5 investor this project is expected to create 27.8 jobs per EB5 investor, the focus on ensuring that every CMB EB5 partnership creates enough jobs is a cornerstone of CMB Regional Centers.
The challenges before the EB5 industry include; new regulations that require a higher EB5 investment dollar amount by every potential immigrant investor, a much more restrictive classification on what qualifies as a targeted employment area, the global pandemic Covid 19 has restricted travel throughout the world and forced a much different way of reaching potential EB5 investors and various financial considerations caused by the global pandemic have also contributed to a much slower EB5 marketplace.
When asked how it is possible to recruit EB5 investors with the above mentioned headwinds facing the CMB Regional Centers, its President Noreen Hogan stated, “CMB has always been a pioneer in the EB5 visa arena and we are no different today. In the first quarter of 2020, CMB was 20% of the entire EB5 marketplace. We saw the regulations coming and prepared, we were ready. Our projects in the marketplace qualified under nearly any scenario the regulations could have taken as they were in truly high unemployment areas. In a nutshell, we anticipated the marketplace and thus only had to deal with the increased dollar amount for each immigrant EB5 investor”
When pressed further on how it is possible to recruit EB5 investors in a very tumultuous marketplace Noreen continued, “We understand the perceived weaknesses in the marketplace today with hospitality being one of the hardest hit sectors of the economy. We have chosen to focus our future projects with stalwart developer Hillwood Development in concentrating on logistics and industrial developments. What we like about the logistics and industrial real estate space is our projects with Hillwood are not typically spec projects, they are built-to-suit spaces for top tier Fortune 500 companies as the tenants. This provides a reasonable assurance that the EB5 visa seed money loaned to build these massive facilities will fit our profile to be extremely successful both in consideration for job creation and likely return on invested capital.”
About CMB Regional Centers
CMB is one of the oldest active regional center operators in the EB5 industry with 23 years of experience. CMB has over 5,700 EB5 investor families from 102 countries that have chosen to invest in one of CMB’s 75 EB5 investment opportunities. As of today, CMB has helped over 1,400 families achieve I-829 petition approval to live and work permanently in the United States and has returned capital to nearly 1,700 investors. There are very few regional centers that can come close to this level of success for their EB5 visa investors.
CMB engages Prevail Capital, LLC, a broker-dealer registered with the SEC and a member of FINRA and SIPC, to be the administrative placement agent for all CMB EB5 partnerships. If you would like to learn more about the EB5 Investor Visa Program, please contact CMB Regional Centers.
CMB Regional Centers