As the economy contracted in late 2008, banks began constricting their lending to developers. In response, many developers sought additional ways to raise money to fund developments. One of these alternative methods was to structure developments to comply with the requirements of an EB-5 visa. The EB-5 visa was created in 1990 as vehicle to spur foreign investment in the United States.
The EB-5 visa can provide a foreign investor permanent residency in the United States, in return for which the investor must create and sustain at least 10 full-time U.S. jobs. In 1992, Congress created the Regional Center Pilot Program to allow foreign investors to pool their investment funds and allow for the required number of jobs created by each investment to be determined by government approved economic methodologies. Investments through the Regional Center Pilot Program are overseen by a “regional center,” a third-party managed entity approved by U.S. Citizenship and Immigration Services to aggregate job creation and pool investor money. Additionally, Congress has allowed foreign investors who invest in a targeted employment area, a rural area or an area which has experienced unemployment of at least 150 percent the national average, to reduce the amount of money needed to be invested in order to qualify for an EB-5 visa.
This program began to take off during the recession and has only grown since. In California, there has been a significant amount of foreign investment in the past five years. It is no surprise that California contains the most regional centers of any state. Particularly successful has been the Bay Area. One of the more active regional centers is San Francisco Regional Center. Its principal, Tom Henderson, has been profiled in the Wall Street Journal and other publications for buying up several properties in Oakland to be redeveloped with the help of foreign investors seeking green cards under the EB-5 program. This includes Oakland’s historic Tribune Tower.
Additional projects being partially funded by the EB-5 visa program include a redevelopment of the Hunters Point Shipyard and San Francisco’s Renoir Hotel. Certain aspects of the EB-5 visa program, including the ability to invest a lower amount of money in a targeted employment area, help provide funds for these redevelopments that would otherwise be shunned by traditional lending entities. The Renoir Hotel, in an underdeveloped area of San Francisco, and the Hunters Point Shipyard, a former naval base and superfund site, will both spur job creation in locations which would otherwise be off-limits to traditional developers.
The EB-5 visa program has existed for over 20 years and has continually spurred job creation in the United States and provided a path to permanent residency for foreign investors. As the EB-5 visa program continues into its third decade of existence and the United States remains a destination for foreigners, we will continue to see a rise in EB-5 sponsored investments. This holds especially true for the Bay Area because of its popularity among foreigners.
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