From the Field: Chinese EB-5 Market Update
BY BRIAN SU
The EB-5 industry is constantly changing in China, making every trip over there so important. The market is becoming the most competitive it has ever been with over 50 projects actively looking for EB-5 investors. Interests and needs of investors for the EB-5 program are real and strong, however, navigating the complex and competitive market is a major challenge for many EB-5 project developers. European countries are heavily promoting their visa programs and using embassy officials stationed in China at seminars to promote their country. Almost all EB-5 agents are taking resources and time to promote European visa programs. With more EB-5 projects entering the market and EB-5 competing against other visa programs, the amount of time and money to promote an EB-5 project continues to increase.
Emigration agents and investors are highly selective in choosing projects and are taking up to a month to do due diligence on a project. The quality of the project is vital in today's market. Emigration agents stress the importance of finding a safe and transparent project which they feel comfortable promoting. I met a number of smaller emigration agents who are very interested in smaller direct EB-5 projects as they feel more control over it. They believe that they can more easily sell smaller projects than big ones. Agents and investors are also watching Obama's immigration reform legislation and they wish that regional center program could become permanent.
There are projects in New York and Texas that are taking the mainstream market, but there are also many smaller projects that have not made major impact but are, nonetheless, successful at securing EB-5 capital. Direct EB-5 projects continue to gain attention but are not making a large impact since, typically, each deal only needs one or two investors. The market is very competitive, resulting in cost of acquiring investors to rise. This will impact the lower quality projects, making it harder and costlier to find investors for their projects. Some projects might not be able to find the EB-5 capital as a result of this competition and may have to resort back to more costly forms of capital. As usual, real estate related projects are very popular among emigration brokers and investors.
It does not seem that the quota on Chinese investors will be reached anytime soon as there is tremendous competition from visa programs in other countries. With the I-526 processing times being over a year, the Chinese investors have grown impatient with the EB-5 program. Because of the long wait, EB-5 investors are conducting more extensive due diligence to be sure that they have a project that is worth waiting for. Projects of higher quality are good for everyone involved in the EB-5 industry.
Investors will continue to do their due diligence on the projects and make the safest investment possible. Because of the increased competition, RC and project developers will have to improve their offerings and also highlight what makes their project different from all other projects in order to stand out. The EB-5 program will continue to be attractive to Chinese investors looking to move to the United States. Any reduction in the long I-526 processing times will attract new EB-5 investors who are debating the EB-5 program versus other visa programs.
Brian Su is the CEO and President of Artisan Business Group,