A once little known federal immigration program that grants green cards to foreign nationals who invest at least $500,000 in the United States has evolved into a powerful tool for job creation and economic development. The EB-5, or Employment-Based Fifth Preference - investor visa program has become so popular that in 2015 for the first time it surpassed the Congressionally mandated annual limit of 10,000 visas. Yet little is known about the pivotal role that regional centers play in directing the flow of EB-5 capital and, often, determining the success of a project.
An EB-5 Regional Center is an entity designated and regulated by the U.S. Citizenship and Immigration Service (USCIS). A regional center is defined as an economic unit, public or private, engaged in the promotion of economic growth, improved regional productivity, job creation and increased domestic capital investment. Regional centers promote investment in job-creating economic development projects by pooling capital, raised in $500,000 increments, and lending the funds to qualified job creating projects. Owning a regional center is a license to sponsor qualifying projects and raise capital for their development.
Basically, regional centers identify investment opportunities that will bring jobs to communities with high unemployment, market those investment opportunities to foreign investors and ensure the EB-5 qualifying project complies with federal regulations to protect investors.
For each $500,000 investment made through regional centers, at least 10 direct, indirect or induced jobs must be created. Regional centers use econometric models, including those developed by the U.S. Department of Commerce, to demonstrate that job creation targets required by law have been achieved.
The entrepreneurial aspect of the regional center drew my attention nearly a decade ago, when foreign investors began to move away from investing directly into their own projects and started investing through regional center sponsored projects. As an immigration lawyer, I began working closely with regional centers in 2006, at a time when only a handful existed. Despite the EB-5 program’s lack of visibility and lackluster track record, it was apparent that the program had unbounded potential as an economic development tool and was, in some instances, a solid option for wealthy clients seeking to obtain lawful permanent residency for their families.
Ultimately, convinced of EB-5’s potential, I was determined to see the benefits of the program reach my clients and the community where I was born, raised and have deep roots — Miami-Dade County. As such, I became involved in counseling regional centers from a program perspective and took ownership in regional centers operating in South Florida.
To a certain extent, regional centers helped rejuvenate the nation’s urban commercial real estate sector during the recession, and made many significant projects economically viable as conventional lenders were reluctant to make construction loans. Soon, developers realized EB-5 capital was a proven alternative financing mechanism, and had advantages over conventional loans. Demand gave way to rapid growth of the regional center industry. As of November 2015, there were 761 approved regional centers in the country.
The benefits of EB-5 investment to communities across the United States have been significant. Since 2008, more than $13 billion of foreign direct investment has been deployed into the U.S. economy thanks to the program, according to IIUSA, the industry trade organization. From 2010-2013 alone, it has also contributed $9.62 billion to GDP and $2 billion to federal/state/local tax taxes while supporting an average of over 29,300 jobs per year — all at no cost to U.S. taxpayers.
Florida has been one of the EB-5 program’s greatest beneficiaries. In 2013, the program supported 2,755 jobs in the state. It generated $10.91 million in state and local tax revenue and had a statewide economic impact of $150.5 million, according to IIUSA.
In Miami, some of the largest real estate development projects that will forge our skyline will be partially financed with EB-5 capital. For instance, our regional center, American Life Investments LLC, is sponsoring CCCC Miami Towers, a mixed-use development that will create over 8,000 jobs and inject nearly $1 billion in our local economy. The project, which will be located in downtown Miami, will seek up to $350 million in EB-5 capital.
The economic impact of the CCCC project will be felt throughout Miami-Dade County, from where the majority of construction workers will come. That is welcome news taking into account that 21 percent of all individuals in the county lived in poverty in 2013, according to a Miami-Dade County report. This ranked Miami-Dade 231st, out of 257 counties with a population of at least 250,000 people.
Regional centers are also increasingly playing an active role helping businesses expand. For instance, American Life Investments LLC recently sponsored a trendy gastropub in South Florida that sought foreign capital to bankroll its expansion. The eclectic gastropub, Tap 42, secured $4.5 million in EB-5 funding to build two new locations in Boca Raton and Coral Gables. Currently, American Life Investments LLC is sponsoring a second offering to raise $10 million to open up to four additional Tap 42 locations in South Florida.
As a lawyer for regional centers in South Florida, I have seen the growing impact regional center-sponsored developments have on certain neighborhoods. Good examples are Design 41, a mixed-use project designed by renowned architect Enrique Norten in the Miami Design District, and Las Olas Ocean Resort, a planned 136-room hotel in Fort Lauderdale. In both instances, the presence of these projects served as a catalyst for growth in the communities where they are planned and will create a total of 1,118 jobs in South Florida. This is a win-win-win for the developers who receive financing, the communities who receive economic benefits, and for the foreign investors who will realize their goal of having their family immigrate to America.
A decade ago, when I began advocating the benefits of the EB-5 program, no one would have ever predicted how successful this program would become. Back then, local leaders, developers, lawyers and bankers were all skeptical. At that time, the lending environment was a lot friendlier and there was little need for alternative financing. But things have changed tremendously post recession and a global economy has made it easier for foreign investors to invest in the United States. Regional centers are reacting to this trend and attracting foreign capital to job-creating investment opportunities throughout our nation. It is gratifying to see that EB-5 is really working.
Roger Bernstein is board certified by The Florida Bar as an expert in Immigration and Nationality Law, with more than 20 years of experience. Mr. Bernstein is a recognized attorney in EB-5 investor-related issues and co-owns American Life Investments LLC, an EB-5 regional center in Miami-Dade County. He is co-founder of Bernstein Osberg-Braun PL, one of South Florida’s largest immigration firms.
By Roger Bernstein
Bernstein Osberg-Braun PL
11900 Biscayne Blvd., Suite 700
Miami, FL 33181
South Florida Legal Guide 2016 Edition