States tap China cash to get things built
Updated: 2014-12-11 07:44
By PAUL WELITZKIN in New York(China Daily USA)
EB-5 visas help Mount Snow get a new lodge, NY more housing
In Vermont, Chinese immigrants provided most of the $52 million for the Mount Snow ski resort. In California, they are providing funds for the development of the 775-acre San Francisco Shipyard. And in New York City, 1,200 Chinese families paid for the $600 million foundation for the city's biggest real estate project.
In those areas and elsewhere in the country, Chinese immigrants are using the EB-5 investor program of putting up money in exchange for a US visa.
The EB-5 program is run by the US Citizenship and Immigration Services (USCIS). With a minimum of $1 million — or $500,000 in low employment or rural areas — an EB-5 investor's project must create or preserve at least 10 full-time jobs. In return, the investor is eligible for a green card for permanent US residency.
In West Dover, Vermont, the money was raised through the EB-5 program to build a 120-million-gallon water storage pond for snow making and a new 36,000-square-foot lodge.
The Mount Snow offering came under the auspices of the state of Vermont EB-5 Regional Center, a designated regional center of USCIS that is part of the Vermont Agency of Commerce and Development. The project, approved earlier this year and scheduled to begin in 2015, will result in the creation of 1,267 jobs.
According to Brent Raymond, executive director of the state of Vermont EB-5 Regional Center, the Chinese made up about 90 percent of the EB5 investors for the project. Raymond said the Vermont EB5 center came into existence in 1997 and had its first project approved in 2006 for another ski resort.
Businesses present a detailed expansion or development plan to the Vermont center. Raymond is quick to point out that his agency does not recruit investors for projects submitted to them. "We will travel for project road shows. Even though we approve a project (to submit for EB5-funding) we don't say you should invest in that project," he told China Daily in an interview.
Raymond said in fiscal 2014, the Vermont center had over 115 investors approved for green cards.
"The smart money seems to be attracted to the EB5 program. In Vermont we have a private equity firm and national motel chains seeking EB-5 funding for projects," he said.
The Wall Street Journal reported on Wednesday that nearly 11,000 investors applied to invest via the EB-5 program as of Sept 30. That's up from 6,346 a year earlier and 486 in 2006, the newspaper reported, citing USCIS figures. Chinese nationals are the biggest source of EB-5 funds and make up about 85 percent of visas approved in the 12 months ended in September according to the Journal.
The Hudson Yards Redevelopment Project, one of the biggest real estate project in New York, continues despite rainfall on Wednesday in New York. Around $600 million of the funding comes from Chinese investors through the EB-5 program. Lu Huiquan/For China Daily
EB-5 funding is playing a major role in many large-scale real estate development projects in the US mainly because it is a source of less costly financing.
"New York City residential rental construction requires very substantial amounts of funding above the amount that (the) banks will loan. Without EB-5 funding, owners would be required to find other sources of capital at substantially higher cost than the EB-5 program. That higher cost would not be justified by the returns generated by NYC residential rental construction," Gary M. Rosenberg, a New York real estate attorney with Rosenberg & Estis P.C. said in an e-mail. "We are now funding with EB-5 proceeds two large projects which are being built in New York. The EB-5 funding was critical to the economic viability of the projects," he added.
Hudson Yards, a $20 billion Related Cos development on Manhattan's far West Side and New York's biggest real-estate project, is depending on financing being provided by Chinese investors through the EB5 program, according to the Journal. Related said it has raised $600 million from 1,200 Chinese families to build the foundation for project's three skyscrapers.
San Francisco's Golden Gate Global is recognized as one of the leading EB-5 regional centers in the US. One of the company's most prominent EB-5 programs is at the 775-acre San Francisco Shipyard development. As the city's newest waterfront community, the project will create 12,000 new homes, two major retail centers, commercial office space and nearly 300 acres of parkland.
"EB-5 funding is a growing, but still a relatively small part of overall funding for real estate development here," Golden Gate CEO Ginny Fang said in an e-mail.
In addition to project approval, EB-5 investors must meet US government requirements to qualify. "The US government has the right to reject an applicant. That's why we require a strict background and national security check," said Vermont's Raymond. In the Vermont program, Raymond said 10 of 1,200 applicants have been denied. "Most of the denials were due to fraudulent information on the application or a proof of funds issue," he said.
"Some projects are denied authorization if they do not conform to the standards required of an EB-5 project. For instance, EB-5 projects must generate at least 10 jobs for each investor in the program," said Golden Gate's Fang.