Construction Executive: A Contractor's Role in an EB-5-Financed Project
In an article published on October 20, 2017 by Construction Executive in the Managing Your Business newsletter, Jennifer Moseley provides guidance on EB-5 financing to contractors working with developers who deal with large infrastructure projects. The article details "Since EB-5 financing has become increasingly popular with developers, developers will prefer contractors who have an awareness of the EB-5 program and their role in ensuring compliance with EB-5 requirements." Moseley specifically defines what EB-5 is and highlights how contractors can attract developers using these funds.
In recent years, the EB-5 visa immigrant investor program has been used as an alternative source of funding for many large infrastructure projects, hotels, real estate development, nursing and assisted living facilities and hospitals. EB-5 investors have typically preferred real estate-related projects.
EB-5 capital has been used to fund high-profile projects by major brand-name developers and hotels because it is most often less expensive than other sources. EB-5 capital can be used as any typical source capital: equity, unsecured mezzanine debt, or secured, senior debt. Since EB-5 financing has become increasingly popular with developers, developers will prefer contractors who have an awareness of the EB-5 program and their role in ensuring compliance with EB-5 requirements.
WHAT IS EB-5?
Congress created the EB-5 immigrant visa category to stimulate investment in rural and high-unemployment areas. The EB-5 program generally provides that foreign nationals may obtain a visa if they make an investment of $1,000,000 and the investment creates full-time employment for at least 10 U.S. workers. If the investment is made in a "targeted employment area" (TEA), a reduced investment of $500,000 can be made, as long as the investment still creates full-time employment for 10 U.S. workers, at a minimum.
Foreign nationals will receive a conditional two-year visa from the U.S. Citizenship and Immigration Services (USCIS) after approval from the USCIS that the investment has met the conditions of the EB-5 program. Before the end of the two-year period, the EB-5 investor must file an application for removal of the conditions to receive a permanent green card by showing that the conditions under the EB-5 investment have been met-namely, that at least 10 jobs have been created. After all the EB-5 investors obtain their permanent green cards, project sponsors often repay the EB-5 capital by refinancing or selling the project.
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