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programs, but EB-5—being housed in a different part of the
government—is not included in those trainings. It’s not part of
the new market tax credits or those different types of programs.
The one exception is the training that is provided by the Council
of Development Finance Agencies (CDFA).
CC: Do you think there are more barriers to entry in terms
of inner city development than there would be in other
non-inner city development areas, or do you think this is
something that affects EB-5 and the development world as
KZ: These are barriers that affect the utilization of EB-5 in
general and are not specific to the inner city. We did not uncover
any inner city barriers specifically.
CC: You also discuss public private partnerships, which is
something that we’ve covered in the magazine in the past, and
they seem to be growing. Do you think that such partnerships
have a particularly important role in inner city investments?
KZ: Yes, we think they’re very important
and it’s because often the public sector can’t
do it alone, and neither can the private
sector. There can be significant public
barriers, such as zoning or regulation, and
then the private sector obviously has more
access to capital and, I think, more access to
innovative development ideas and projects.
Yet, the public sector also can have a more
robust pipeline of projects that they could
consider funding with EB-5.
CC: So getting into the specifics of
the report, why did you choose these
particular projects? What qualities were you looking for
when you chose the case studies?
KZ: When we were engaged to write this report, we said we
would write a maximum of three case studies, and we honestly
couldn’t limit ourselves to doing three. So we wound up doing
five and we could have done more. Our research uncovered a
wide variety of really interesting case studies, but we chose these
because of their location, their potential for replication, and
their positive impact on their community. They also seem to
have provided significant local job opportunities.
Then two of them seemed to be really unique to us: E3 Cargo
Trucking and the Education Fund of America. E3 Cargo
Trucking involves the direct funding of a business. And charter
schools are an interesting trend in the inner city because of all
the education challenges, so we thought that would really be
interesting for our demographic.
CC: What are some impacts of inner city investment for the
community, for developers, or even for investors?
KZ: Most inner cities are characterized by underinvestment.
So they need more investment just to create more thriving
infrastructure, robust commercial districts, housing – you name
it. That’s the impact for the community: it’s badly needed.
For the investors, it’s the opportunity to invest in an area where
you can have a significant impact beyond just the return on
your investment. When they get it right, they’re able to invest
in projects that, but for EB-5, would not make it.
In addition, again with the public private partnership, the
investors and the developers can find that alignment and then
they have the support of the public agencies. They can leverage
public funding and other resources. Oftentimes inner cities
offer a cheaper place to do business and you can leverage more
resources, and other funding opportunities.
When the investments are part of a broader economic plan,
their risk is generally diminished.
CC: As you mentioned in the report and as we’ve mentioned
in our conversation, investors, a lot of times, especially from
China, will favor real estate projects or large projects. How
can the industry deal with that or remedy that to get people
to invest in smaller inner city projects?
KZ: This is a tough one because investors may have a bias and
there is also a bias on the EB-5 approval process, where it’s very
easy to get real estate projects approved
because they understand those models and
they’re used to it. The other issue is that
the fixed costs associated with any project
mean that the smaller projects may not be
profitable. I think the industry as a whole
needs to study the viable smaller projects,
like E3 Cargo Trucking and the charter
schools. The more that they can learn
from them as a smaller model and start
to replicate that and put it out there as a
viable option will help. There also needs
to be something done in the government
in terms of how they’re processing approvals and what they’re
counting for jobs. It’s not just an investor bias.
And I have to say that the cargo trucking and the charter school
case studies are the ones that everyone continues to ask us about. I
think there’s a real demand for smaller projects. The more smaller
projects get funded, I think the more they can be replicated.
“In inner city investment nothing is easy.
For us, EB-5 didn’t seem to have any
more challenges than any other tool.”
CC: What did you learn from your research? I know that’s a
big question, so breaking it down a bit—how many projects
do you see operating in inner cities? What are some of the
challenges and advantages of developing in an inner city?
What are some of the transferrable insights or trends across
your case studies that you noticed?
KZ: We found about 180 EB-5 projects. We know there’s a
lot more happening in EB-5 than we anticipated and that the
economic development field understands. So that’s one thing.
It is still a relatively hidden tool that has a lot of potential. At
the other end of this we really came out thinking, “Wow! It
really does have a lot of potential for the inner city.” There are
challenges with it, like any special government program. In
EB5 INVESTORS MAGAZINE
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