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As a lending option , EB-5 stands out — a win-win for both parties : on the one hand , investment money for a project ; on the other , the opportunity of obtaining a green card . Now is the time to take advantage , particularly for new hotel construction , which has been constricted since the pandemic , but will pick up as capital markets thaw out . What past cycles have shown is that , regardless of the operating environment , the hotel industry is resilient and , unlike other asset classes , is able to dynamically price rooms daily .
For investors searching for yield , hotels provide a safe
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WHETHER IN A SENIOR OR MEZZANINE POSITION , EB-5 ’ S ATTRACTIVE RATES AND FLEXIBLE TERMS ENABLE PROJECTS TO GET BUILT IN TODAY ’ S CHALLENGING FINANCING ENVIRONMENT
– CHRIS FOULGER ,
PRESIDENT , HOMEFED
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hedge against inflation and other exigent variables ; for developers , EB-5 is a cheaper form of debt than they could normally raise or tap into , noted Rohit Kapuria , a partner at Saul Ewing , whose practice includes handling private offerings under the EB-5 investor visa program , representing lenders , borrowers , banks and regional centers , among other stakeholders . “ At the end of the day , [ EB-5 ] rates are far more attractive than senior or any other form of traditional financing ,” he said , adding that secondary or mezzanine rates were as high as 17 %, in some instances . “ EB-5 is still , most times , sub 10 %,” Kapuria said . “ It ’ s been one of the driving forces for developments that need to proceed .” It is a finance vehicle that many of the largest real estate companies in the U . S . are putting to good use . Consider HomeFed Corporation , a real estate development company based in Carlsbad , Calif ., which specializes in mixed-use master-planned communities , but also dabbles in hospitality — it has an equity position , for example , in the 667-room New York Marriott at the Brooklyn Bridge , part of Brooklyn Renaissance Plaza . EB-5 capital has played a significant role in many of the company ’ s projects . “ EB-5 capital has been an integral part of HomeFed ’ s project capitalization for nearly 10 years ,” said its president , Chris Foulger . “ Whether in a senior or mezzanine position , EB-5 ’ s attractive rates and |
flexible terms enable projects to get built in today ’ s challenging financing environment .”
RESTART In March 2022 , the EB-5 immigrant investor program was renewed for five years , through September 30 , 2027 , as part of a massive U . S . government funding bill , giving hotel developers renewed opportunities to tap into this alternative source of funding .
The EB-5 Reform and Integrity Act of 2022 ( RIA ) was part of the overall U . S . Omnibus Spending Bill and reauthorized regional centers to manage pools of investments from nonresidents who want to invest and gain access to green card residency for them and their family members in the U . S .
The EB-5 program sets aside nearly 10,000 visas a year for investors and their families ; since the family size averages 2.5 people , this means that about 4,000 new investments a year can come through this route .
Most EB-5 money is directed into real estate as opposed to , for instance , tech startups , because foreign investors understand and are more comfortable with investing in hard assets . One of the significant revisions to the RIA reset how much capital had to be spent on a particular project by location . The bipartisan bill determined that too much investment money was being directed to urban locations , bypassing rural areas , defined as locations outside
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AT THE END OF THE DAY , [ EB-5 ] RATES ARE FAR MORE ATTRACTIVE THAN SENIOR OR ANY OTHER FORM OF TRADITIONAL FINANCING
– ROHIT KAPURIA , PARTNER ,
SAUL EWING
of a metropolitan statistical area ( MSA ) with a permanent population of less than 20,000 people .
As such , the bill bifurcated the thresholds for investment dollars based on geography , with a minimum amount of $ 800,000 needed for a rural investment in what are also known as Targeted Employment Areas . The amount is $ 1,050,000 for other areas .
Another benefit afforded investors who apply through projects in rural areas is that their application is processed as a priority over investors who apply through projects located within the top MSAs .
Hotel development outside major urban centers is making
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