Senior housing construction and development are booming, mostly due to an aging baby boomer generation and increasing life-spans. Senior housing developers seeking to fund their new projects are increasingly turning to a less-costly alternative to traditional loans — EB-5 financing. The EB-5 program — administered by U.S. Citizenship and Immigration Services, a component of Department of Homeland Security, allows for the grant of green cards to foreign citizens who invest at least $500,000 in a qualifying project that is likely to create 10 or more jobs in the United States. Green cards are also issued to the investor’s spouse and unmarried children under age 21. Permanent residency is granted in two stages — a conditional residency period and, two years later, the grant of unconditional green card status as long as the investment has been sustained and treated as “at-risk,” and the required jobs have been created.
EB-5 capital can serve as part of the initial capital stack for a new venture (often as mezzanine financing) or be used to take out and repay higher-interest bridge or construction loans.
The Nuts and Bolts of the EB-5 Program:
There are two main methods of EB-5 investment – direct investing into the new commercial enterprise or investment through a regional center (i.e., an entity approved by the federal government to be involved in the EB-5 Program and the promotion of economic growth and job creation in a geographic area). Under the direct investment program, immigrant investors may only count direct jobs created for employees issued IRS Form W-2 by the “new commercial enterprise.” However, under the regional center investment model, investors are allowed to count direct, indirect and induced jobs. Although the regional center program is set to sunset on September 30, 2016, there is wide consensus that Congress will continue to extend the program because it provides jobs for U.S. workers and generates federal, state and local tax revenues. Also likely will be the inclusion in future EB-5 legislation of additional “integrity measures,” which would enhance investor protection and promote national security, while clarifying eligibility criteria. The direct EB-5 program, however, is not subject to reauthorization and thus will not sunset.
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