global perspectives april 2011

to local, international & lifestyle real estateApril 2011

4THE INVESTOR’S VISA

Attracting Global Real Estate InvestorsThe U.S. is known as the land of opportunities and entrepreneurial spirit, and has long attracted

global business investors from around the world. With often-intertwined interests in commercial

investment, residential and recreational properties, one transaction with a wealthy, well-connected

individual from another country can lead to several more attractive opportunities.

But foreign investors also face additional complexities in purchasing and using a

U.S. residence. Immigration, tax, currency and financing issues all play a bigger

role for global investors. (See the October 2010 issue of Global Perspectives for

a complete overview of overcoming these and other barriers.)

The EB-5 visa has emerged as one important tool for those willing

to invest in the U.S. as a means of obtaining U.S. residency status.

It’s not a simple program. But any real estate agent interested in

working with foreign clients of substantial means will benefit from a

solid understanding of the EB-5.

This issue of Global Perspectives helps you come up the learning curve on

the key aspects of the EB-5 program, including implications and specific action steps

for real estate agents. Inside, you’ll also find an update on anti-money laundering efforts, another

important issue to be aware of when working with large cross-border transactions. GP

2 ~ Global Perspectives April 2011


If your business has a global focus, you have probably encountered foreign nationals who would

like to purchase property in the U.S. but are deterred by visa limitations that restrict their ability

to live in the U.S. for extended periods. For most immigrants, the road to permanent residency

via the green card can be long and complicated. However, there is a shortcut for those with

significant financial resources—the EB-5 visa.

Known informally as the investment or entrepreneurial visa, the EB-5 encourages foreign

nationals to invest specified amounts of money, typically $500,000 or $1,000,000, in

commercial enterprises or development projects that create jobs for U.S. workers. In return,

they receive conditional permanent residency. While other types of visas may have waiting

periods or long delays in processing, the EB-5 has no waiting period after approval. The

government is authorized to grant 10,000 EB-5s per year, but has never met its quota.

GLOBAL REAL ESTATEGET ACQUAINTED WITH THIS PATH TO U.S. RESIDENCY, WHICH CAN GENERATE

OPPORTUNITIES

EB-5 VISAT H E

Global Perspectives April 2011 ~ 3

1 See Terms to Know on page 4.2 IBID

Are your international buyers a good fit for the EB-5?

There are many scenarios under which

the EB-5 might be the right answer to an

international investor’s visa-related

residency issues. For example:

n Individuals, couples and families that

prefer to live and raise their children in

the U.S.

n Foreign nationals on long waiting lists

for other visas

n Entrepreneurs who want to start a

U.S. business

n Affluent buyers looking for a second

home in the U.S. and more flexibility to

use it

If you’ve had prospects of substantial means

who fit these descriptions, you should learn

more about the EB-5 visa.

A win-win arrangement

The EB-5 visa was designed to attract

foreign capital to the U.S. specifically for job

creation. It benefits the housing market and

communities, particularly disadvantaged

ones, through investment in the local

economy. EB-5 capital provides developers

with a low-cost source of funds in the now

tight capital markets. Real estate agents

benefit because EB-5 green card holders are

required to maintain a U.S. residence.

Upon approval, an applicant receives green

cards for himself, spouse and unmarried

children under the age of 21, and the ability

to move freely about the country and in and

out of it.

Origins of the EB-5 visa

The Immigration Act of 1990 created the

EB-5 visa as a way to make the U.S. more

attractive to wealthy individual foreign

investors during a time when other

countries were offering significant

incentives to compete for foreign capital.

EB-5 applicants who invested $1,000,000 in

(and managed) a new commercial enterprise

projected to create 10 new jobs would receive

green cards for themselves and their families.

By 1992, few EB-5 visas had been issued.

In response, Congress passed the EB-5

Immigrant Investor Pilot Program to attract

more applicants by lowering the threshold

for investments directed at economically-

disadvantaged areas called Targeted

Employment Areas, or TEAs1.

The program also created Regional Centers,

a designation for approved development

organizations which would direct pooled

immigrant investments for use in job-creating

projects in specific geographic areas. Under

the pilot program, EB-5 applicants could

invest $500,000 in a Regional Center project

to receive a temporary green card, without

having to run a business.

Two paths to residency

Today there are two ways to apply for the

EB-5 visa: 1) under the original program as

an individual investor/entrepreneur, or

2) under the Regional Center Pilot Program,

contributing to an investment pool.

Individual EB-5 requirements:

• Invest at least $1,000,000 in a new

commercial enterprise, an existing

business reorganized as a new

enterprise, the expansion of an existing

business, or a troubled business2;

lowered to $500,000 if the investment is

in a Targeted Employment Area.

• In a new business, create 10 jobs for U.S.

workers, not including the immigrant and

his or her family.

• In a troubled business, maintain the

pre-investment level of jobs for at least

two years.

• Directly manage the business or

formulate business policy.

Regional Center EB-5 requirements:

• Invest at least $1,000,000 or $500,000

into an investment pool funding a new

commercial enterprise or troubled

business within or affiliated with a

Regional Center, depending on the TEA

status of the region.

• Create at least 10 new full-time jobs

either directly or indirectly through

capital investment.

• Investor becomes a limited partner in

the venture, freeing him or her to live

anywhere in the U.S.

According to Ron Klasko, an attorney

specializing in EB-5 law, there are about

20 top law firms in the U.S. with solid

EB-5 experience. He gives this advice for

finding them:

• Contact the American Immigration Lawyers Association (aila.org) or the Alliance of Business Immigration Attorneys (abil.com); each have EB-5 committees.

• Ask an immigration attorney to refer you to an EB-5 specialist.

• Contact a few of the top Regional Centers; they have lists of lawyers they trust.

• When you have several names, review their websites. Experienced attorneys will provide information about the EB-5, a list of their published articles, and a

list of speaking engagements.

HOW TO FIND AN EXPERIENCED

EB-5 LAWYERZ

(continued on page 4)



The role of Regional CentersEB-5 investors who are not interested in

starting and managing their own business

can invest in projects associated with a

government-approved Regional Center.

Regional Centers exist in almost every state.

(See Regional Center map.)

As defined by the USCIS, a Regional

Center is any USCIS-approved public or

private economic unit involved with the

promotion of economic growth, improved

regional productivity, job creation, and

increased domestic capital investment in a

specific geographic area.

Most Regional Centers are in Targeted

Employment Areas with $500,000

investment requirements. Their activities

include:

n Looking for local projects which can

benefit from foreign investment and

will meet USCIS requirements for

job creation.

n Marketing projects in their geographic

region to foreign investors.

n Pooling individual EB-5 investors’ funds

to provide a low-cost source of capital to

local developers.

THE EB-5 VISA (continued from page 3)

The benefits of Regional Centers to

EB-5 applicants include:

n Projects associated with Regional

Centers have less restrictive job creation

requirements, and jobs created indirectly

count toward the quota.

n Much of the business documentation

required for the application is provided by

the Regional Center.

n Most projects are structured as limited

partnerships, meaning investors can live

anywhere in the U.S. and meet USCIS

requirements for management.

Partly because Regional Center EB-5

requirements are less restrictive and

somewhat easier to meet, Regional Center

investors now account for over 90 percent

of EB-5 applications.

There are currently over 100 Regional Centers

in the U.S., with many more applications in the

pipeline. Regional Centers must meet ongoing

reporting requirements to maintain their

designation. If they fail to do so, they are

dropped by USCIS. For an updated list, go

to uscis.gov and enter Immigrant Investor

Regional Centers in the search box.

Source: USA

dvisors.org/EB5info.com

Qualified advisors are important

Under either path, the U.S. Citizenship and

Immigration Services (USCIS) requires

extensive documentation to be submitted

with the visa application on the commitment

of required funding, lawful source of funds,

and viability of the business plan and job

projections.

An immigration attorney specializing in EB-5

law and a financial advisor can help an

investor navigate the complex process.

An EB-5 attorney can provide a list of well-

established Regional Centers into which

to inquire about investments, and provide

guidance on legal matters. A financial advisor

can examine the fit of the investments to the

applicant’s needs.

“There are two kinds of risks in the EB-5,”

says H. Ron Klasko, immigration attorney and

founding partner with Klasko, Rulon, Stock

and Seltzer LLP in Philadelphia, and Chairman

of the EB-5 Committee of the American

Immigration Lawyers Association (AILA).

“As immigration attorneys, we deal with

issues of immigration risk. We insist that

investors have their own financial advisors

conduct due diligence on the Regional Center

and the project to address the financial risk.”

(See sidebar on page 3 for advice on finding a

qualified EB-5 attorney.)

Once the EB-5 visa is granted, the individual

and his family become conditional permanent

residents. After two years the visa holder

must petition for removal of conditional sta-

tus by submitting proof that the original

requirements for the visa were met.

REGIONAL CENTERA public or private economic unit engaged in the promotion of economic growth, improved regional productivity, job creation and increased domestic capital investment.

TARGETED EMPLOYMENT AREAA rural area or an area experiencing high unemployment of at least 150 percent of the national average.

TROUBLED BUSINESSA business in existence for at least two years that has incurred a net loss of at a least 20 percent of its net worth in the previous 12 to 24 months.

ZTERMS TO KNOW


Success storiesDuring the recession, funds raised by

Regional Centers became an important source

of capital for projects across many industries.

Examples include:

n The Philadelphia Regional Center helped

the Philadelphia Convention Center raise

$122 million of its total $700 million cost

through 244 EB-5 investors.

n The Los Angeles Film Regional Center

invested $272 million from 545

EB-5 investors into Time Warner and

Sony Studios.

n The New York City Regional Center has

provided $125 million in EB-5 funding to

the Brooklyn Navy Yard Expansion; $60

million for developing industrial space to

house green industries, and $65 million to

build Steiner Studios, a television and film

production company.

Thousands of jobs for U.S. workers have been

generated by these and other projects.

How to get involvedThere are a number of steps that agents

can take to further investigate opportunities

associated with EB-5 visas, including:

n Learn more about the program. A good

place to start is the USCIS site, uscis.gov,

where you can follow through links to

Working in the U.S./Permanent

Workers, and Employment-based

Immigration: Fifth Preference EB-5.

There you will find extensive information

on eligibility criteria, the Regional Center

Pilot Program, the application process,

forms and the documentation required.

Other sites to investigate include

eb5immigration.com/articles for articles

covering important EB-5 issues, and

eb5info.com/newsletters for updates on

EB-5 developments and information on firms

that can help with the EB-5 process.

n Ask foreign clients about their visa status.

If their status is deterring them from

buying property, make them aware of the

EB-5 visa and the resources required for a

capital investment. If the EB-5 is a good fit

for their situation, direct them to qualified

legal and financial experts who can advise

them further.

n Establish contacts with several immigra-

tion attorneys experienced in EB-5 visas.

Be able to provide clients with more than

one name to call. Experienced attorneys

can guide your clients through the process

and provide a list of well-established

Regional Centers and contact names as

possible investment opportunities.

n Familiarize yourself with Regional Center

success stories. Learn more about

successful EB-5 projects through their

websites. Examples of completed and

shovel-in-the-ground projects include:

canamenterprises.com

Canam Enterprises raises and manages

funds for the Pennsylvania, Philadelphia,

Los Angeles and Hawaii Regional Centers.

eb5jaypeakresort.com

Within the State of Vermont Regional

Center, Jay Peak is a major ski resort

development in various phases of

development.

skycondos.com

Twin Development LLC Regional Center

is developing a large mixed-use project

in Seattle.

Source: USA

dvisors.org/EB5info.com

Valdez

Fairbanks

Anchorage

BayPrudhoe

Barroww

Nome

Bethel

Boise

Helena

Salt Lake City

Pierre

Cheyenne

St. Paul

Harrisburg

TT

rtfordHartfoor

Albany

Carson City

Phoenix

Santa Fe

Denver

Austin

Little Rock

Jackson

Springfield Indianapollis

Nashville

Montgomery

FrankfortC nCharleston

Tallahassee

Columbia

Atlanta

Richmond

Boston

Honolulu

ashington, D.C.ash

CChicago

Houston

Dallas

LLas Vegass

Los Angeles

SSan Franciscoo

Sacramento

Memphis

New OrleansNe

St. Louisis

Rouge

Bismarck

Oahu

Kauai

Hawaii

Maui

Oklahoma Cityahoma City

Montpeliiererererererererereerr

Baton

MMiami

Seattle

Olympia

Salem

Lincoln

Topeka

Je�erson City

Des Moines

Madison Lansing

DetroitPhiladelphia

Columbuuss

Annapolis

oncordoCoo

rovidenceProvid

New YorkNTrenton

eighRaleigh

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Regional Center Locations

(continued on page 6)

ZTERMS TO KNOW

THE EB-5 VISA(continued from page 5)



n If you are a commercial real estate agent,

ask your developer contacts if they are

aware of the program. They may be able

to qualify for foreign investor funds under

the Pilot Program.

n If you are interested in becoming directly

involved in a Regional Center project,

do your homework. Vet the project and

consult an attorney with EB-5 experience

to advise you on USCIS requirements.

The EB-5 visa can attract buyers from around

the world. Awareness of the program is rising

and the number of applications for the visa is

at an all-time high. Turn this into an opportu-

nity to build your global business by learning

more about the program and making the right

contacts within the professional community.

GP

n Don’t forget to ask for referrals. If your

global clients are not a good fit for the

EB-5 visa, ask them if they have friends

who might benefit from the program.

Foreign retirees are especially good

candidates, as they tend to know others

with similar interests. Also, ask any

newly-established contacts in immigration

law to refer clients looking to buy homes in

your area.

If there is a Regional Center project in your

area, you may also want to investigate other

opportunities to get involved, including:

n Introduce yourself to the developers

associated with the project. To the extent

that EB-5 investors associated with the

project may be interested in purchasing

real estate in your area, the developers

may become an important source of

referrals. A current list of Immigrant

Investor Regional Centers, including

contact information, can be found at

uscis.gov.

Key Differences between Individual and Regional Center EB-5 Visa Requirements

Individual EB-5 Regional Center EB-5

Investment

Job Creation

Type of Venture

Management

$500,000 in TEA, otherwise $1 million

$500,000 in TEA, otherwise $1 million

10 direct new full-time jobs for U.S. workers

10 new full-time jobs directly or indirectly in the community

New business; reorganized existing business; expansion of existing business; troubled business

Regional Center project

Active management Limited partnership

During the recession, funds raised by Regional Centers became an important source of capital for projects across many industries.


With an influx of foreign buyers interested in living and investing in the United States, it is essential that real estate professionals be informed about efforts to prevent illegal financing activities, including specific steps that can be taken to avoid becoming an unwitting participant to money laundering schemes.

The Financial Crime Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury, collects and analyzes information about financial transactions in order to combat money laundering, terrorist financiers, and other financial crimes. Important points to keep in mind when working with buyers from out of the country interested in investing in U.S. real estate:

Currency transaction reportsThe IRS requires each person engaged in a business or trade to report any cash transactions they receive in excess of $10,000 from one buyer as a result of a single or related series of transactions. This would include such things as cash payments received for earnest money deposits and payments to contractors. The transaction must be reported to the IRS using Form 8300. The information provided by Form 8300 provides valuable information to the IRS and FinCEN in their efforts to combat money laundering.

Additional information from the IRS can be found in the online version of this article at realtor.org/global/antimoneylaundering.

Specially Designated NationalsThe Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States.

As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, such individuals and companies are called Specially Designated Nationals or SDNs. Their assets are blocked and U.S. persons are generally prohibited from dealing with them.

Members can also access the list though realtor.org/global/antimoneylaundering.

Legislative and regulatory status and outlookNAR continues its work with legislators and regulators to develop the best ways for real estate professionals to become aware of how real estate is currently being used in illegal financing schemes and continue to take steps to play their part in the global fight against money laundering and terrorist financing.GP

Anti-Money Laundering

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UPDATE

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Of course there are many incentives to attend the meeting – learn about all of them at realtor.org/midyear.

5 Reasons You Need to Be There (Plus one you just can’t afford to miss!)NAR Midyear Meetings are only a month away! The event is always rich in networking and education opportunities for Global professionals – here are the top 5 reasons you should be there (in no particular order):

1) International Local Council Forum – Roundtable format for AEs and volunteer leaders to help with globally themed programming for associations.

2) International Forum – Subject matter experts will discuss immigration laws and what REALTORS® need to know when selling properties to foreign investors.

3) Embassy Visits – Exclusively for CIPS designees, you’ll have the opportunity to visit several embassies (specific embassies TBD).

4) CIPS Breakfast – Be recognized for your achievement! New CIPS designees are recognized and pinned at this breakfast networking event. Exclusively for CIPS designees – get your application in today so you can be recognized!

5) International Networking Reception – Make new friends and visit with old ones over hors d’ouevres and cocktails at the International Networking Reception.

Global Referral Profile VideotapingThe Global Referral Profile videotaping made its debut at the REALTORS® Conference & Expo last year in New Orleans, and returns by popular demand for the 2011 Midyear meetings. This is your chance to have a professional video of you promot-ing your business to the world. Tell global real estate professionals all over the world who you are, where you practice, what your specialties are, and why they should send referral business to you. NAR will post them on the NARGlobal YouTube channel (youtube.com/user/NARGlobal), realestateconnections.tv, and will add them to your Find a CIPS profile on realtor.org. Don’t miss out!

r

NAR Midyear Legislative Meetings

...and the one you can’t afford to miss:

May 9-13, 2011Washington, D.C.

430 North Michigan Avenue • Chicago, IL 60611-4087800.874.6500 • www.REALTOR.org