global perspectives april 2011
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Global Perspectives April 2011TRANSCRIPT
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
4THE INVESTOR’S VISA
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)
4 ~ Global Perspectives April 2011
4THE INVESTOR’S VISA
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
Global Perspectives April 2011 ~ 5
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
taAugusta
Regional Center Locations
(continued on page 6)
ZTERMS TO KNOW
THE EB-5 VISA(continued from page 5)
6 ~ Global Perspectives April 2011
4THE INVESTOR’S VISA
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.
Global Perspectives April 2011 ~ 7
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