When Seattle Business magazine first reported that 95 foreign nationals had invested $48 million to buy bonds to help fund the replacement of the State Route 520 floating bridge in hopes of getting visas to the U.S., the London Economist responded to the story with a wry look at the visas-for-the-rich program entitled “Give me your Gucci-clad masses”
But the EB-5 visa program, under which foreigner who invest at least $500,000 in a project can apply for an EB-5 visa if the investment creates at least 10 jobs, is actually a temporary program that has been around since 1993. But the program, which has been an important source of capital for real estate development projects in Seattle, is set to expire next September.
The U.S. Senate Judiciary Committee held hearings Wednesday morning to discuss legislation introduced earlier this year to make the program permanent.
“In 2011 alone, the EB-5 program is on track to create an estimated 25,000 jobs, and provide direct investments in American communities of $1.25 billion dollars,” Senator Patrick Leahy (D–Vermont), who chaired the hearing, said in a statement. “Projects like this are occurring all over America, and there is every reason to support these job creators as well as the immigrants who wish to invest in and contribute to America.”
Seattle has been among the most innovative and aggressive regions in taking advantage of the EB-5 program. American Life Inc. founder and CEO Henry Liebman attracted about $700 million in foreign investments to fund the purchase and development of real estate in SoDo, accounting for about 10 percent of all EB-5 investments nationwide. Another company has collected investments, largely from Chinese investors, to by bonds to support the construction of the 520 bridge.
Seattle is a popular target of investment, says Dean Jones, principal at Realogic Sotheby’s International Realty, in part because of the improved market confidence in Seattle. “I have a lot of clients in China who ask me about suitable properties to invest in under the EB-5 program,” says Jones.
But Jones points out that developing real estate with money from EB-5 investors can be tricky. A project in Federal Way called the Sky Hotel and Residences that was supposed to be developed in 2010 with money from Korean investors fell apart because the needs of the investors and developers weren’t sufficiently aligned. “The development has to be well enough along that investors have confidence that all the project needs is the money to be completed,” says Jones.
The EB-5 program is particularly popular among Chinese investors who want to come to America to take advantage of its strong education and health care systems. The Associated Press reports that nearly 68,000 Chinese-born people became legal permanent residents of the United States last year, second only to those born in Mexico.
The AP reports concern in China about the departure of so many wealthy residents. The article quoted officials who fear that many of the investors moving their money offshore are corrupt officials transferring illegally acquired fortunes. Of the 20,000 Chinese with at least 100 million yuan ($15 million) in individual investment assets, more than one-fourth have already emigrated and nearly half are considering it, according to a report by China Merchants Bank and U.S. consultants Bain & Co. quoted in the article.