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Global Perspectives April 2011


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Global Perspectives April 2011

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Global Perspectives April 2011

  1. 1. April 2011 to local, international & lifestyle real estate 4THE INVESTOR’S VISA Attracting Global Real Estate Investors The 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. 2. 4THE INVESTOR’S VISA THEEB-5 VISA GET ACQUAINTED WITH THIS PATH TO U.S. RESIDENCY, WHICH CAN GENERATE GLOBAL REAL ESTATEOPPORTUNITIES 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.2 ~ Global Perspectives April 2011
  3. 3. Are your international buyers agood fit for the EB-5?There are many scenarios under whichthe EB-5 might be the right answer to aninternational investor’s visa-relatedresidency issues. For example:n Individuals, couples and families that 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 HOW TO FIND AN EXPERIENCED EB-5 LAWYER Z According to Ron Klasko, an attorney prefer to live and raise their children in for investments directed at economically- specializing in EB-5 law, there are about the U.S. disadvantaged areas called Targeted 20 top law firms in the U.S. with solidn Foreign nationals on long waiting lists Employment Areas, or TEAs . 1 EB-5 experience. He gives this advice for for other visas finding them: The program also created Regional Centers,n Entrepreneurs who want to start a a designation for approved development • Contact the American Immigration U.S. business organizations which would direct pooled Lawyers Association ( or immigrant investments for use in job-creating the Alliance of Business Immigrationn Affluent buyers looking for a second projects in specific geographic areas. Under Attorneys (; each have EB-5 home in the U.S. and more flexibility to committees. use it the pilot program, EB-5 applicants could invest $500,000 in a Regional Center project • Ask an immigration attorney to referIf you’ve had prospects of substantial means you to an EB-5 specialist. to receive a temporary green card, withoutwho fit these descriptions, you should learn having to run a business. • Contact a few of the top Regionalmore about the EB-5 visa. Centers; they have lists of lawyers they Two paths to residency trust.A win-win arrangement • When you have several names, review Today there are two ways to apply for the their websites. Experienced attorneysThe EB-5 visa was designed to attract EB-5 visa: 1) under the original program as will provide information about the EB-5,foreign capital to the U.S. specifically for job an individual investor/entrepreneur, or a list of their published articles, and acreation. It benefits the housing market and 2) under the Regional Center Pilot Program, list of speaking engagements.communities, particularly disadvantaged contributing to an investment pool.ones, through investment in the local Individual EB-5 requirements: Regional Center EB-5 requirements:economy. EB-5 capital provides developerswith a low-cost source of funds in the now • Invest at least $1,000,000 in a new • Invest at least $1,000,000 or $500,000tight capital markets. Real estate agents commercial enterprise, an existing into an investment pool funding a newbenefit because EB-5 green card holders are business reorganized as a new commercial enterprise or troubledrequired to maintain a U.S. residence. enterprise, the expansion of an existing business within or affiliated with a business, or a troubled business ; 2 Regional Center, depending on the TEAUpon approval, an applicant receives green lowered to $500,000 if the investment is status of the for himself, spouse and unmarried in a Targeted Employment Area.children under the age of 21, and the ability • Create at least 10 new full-time jobsto move freely about the country and in and • In a new business, create 10 jobs for U.S. either directly or indirectly throughout of it. workers, not including the immigrant and capital investment.Origins of the EB-5 visa his or her family. • Investor becomes a limited partner inThe Immigration Act of 1990 created the • In a troubled business, maintain the the venture, freeing him or her to liveEB-5 visa as a way to make the U.S. more pre-investment level of jobs for at least anywhere in the U.S.attractive to wealthy individual foreign two years.investors during a time when other • Directly manage the business orcountries were offering significant formulate business policy. (continued on page 4)incentives to compete for foreign capital.1 See Terms to Know on page 4.2 IBID Global Perspectives April 2011 ~ 3
  4. 4. 4THE INVESTOR’S VISATHE EB-5 VISA (continued from page 3)Qualified advisors are important The role of Regional Centers The benefits of Regional Centers to EB-5 investors who are not interested in EB-5 applicants include:Under either path, the U.S. Citizenship and starting and managing their own businessImmigration Services (USCIS) requires n Projects associated with Regional can invest in projects associated with aextensive documentation to be submitted Centers have less restrictive job creation government-approved Regional Center.with the visa application on the commitment requirements, and jobs created indirectly Regional Centers exist in almost every state.of required funding, lawful source of funds, count toward the quota. (See Regional Center map.)and viability of the business plan and job n Much of the business documentationprojections. As defined by the USCIS, a Regional required for the application is provided by Center is any USCIS-approved public orAn immigration attorney specializing in EB-5 the Regional Center. private economic unit involved with thelaw and a financial advisor can help an n Most projects are structured as limited promotion of economic growth, improvedinvestor navigate the complex process. partnerships, meaning investors can live regional productivity, job creation, andAn EB-5 attorney can provide a list of well- anywhere in the U.S. and meet USCIS increased domestic capital investment in aestablished Regional Centers into which requirements for management. specific geographic inquire about investments, and provide Most Regional Centers are in Targetedguidance on legal matters. A financial advisor Partly because Regional Center EB-5 Employment Areas with $500,000can examine the fit of the investments to the requirements are less restrictive and investment requirements. Their activitiesapplicant’s needs. somewhat easier to meet, Regional Center include: investors now account for over 90 percent“There are two kinds of risks in the EB-5,” n Looking for local projects which can of EB-5 applications.says H. Ron Klasko, immigration attorney and benefit from foreign investment andfounding partner with Klasko, Rulon, Stock will meet USCIS requirements for There are currently over 100 Regional Centersand Seltzer LLP in Philadelphia, and Chairman job creation. in the U.S., with many more applications in theof the EB-5 Committee of the American pipeline. Regional Centers must meet ongoing n Marketing projects in their geographicImmigration Lawyers Association (AILA). reporting requirements to maintain their region to foreign investors.“As immigration attorneys, we deal with designation. If they fail to do so, they are n Pooling individual EB-5 investors’ funds dropped by USCIS. For an updated list, goissues of immigration risk. We insist that to provide a low-cost source of capital to to and enter Immigrant Investorinvestors have their own financial advisors local developers. Regional Centers in the search box.conduct due diligence on the Regional Center Zand the project to address the financial risk.”(See sidebar on page 3 for advice on finding a REGIONAL CENTERqualified EB-5 attorney.) A public or private economic unit engaged in the promotion of economic growth, improved regional productivity, jobOnce the EB-5 visa is granted, the individual creation and increased domestic capital investment.and his family become conditional permanentresidents. After two years the visa holder TARGETED EMPLOYMENT AREAmust petition for removal of conditional sta- A rural area or an area experiencing high unemployment of attus by submitting proof that the original least 150 percent of the national average.requirements for the visa were met. TROUBLED BUSINESS A 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.4 ~ Global Perspectives April 2011 TERMS TO KNOW
  5. 5. Source: Regional Center Locations Seattle Olympia Augusta ta Helena Salem Bismarck Montpelier ier Co o oncord Boise St. Paul Albany Boston Provid rovidence Pierre Lansing Madison Hartfor rtford o Detroit N New York Chicago Philadelphia T Trenton Cheyenne Harrisburg Sacramento Carson City Des Moines Salt Lake City Lincoln Columbus u Annapolis San Francisco o Indianapolis l ash ashington, D.C. Denver Springfield Topeka Richmond St. Louis is Charleston C n Je erson City Frankfort Las Vegas s Raleigh eigh Nashville Los Angeles Santa Fe Memphis Columbia Barrow w Phoenix Atlanta Little Rock Prudhoe Bay Oklahoma City ahoma Dallas Montgomery Jackson Fairbanks Nome Valdez Tallahassee Anchorage Baton Bethel Austin Rouge Ne New Orleans Kauai Houston Honolulu Oahu Maui Miami HawaiiSuccess stories How to get involved n Establish contacts with several immigra-During the recession, funds raised by There are a number of steps that agents tion attorneys experienced in EB-5 visas.Regional Centers became an important source can take to further investigate opportunities Be able to provide clients with more thanof capital for projects across many industries. associated with EB-5 visas, including: one name to call. Experienced attorneysExamples include: can guide your clients through the process n Learn more about the program. A good and provide a list of well-establishedn The Philadelphia Regional Center helped place to start is the USCIS site,, Regional Centers and contact names as the Philadelphia Convention Center raise where you can follow through links to possible investment opportunities. $122 million of its total $700 million cost Working in the U.S./Permanent through 244 EB-5 investors. Workers, and Employment-based n Familiarize yourself with Regional Centern The Los Angeles Film Regional Center Immigration: Fifth Preference EB-5. success stories. Learn more about invested $272 million from 545 There you will find extensive information successful EB-5 projects through their EB-5 investors into Time Warner and on eligibility criteria, the Regional Center websites. Examples of completed and Sony Studios. Pilot Program, the application process, shovel-in-the-ground projects include: forms and the documentation required. canamenterprises.comn The New York City Regional Center has provided $125 million in EB-5 funding to Other sites to investigate include C anam Enterprises raises and manages the Brooklyn Navy Yard Expansion; $60 for articles funds for the Pennsylvania, Philadelphia, million for developing industrial space to covering important EB-5 issues, and Los Angeles and Hawaii Regional Centers. house green industries, and $65 million to for updates on build Steiner Studios, a television and film EB-5 developments and information on firms Within the State of Vermont Regional production company. that can help with the EB-5 process. Center, Jay Peak is a major ski resort n Ask foreign clients about their visa status. development in various phases ofThousands of jobs for U.S. workers have been If their status is deterring them from development.generated by these and other projects. buying property, make them aware of the EB-5 visa and the resources required for a Twin Development LLC Regional Center capital investment. If the EB-5 is a good fit is developing a large mixed-use project for their situation, direct them to qualified in Seattle. legal and financial experts who can advise (continued on page 6) them further. Global Perspectives April 2011 ~ 5
  6. 6. 4THE INVESTOR’S VISA Key Differences between Individual and Regional Center EB-5 Visa Requirements Individual EB-5 Regional Center EB-5 Investment $500,000 in TEA, $500,000 in TEA, otherwise $1 million otherwise $1 million Job Creation 10 direct new full-time jobs for 10 new full-time jobs directly or U.S. workers indirectly in the community Type of Venture New business; reorganized existing Regional Center project business; expansion of existing business; troubled business Management Active management Limited partnership (continued from page 5)During the THE EB-5 VISArecession, funds n Don’t forget to ask for referrals. If your global clients are not a good fit for the n If you are a commercial real estate agent, ask your developer contacts if they areraised by Regional EB-5 visa, ask them if they have friends aware of the program. They may be able who might benefit from the program. to qualify for foreign investor funds underCenters became Foreign retirees are especially good the Pilot important candidates, as they tend to know others with similar interests. Also, ask any n If you are interested in becoming directly involved in a Regional Center project,source of capital newly-established contacts in immigration do your homework. Vet the project and law to refer clients looking to buy homes in consult an attorney with EB-5 experiencefor projects across your area. to advise you on USCIS requirements.many industries. If there is a Regional Center project in your area, you may also want to investigate other The EB-5 visa can attract buyers from around the world. Awareness of the program is rising opportunities to get involved, including: and the number of applications for the visa is n Introduce yourself to the developers at an all-time high. Turn this into an opportu- associated with the project. To the extent nity to build your global business by learning that EB-5 investors associated with the more about the program and making the right project may be interested in purchasing contacts within the professional community. real estate in your area, the developers GP may become an important source of referrals. A current list of Immigrant Investor Regional Centers, including contact information, can be found at ~ Global Perspectives April 2011
  7. 7. Anti-Money Laundering UPDATE 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 reports The 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 Specially Designated Nationals The 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 Legislative and regulatory status and outlook NAR 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 Global Perspectives April 2011 ~ 7
  8. 8. May 9-13, 2011NAR Midyear Legislative Meetings Washington, D.C.5 Reasons You Need to Be There r(Plus one you just can’t afford to miss!)NAR Midyear Meetings are only a month away! The event is always rich innetworking and education opportunities for Global professionals – here arethe top 5 reasons you should be there (in no particular order): ...and the one you 1) International Local Council Forum – Roundtable format for AEs can’t afford to miss: and volunteer leaders to help with globally themed programming for associations. Global Referral Profile Videotaping The Global Referral Profile videotaping made its 2) International Forum – Subject matter experts will discuss debut at the REALTORS® Conference & Expo last immigration laws and what REALTORS® need to know when year in New Orleans, and returns by popular selling properties to foreign investors. demand for the 2011 Midyear meetings. This is your 3) Embassy Visits – Exclusively for CIPS designees, you’ll have the chance to have a professional video of you promot- opportunity to visit several embassies (specific embassies TBD). ing your business to the world. Tell global real estate 4) CIPS Breakfast – Be recognized for your achievement! New CIPS professionals all over the world who you are, where designees are recognized and pinned at this breakfast networking you practice, what your specialties are, and why event. Exclusively for CIPS designees – get your application in today they should send referral business to you. NAR so you can be recognized! will post them on the NARGlobal YouTube channel (, 5) International Networking Reception – Make new friends and visit, and will add them to your with old ones over hors d’ouevres and cocktails at the International Find a CIPS profile on Don’t miss out! Networking Reception. Of course there are many incentives to attend the meeting – learn about all of them at 800.874.6500 • 430 North Michigan Avenue • Chicago, IL 60611-4087