Real Estate Corners the EB-5 Market

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It is no secret that the vast majority of EB-5 Regional Centers pursue projects involving real estate development. Some of the most popular projects to date include office buildings, retail developments, and hotels. These type of real estate projects are suitable to the EB-5 Program because they are often able to show the required number of jobs for each EB-5 Investor.

EB-5 real estate projects are typically structured in such a way that each EB-5 Investor invests in a limited partnership that either provides a loan (debt model) or takes an equity stake (equity model) in a qualifying project through an EB-5 Regional Center. Once the investment is placed at risk, the real estate project is built, and the economist sufficiently demonstrates that the project has created the requisite number of jobs for each EB-5 Investor, the developer will initiate a refinancing or selling of the project in order to return the invested EB-5 capital to each investor. While the above description may be an oversimplification, most EB-5 real estate projects follow that exact model. The model is proven, relatively easy to implement, and simple to present to potential Investors.

Is this use, however, true to the original intent of Congress in creating the EB-5 Program? Did Congress intend for the EB-5 Program to be so highly used by the real estate industry? While there have been other non-real estate projects such as car manufacturing plants and film productions that have taken advantage of the EB-5 Program, the vast majority of projects relate to construction and the real estate industry. Ultimately, the project types most suitable to the EB-5 Program are those that create a large amount of jobs. For better or for worse, one of the safest and easiest ways to show the required number of jobs is through real estate development projects.

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