According to a January 29th article in the Wall Street Journal, the EB-5 visa is turning out to be a bonanza for wealthy Chinese nationals looking to establish permanent U.S. residency. The EB-5 visa program allows foreign nationals to become permanent U.S. residents if they invest $500,000 or more in a project that creates at least 10 new jobs.
Moreover, according to Wei Gu of the WSJ, U.S. companies (including holding companies of Warren Buffett’s Berkshire Hathaway) are making out like bandits on these deals as the individuals making the investment are typically more interested in the permanent residency status than the return on his or her investment.
Of note, more than 85% of EB-5 visas issued in fiscal year 2014 were given to Chinese citizens.
On April 9th 2021, Bruce Greenwald, the founding director of the Heilbrunn Center for Graham and Dodd Investing at Columbia Business School, sat down for a Fireside Chat with Li Lu, the founder and chairman of Himalaya Capital as part of the 13th Columbia China Business Conference. Q1 2021 hedge fund letters, conferences and more Read More
EB-5 visa deals booming
Typical EB-5 investments started a few years ago as small hotels or strip malls, but today a growing number are mega-projects run by large development firms. Related Cos. recently announced that $600 million from 1,200 Chinese families will be used for the foundation of three new buildings at Hudson Yards in NY. In San Francisco, home builder Lennar has raised more than $200 million through the EB-5 program for projects such as 12,000 housing units on a former naval shipyard. World Trade Center developer Larry Silverstein is working to come up with $250 million for a small Four Seasons hotel and condominium property.
“Every day we get information about several new EB-5 projects. It seems that there are more projects than clients,” notes Forra Luo, owner of Canway Investment Consulting Service Co. in Shenzhen, China.
Buffett firms profiting from EB-5 visa deals
The conversion of the 13-story Amerock building into a $66 million hotel and convention center in Rockford, Illinois is a recent example of the construction boom in the U.S. driven by the EB-5 cash-for-immigration program.
A holding company of Buffett’s Berkshire Hathaway is negotiating to provide equity for the project, which includes a new train station, a sports center and a green space. The financing for the project will actually from 92 foreign investors, nearly all from China. With an investment of $500,000 in the project, each of these individuals will receive U.S. permanent residency.
However, they will receive an annual interest rate of only 0.5% for their investment. In most cases, 5.5% a year would be typical for similar projects, according to Gary Gorman, CEO of Gorman & Co., the developer of the Amerock project. Moreover, if the project fails to create the necessary jobs, they won’t get their visas.
“It appears that EB-5 investors assume most of the risks in this project,” commented Luo, who has reviewed the deal’s details and says she hasn’t decided on whether to recommend it or not.