Florida Commercial Real Estate, Foreign Investors, and the EB-5 Program: Cash for Visas or Savvy Investing?
Foreign investment in Florida real estate has been a significant factor in Florida's fight against a hard, harsh economy - however, truth be told, much of the media coverage on the international money coming into Florida has been through residential real estate purchases. Lots of global interest in condos, particularly, as second homes or vacation spots.
However, commercial real estate in South Florida is benefiting from foreign investors as well, and an interesting article was published in this week's Sun Sentinel that spotlights one program that is helping draw those international funds into the Sunshine State: the federal foreign investment program commonly known as the Employment Based Immigration: Fifth Preference, the Immigrant Investor or the "EB-5."
Residential Real Estate vs. Commercial Real Estate Foreign Investment Incentives
As you may recall if you follow this blog, there's movement up in Congress to grant foreigners to the United States visas if they spend at least $500,000 on residential housing in this country: in sum, if the VISIT USA Act ever becomes federal law, then any foreign citizen who buys $500,000 or more in residential real estate in the United States, will automatically get a U.S. Visa (for details see our earlier post).
For commercial real estate, the EB-5 program is already on the books - and has been for awhile now, since it was initially introduced as part of the Immigration Act of 1990. Under the EB-5 Program, a foreign investor can not only get a visa but establish PERMANENT US RESIDENCY if he or she has the funds to invest $500,000 or more in commercial real estate project that will create at least ten (10) jobs that last at least two (2) years.
The EB-5 Program Is Extremely Popular: But Is It Shady?
It's a national program, of course, and one which does have its critics. In December 2011, the New York Times ran a story about the popularity of the EB-5 Program: from 2009 to 2011, the number of foreign investors seeking to take advantage of the EB-5 invitation not only doubled, it quadrupled.
And with that upsurge, according to the NYT, came an outcry from some circles that the EB-5 was really a "cash for visas" scheme - with the newspaper's own investigation hinting that some officials as well as some commercial developers were pushing the edge of the envelope in their areas to get their projects to fit into the EB-5 Program requirements, so that they could interest international investors to their plans.
For instance, in Florida there are designated "targeted employment areas" that are the geographic locations required to meet EB-5 standards in any international investment in commercial real estate. The foreign investor with $500,000 anxious to take advantage of the EB-5 offer of residency needs to make sure that his Florida investment will be built in one of these TEAs. This means that commercial developers wanting foreign investment funding will need to look into these locations as potential sites for their projects.
Florida and Foreign Investors: Will the EB-5 Federal Legislation Continue to Thrive? You Betcha.
Recently, Congress approved the extension of the EB-5 Program through 2015 and President Obama is expected to sign the legislation into law. It was a welcomed decision and pretty much a slam dunk up in Washington, especially since there were several pending EB-5 hot spots anxious to keep the ball rolling on international interest in their locales.
Florida has been one of the states suffering the most in these recessionary times and the influx of foreign investment monies into our economy, for either residential or commercial purposes, has been welcomed. And needed.
A couple of weeks ago, it was announced that Miami City Hall will be the location of a regional EB-5 Immigrant Investor Center, assuming that its application to the US Citizenship and Immigration Services Administration is approved. (This may take anywhere from 6 to 8 months.) It's the brainchild of not only the City of Miami but also other potentially benefiting interests, such as Enterprise Florida, Port Miami, the Greater Miami Chamber of Commerce and the Greater Miami Convention & Visitors Bureau.
Looks like South Florida will be seeing lots of EB-5 promotion to get international interest in our local commercial real estate projects for the long term future.