Hotel Lawyer: Why NOW May Be the Best Time for Developers to Start EB-5 Financing
August 22, 2016 10:32am
By Jim Butler and the Global Hospitality Group®
Hotel Lawyers | Author of www.HotelLawBlog.com
22 August 2016
Is there a serious risk that EB-5 will expire September 30, 2016?
Anything is possible when Congress is in session, but none of the experts we talk to believe that the EB-5 program will be allowed to lapse.
As discussed below, certain key provisions of the EB-5 program dealing with regional centers will “sunset” or expire on September 30, 2016. And, as part of the effort to extend the regional center program or make it permanent, there are some proposals to modify potentially significant aspects of the EB-5 program.
No one should be complacent about Congressional “renewal”, but the industry fully expects the EB-5 program will be reauthorized on terms that maintain the viability of program. Some proposals are more or less attractive to certain affected parties, but we expect the final resolution to be satisfactory.
With Congress likely to act soon, should any developers start EB-5 financing now? YES!
Amidst the uncertainty of when and how the EB-5 renewal legislation will be finally resolved, some developers have decided to do nothing with the EB-5 financing opportunity until all the dust settles. Such timing is not certain.
Many hope that Congress will act before September 30, 2016. Others think that with election-year turmoil, as it did last year in the budget stalemate, Congress may “kick the can down the road” with one or more interim extensions of the EB-5 program.
We believe the “wait and see” approach is a mistake for many developers — particularly those who are ready to start construction now. Here is why:
Given the timing of U.S. holidays and the Chinese New Year, the strategy of starting now on EB-5 financing might mean that you can close your EB-5 funding many months earlier than with the “wait and see strategy.”
Time to evaluate the right strategy for you?
We have a lot of practical experience in helping our developer clients raise EB-5 funding. As now, our JMBM EB-5 Financing group has closed more than $1 billion of EB-5 financing for our clients, and sourced more than $700 million for their projects.
If you would like some help to evaluate whether EB-5 could work for you, or what strategy is best for you, then give us a call. There is no cost for an initial discussion.
A primer on EB-5 and key issues in its renewal
What is the EB-5 Immigrant Investor Visa Program?
The EB-5 immigrant investment visa program provides a “fast track” to obtain permanent U.S. residency (a “green card”) to qualified foreign investors who satisfy specified requirements, including investing at least $500,000 in a U.S. enterprise or project that creates at least 10 new permanent jobs for U.S. citizens, and otherwise comply with the immigration visa process.
The regional center pilot program
In addition to the basic permanent EB-5 legislation, a “pilot program” regarding Regional Centers (or RCs) was adopted in 1992. Although it has never lapsed, the Regional Center provisions have typically been renewed for relatively short periods (e.g. 1 to 5 years). The current authorizing legislation for this Regional Center aspect of the program is set to expire or “sunset” September 30, 2016.
Before the Regional Center pilot program expired last year in September, a bi-partisan effort in both houses of Congress worked with industry leaders to propose legislation with a broad consensus of stakeholders that would have addressed a full range of issues concerning the EB-5 program. But at the proverbial 11th hour, Congress dropped the comprehensive reform and decided to renew the existing law (without change) for 12 months (expiring September 30, 2016).
Now that the sunset date is approaching again, many stakeholders in the EB-5 process are working with Congress for a better and longer-lasting resolution of the EB-5 issues.
Although a review of last year’s drafts of legislation may be helpful in understanding the “big picture issues,” the political environment is different this year, particularly with election-year dynamics. It is too early to predict what approaches and proposals will succeed, but there is almost universal belief that a workable resolution will be achieved for all legitimate stakeholders. Some of the major proposals are listed below.
JMBM’s EB-5 Financing team follows these developments closely, and you should talk with us to get the latest update.
These 8 broad areas of inquiry about the EB-5 program are worth discussing and, in fact, have been discussed at length for some time.
What should you do now?
We may not know all the details of how this will turn out, but virtually everyone involved in EB-5 is highly confident that the EB-5 program will be continued in a viable form. EB-5 is an important and proven source of new development financing that creates new U.S. jobs.
Developers who want to take advantage of EB-5 funding should get started now (at least with evaluation).
Other articles on EB-5 Financing
To access our rich library of articles on EB-5 financing, go to www.HotelLawyer.com, scroll down the right-hand side under LEARN MORE ABOUT and click on “EB-5 Financing.” For your convenience, here are a few popular EB-5 articles that may be of interest:
EB-5 Immigrant Visa program extension signed into law — without any changes. EB-5 financing continues for new development projects.
JMBM has sourced more than $700 million of EB-5 financing for new development projects
Hotel Financing 2015: JMBM’s “preferred” EB-5 construction financing program for top developers and projects.
FAQs about EB-5 project financing for new hotel development
Hotel development & EB-5 financing: Why you don’t want to form your own regional center
Hotel development financing: How to win the race for EB-5 capital
Financing hotel development today: The 5 questions every hotel developer is asking about EB-5 financing
Hotel Lawyer to Developers: Looking for EB-5 Financing? The China “Retrogression” means you should act sooner than later!
This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. Why don’t you give us a call (or send an email) and let us know what you working on? We would like to see if our experience might help you create value or avoid unnecessary pitfalls. Who’s your hotel lawyer?
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Jim Butler is a founding partner of JMBM, and the founder and chairman of JMBM’s Global Hospitality Group® and Chinese Investment Group™. He is recognized as one of the top hotel lawyers in the world and has authored or co-authored The HMA & Franchise Agreement Handbook, How to Buy a Hotel Handbook, and The Lenders Handbook. Jim has led the Global Hospitality Group® in more than $71 billion of hotel transactional experience, involving more than 3,800 hotel properties located around the globe.
Contact: Jim Butler
+1 (310) 201-3526
Our Perspective. We represent hotel owners, developers and investors. We have helped our clients find business and legal solutions for more than $71 billion of hotel transactions, involving more than 3,800 properties all over the world. We bring this experience to any hotel project — big or small. Let’s explore how it might work for you.
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