Looking to lure foreign investors

From the home of the Brooklyn Nets to a ski resort in northern Vermont and an office building in downtown New Bedford, enterprises across the country are cashing in on the global desire to live in the United States.
Through a U.S. immigration program that awards green cards, or permanent residency, to foreigners in exchange for job-creating investments, American businesses have raised more than $2.4 billion in direct international capital since 1990.
Use of the program, known as EB-5, has soared recently. In the last two years alone, $903 million in foreign investment was raised through EB-5.
But despite its focus on job creation and growing popularity, EB-5 hasn’t produced a single dollar of investment in Rhode Island, where the unemployment rate has lingered at or near the nation’s highest since the recession.
Now a group of Rhode Island-based financial professionals, Pathway Capital Partners LLC, intends to change that.
Led by Henry M. Diamond, founder of alternative mortgage lender HDC Inc. of Providence, Pathway Capital is in the final stages of the lengthy federal approval process to become a designated EB-5 “regional center.”
The vast majority of EB-5 investments take place through regional centers, which are allowed to bundle foreign investors into groups and act as a broker between them and American businesses looking to raise money.
Projects organized by regional centers can also count anticipated “indirect jobs” created by a project to qualify for a visa.
There are 218 regional centers across the country but none in the Ocean State.
“It seemed like a glaring absence – we kind of scratched our head as to why there wasn’t one here,” Diamond said. “There had been grumblings about it here, but no one actually went into the process. We decided to capitalize an entity and apply for a regional center because Rhode Island has [one of the] highest unemployment rates in the country, which makes it a prime candidate.”
Diamond said his struggle accessing capital for HDC convinced him of the need for foreign investment. Pathways has also applied for a regional center in Rochester, N.Y., with Eastman Business Park as part of a plan to revive bankrupt film company Eastman Kodak.
U.S. Sen. Jack Reed, D-R.I., has backed the Pathway Capital application in its now nine-month trip through the federal bureaucracy, according to city officials.
In addition to the regional center bid, Reed is helping designate Rhode Island as a federal Targeted Employment Area, which cuts in half the amount each foreign investor needs to spend – from $1 million to $500,000 – in order to get a green card.
And Providence Mayor Angel Taveras has raised it as an alternative funding source for some of the city’s most challenging economic-development projects.
Asked where the money will come from to finance a Providence streetcar – one of the priorities in his recent economic-development action plan – Taveras suggested EB-5 would be a “creative” way to pay for it without burdening taxpayers.
Spearheading Taveras’ pursuit of EB-5 investment is city Economic Development Director James Bennett, who last summer visited Portland, Ore., to speak with investors there and find out how the system works.
Bennett has used what he learned on the West Coast to support Pathway Capital’s application for regional-center status, and a streetcar is just one example of the things that could be financed with foreign investment.
“Any project that creates jobs,” Bennett said about what EB-5 could do in Providence. “A hotel could be financed. If there was a project down at the Port of Providence you could finance it. The Dynamo House could work because of the job-creation benefits. We want to have another [investment] tool.”
Rhode Island’s tallest building, the Industrial Trust Tower at 111 Westminster St., also known as the Superman Building, has been the subject of EB-5 speculation.
The 26-story building recently became vacant, and developers have suggested it could require up to $40 million in tax breaks to make a residential conversion of the tower viable. As they put together a plan to redevelop the building, the property’s owners at High Rock Development LLC are “intimately aware” of the EB-5 program, said William J. Fischer, spokesman for High Rock.
Asked whether High Rock has met with anyone about EB-5 investment, Fischer said it had, but they were only “superficial discussions to date.”
The roughly 20 acres of prime Providence land controlled by the Interstate 195 Redevelopment District Commission are also candidates for foreign investment, although commission Chairman Colin Kane said it’s still too early in the development process for any discussions of financing.
However, he said a colleague at his development firm Peregrine Group LLC is working on a potential EB-5 financed restaurant in Boston.
Real estate projects are only one type of EB-5 investment.
Pathway Capital also lists medical technology, energy generation, hospitality, advanced manufacturing and environmental technology as its investment-focus industries.
Despite the money it’s poured into local projects throughout the country, EB-5 has its share of critics.
Allowing rich foreigners to jump the line for entry into the country is the most common objection.
Others describe it as corporate welfare for the firms that secure visa-backed investment and question its public economic benefit.
U.S. Citizenship and Immigration Services doesn’t make public the annual reports or financial records of regional centers. The agency also doesn’t track whether foreign investors get their money back or how many of the jobs attributed to each project are directly related to the foreign investment.
The Citizenship and Immigration Service estimates EB-5 has created 49,000 jobs since 1990, but those include projections of “indirect jobs” and all the jobs created by projects in which EB-5 is only one source of funding. A 2005 U.S. Government Accountability Office report said it was unclear how many jobs the program has actually created.
To get a green card, each foreign investor must put up at least $500,000, either in a loan or equity, in an enterprise expected to create at least 10 jobs. So for 10 investors to come to the United States, they would put up a minimum of $5 million in a project creating 100 jobs.
When immigration officials approve an EB-5 investment, the investor can move to the United States, but only after the project’s job creation is evaluated after two years does the green card become permanent. Their spouse and dependent children are also allowed to become permanent residents.
In the program’s history, Citizenship and Immigration has approved 13,598 EB-5 investments, but only 4,895 permanent green cards.
Last year, 3,677 EB-5 investments were approved and 736 applications for permanent green cards were approved.
The law authorizes up to 10,000 EB-5 visas each year.
The Obama administration has said it would like to see the program expanded to produce 40,000 new jobs each year.
Agency spokesman Christopher Bentley said it is opening a new office just to administer EB-5.
Like Rhode Island, Connecticut, New Hampshire and Maine don’t have a regional center. Massachusetts has one, the Boston-based EB-5 Jobs for Massachusetts Inc., which is currently involved in a development project in Boston’s booming Seaport district.
EB-5 Jobs for Massachusetts also brokered the redevelopment of the 34,000-square-foot, 19th-century former home of The Standard-Times of New Bedford in 2011.
EB-5 Jobs for Massachusetts Inc. CEO Douglas Edwards said for several years he has been interested in expanding to Rhode Island and New Hampshire, but the red tape involved with amending his group’s geographical area made it not worth it.
At Pathway Capital in Providence, Diamond expects an answer from the government on his application – even if it is for more documentation – in May. •

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