2022 Update: EB-5 is back! What every real estate and hotel developer needs to know about the program’s renewal

By Jim Butler - Partner, Chairman, Global Hospitality Group® and David A. Sudeck - Partner

4 April 2022
Jim  Butler
Jim Butler
David A. Sudeck
David A. Sudeck

The hotel development and financing world is buzzing with the news that the EB-5 program has been renewed, creating new opportunities for upcoming projects. My partner David Sudeck and I have written the short update below to help get you up to speed.

In case you haven’t heard, EB-5 is back! On March 15, President Biden signed the Omnibus Spending Bill, which included the “EB-5 Reform and Integrity Act of 2022,” sponsored by Senators Pat Leahy (D-VT) and Chuck Grassley (R-IA). This bipartisan bill restores viability to EB-5 by reauthorizing the lapsed Regional Center Program, a component essential to the success of EB-5.

What’s different about EB-5 this time around?

While the basics of the program remain the same–foreign investors provide a specified amount of capital to development projects that create American jobs, and are put on a fast track to green cards for themselves and their families–some aspects of the Regional Center Program have changed. The Regional Center Program, which was authorized until June 2021, allows investors to pool their resources to finance new projects and enterprises. Regional centers also have different requirements for the types of jobs created by a development project.

The new bill raises the minimum investment in qualified projects to $1,050,000, except in Targeted Employment Areas (TEAs) where the investment minimum will be $800,000. TEAs are areas that the program prioritizes for job creation, usually rural or areas with high unemployment–where the investment minimum remains $800,000. The new minimum investment requirement will hold for the next five years, and then will be subject to reevaluation. The bill also puts a premium on investment in rural areas by expediting visa applications for investors involved in those projects; ten percent of EB-5 visas are set aside for these investors. Infrastructure projects are also subject to lower minimum investment requirements, but do not qualify for expedited visa processing.

Regional centers are now the only way for investors to pool their resources, and existing centers will need to refile to comply with new requirements. They cannot be owned by non-US citizens, and will be subject to additional regulatory filings, multiple certifications, audits, inspections, filing fees and compliance. Experts expect that these changes will greatly reduce the number of regional centers to those who truly intend to be active in the program.

Why should developers be paying attention?

The renewed EB-5 program revitalizes a source of hard-to-find financing for new construction and development projects. We expect high-quality projects, like hotel and other real estate projects, to continue to be favored by foreign investors. The funds obtained through this program are relatively low-cost, in the six- to seven- percent range–much cheaper than typical mezzanine financing.

There’s a lot of new energy and excitement following these developments in the EB-5 program, and we see that attitude reflected in two big conferences scheduled for early April: The EB-5 & Global Immigration Expo in Miami on April 7-8 and the IIUSA Conference in Orlando on April 11-13. We hope to see you there!

More than ever, the key to successfully financing a project with EB-5 funds will hinge on finding a reliable source of financing to raise capital, and knowledgeable advisors who can help developers avoid costly misadventures. Our Global Hospitality Group® has closed $1.5 billion in EB-5 financing, and has a 100% successful track record on deals with signed term sheets.

We will be publishing further articles exploring the impact of the revitalized EB-5 program over the next several weeks—please reach out if you have questions you would like to see answered.

Get help evaluating and executing on EB-5 financing

We have a lot of practical experience in helping our developer clients raise EB-5 funding. If you would like some help to evaluate what strategy might be best for you, please contact us. There is no cost for an initial discussion.

Jim Butler, +1-310-201-3526 or jbutler@jmbm.com
David Sudeck, +1-310-201-3518 or dsudeck@jmbm.com

For more information about EB-5 financing, including the latest updates, check the EB-5 Financing section of our Hotel Law Blog.

For more on the background of the EB-5 program, some best practices we’ve observed through our work with clients, and other EB-5 information, you can start with these popular articles:

The Hotel Developer’s EB-5 Handbook

FAQs: Essentials of EB-5 construction financing for developers

EB-5 construction financing term sheet for top developers

More than $1.5 billion of EB-5 construction financing closed for JMBM clients

Are hotels still the darling of EB-5 financing?

The 5 questions every developer is asking about EB-5 financing

Tips to avoid the 6 most common mistakes developers make with EB-5

Why you do NOT want to form your own regional center

What does JMBM do to help with EB-5 construction financing?

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on EB-5 Financing, and here for C-PACE Financing.

Click here to view the original version of this release.

For more information about JMBM, visit www.jmbm.com

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JMBM Global Hospitality Group

1900 Avenue of the Stars, Seventh Floor
Los Angeles, CA 90067
United States
Phone: (310) 203-8080
www.jmbm.com

Jim Butler

Jim Butler is a founding partner of JMBM and one of the top hotel lawyers in the world. Devoting 100% of his practice to hospitality, Jim is author of www.HotelLawBlog.com and chairman of the Global Hospitality Group® which focuses on representing hotel owners, developers, and lenders. Jim and his team have helped clients as business and legal advisors on more than $87 billion of hotel purchase, sale, financing, and other transactions, involving more than 3,900 properties all over the world. In the last 18 months, they have closed more than $1.5 billion of EB-5 financing and sourced more than half of that for our clients. In addition to acquisitions, dispositions and financing, the Group handles ADA compliance and defense, hotel mixed-use development, labor and employment, management, branding and franchise agreements and litigation. With experience gained from more than 1,000 bankruptcies, receiverships and workouts, they use innovative solutions to unlock and create value for lenders and opportunistic investors for distressed assets. Jim also serves as an expert witness in hospitality matters.

David A. Sudeck

David Sudeck is a member of JMBM's Global Hospitality Group® - a team of 50 seasoned professionals with more than $60 billion of hotel transactional experience, involving more than 1,300 properties located around the globe. David primarily focuses on the formation and registration of condominiums, timeshares, private residence clubs, and fractional interest regimes, the negotiation of hotel, spa, golf, and restaurant management agreements, and the development, acquisition, sale and leasing of hotels, golf courses, and restaurants.

Jim Butler

Phone: +1 310 201 3526
jbutler@jmbm.com