The Step America approach to US investment immigration

With the strength of the US dollar and an unemployment rate reaching pre-recession levels, many are keen to review the investment immigration process of the United States.

Dubai — In a rush to obtain secondary passports from Western nations, Investors from the Middle East have been reviewing their choices among the various nations that are willing to “sell” a passport or citizenship.

In light of the different public and private parties involved in securing an investor a foreign passport or citizenship, how can one best navigate the sea of information surrounding the topic of North American investor immigration and citizenship? Perhaps the best starting point is to understand the fundamental differences between the US and Canadian program, and begin by asking the right questions.

With the strength of the US dollar and an unemployment rate reaching pre-recession levels, many are keen to review the investment immigration process of the United States. The United States EB-5 Green Card program provides a method of obtaining residency and access to a plethora of benefits that are afforded to all US Green Card holders and citizens.

The foreign national would typically invest $500,000 in a business enterprise that would either create or preserve at least 10 jobs for US Workers. The investment in turn would provide an expedited path to US residency and a Green Card to the investor, his or her spouse, and any minor children under the age of twenty-one.

This program has seen a tremendous response from those in this region who seek to obtain US passports for their families, have their children attend free public school education in the US, and gain subsidized college tuitions through government guaranteed loans, grants, and scholarships.

Currently the United States program can appear to be a bargain compared to the competing Canadian investment immigration program. The Canadian program has seen recent changes as of January 2015 that now mandates an investment four times as much as the US program and requires an investment term of fifteen years, as opposed to the typical five-year term of US Investment projects.

Notwithstanding, there may be changes in the future for the US program that may raise the investment threshold, but for the short term, many foreign investors are capitalizing on what appears to be a discounted path to US residency, and ultimately citizenship with a US passport.

US Congress initially instituted the EB-5 investment program in 1992, and since then there has been steady approvals of immigrant petitions nearing 85%. Since the program is structured around the boosting of employment in the US, it has seen bipartisan support from both Democrats and Republicans.

Nevertheless, given the rise in popularity of investor immigration programs to North America, neither the US nor Canadian program provides a government backed guarantee that protects the investor from losses should their investment not succeed. Thus it is imperative that the prospective investor be armed with the right tools in asking the most pertinent questions when choosing an investment for immigration purposes.

Step America, a local firm dedicated to navigating investors in the UAE through the US Program have provided us some insight on the topic. Spearheaded by two US licensed lawyers, Shai Zamanian and Preeya Malik, they highlight some of the questions that may be relevant to ask when choosing a pre-designed immigration investment project. Malik and Zamanian are continually growing their offices in Jumeirah Lakes Towers to meet localised demands for EB-5 and US investment immigration.

Zamanian explains, “it’s imperative to find an experienced team that is well versed not only on the review of US commercial real estate projects, but also those that understand the nuances in the US laws concerning immigration.”

His co-partner Malik explains, “you cannot simply investment in the US with hopes of gaining US residency, the rules of the game are quite stringent and when picking a pre-designed project for the purposes of immigration, it’s best to ask the right questions. Has the project obtained government pre-approvals? What is the nature of the capital stack of the project? What are the escrow terms, and ultimately, what are the lien positions for foreign investors should there be an unforeseeable downturn in the US economy where the investor may be vulnerable to loss?”

The term “government approved,” appears to be elusive in the EB-5 investment immigration industry. Although US project developers may use the term loosely, there is only one official form of government pre-approval, namely an Exemplar designation. Many project developers do not undertake the expense and long wait of obtaining an Exemplar before marketing their projects to investors.

In fact, less than five per cent of new EB-5 investment projects are certified by the United States Citizenship and Immigration Services as Exemplar approved.

Theoretically, when a project is Exemplar approved, the only documentation that requires review from the US government are the investor’s source of funds. Thus, exemplar projects can potentially expedite an investor’s application through the approval process and are generally viewed to be much more favorable.

Nevertheless, Zamanian explains, “just because the US government has provided such designation, it’s not safe to say that it’s the best project, however if you do find such rare project, it is certainly worth taking a closer look.”

The capital structure of the investment is one of the most important pieces when questioning an EB-5 investment. The capital structure delineates how a project developer finances its operations and overall growth of the project by gathering different sources of funding. For example, many projects operate on the US developer’s own cash equity, along with bank loans, government grants, and proceeds from foreign investors.

Zamanian states, “generally it can be viewed as a good sign if there is a large bank loan or institutional debt in the mix. US banks are still operating in a restrictive and austere lending market. When banks do lend to the project, at the very least an investor is assured that a third-party has conducted a round of due diligence.”

In terms of the capital structure, there are a lot of different players who have extended their funds to the potential project. Each is interested in the security of their investment should an economic downturn take place in the US.

“Better projects today are providing preferable lien positions to foreign investors. If a developer is confident in their ability to host a profitable project, their cash proceeds should be at greater risk than that of the foreign investor. What Step America likes to see in its due diligence for the viability and security of a project, is that the EB-5 foreign investor is not last in line.

It makes sense to us that if the developer feels the project is secure, they should be able to extend that guaranty and bear the majority of any risks, rather than placing it all on the shoulders of the investor.” In the most ideal projects, EB-5 investors are at the top of the priority list or at least in line and on the same playing field as the institutional debt. In so far as any liquidation of the project, the foreign investor would be in a position to best recoup their investment, which minimises risks of loss at the end of the loan term.

Although risks are apparent in any country and in any form of investment, the EB-5 landscape nevertheless appears to be improving. Greater government oversight along with projects being hosted by US developers with established track records of real estate development are improving the process.

Thousands of investors have so far successfully gained US Green Cards and ultimately passports through citizenship for their families in an opportunity that appears to be a bargain. Malik advises, “If you’re considering a path to a US passport for your yourself or your children through investment, it would be best to start the process before September of this year. There have been talks about legislative changes to the program taking place in September which may potentially make the process much more expensive. This is expected as the US aims to align itself with the pricing of other foreign investment programs. It is best to ensure you can lock in the current rate before these changes occur.”