Florida businesses are working the immigration system to ramp up their projects and create jobs. And they're not looking for day laborers.
Using a federal employment-based visa program, companies across the country are seeking wealthy overseas investors willing to shell out $500,000 or more in exchange for U.S. citizenship.
The EB-5 investment program, which began in the 1990s, is growing as U.S. lenders tighten their pursestrings. Last year, U.S. Citizenship and Immigration and Services issued 4,218 EB-5 visas to investors from overseas.
Florida has five investment centers to match EB-5 applicants and business ventures. Another is springing up in Palm Beach County, where a $127 million waterfront project is planned for Jupiter.
The Harbourside venture is slated to include retail, offices, a hotel and boat docking. Allied Capital & Development of South Florida envisions creating 2,000 jobs in the first phase.
Like many development projects, Harbourside needs financing beyond what skittish banks and venture capital firms are providing. So Allied plans to create the Florida Regional Center to attract foreign investors.
Because Palm Beach County, like dozens of counties statewide, posts unemployment rates significantly higher than the U.S. average, the EB-5 program allows visa-seeking foreigners to invest $500,000 (instead of the usual $1 million) with job-creating projects in return for U.S. citizenship.
The EB-5 application process involves a time-consuming and complicated traipse through the federal Homeland Security bureaucracy, but patience can pay off, says Roy Norton, head of the Florida Overseas Investment Center.
"It means net new jobs and net U.S. investment dollars that don't cost taxpayers anything," Norton said from his office in Sarasota.
Since the EB-5 visa category was created by Congress in 1990, it has generated some 20,000 full-time jobs and $1 billion has been invested in U.S. businesses, according to the USCIS.
Up to 10,000 EB-5 visas are allowed annually, and 2009's issuances more than tripled the total from 2008, when domestic banks started tightening up on loans.
Regional centers are expanding, too. Two years ago, there were 20 centers around the country; today there are more than 80.
Though no EB-5 visa statistics were available for Florida, Norton said his regional center was approved last September to serve 12 industry sectors ranging from alternative energy products to office buildings.
Compared with aggressive marketing by such states as Vermont (see video), Florida is "a latecomer" to EB-5, said Jeff Devore, a Palm Beach Gardens immigration attorney.
Devore said his EB-5 clients come primarily from Canada, Great Britain and South Africa, and that investment centers have popped up in Miami, Tampa and Lake Buena Vista (Orlando).
Florida's 28 most sparsely populated counties also are potentially fertile fields for the program, which automatically targets rural counties for participation at the discounted $500,000 level, Norton said.
In addition to lengthy EB-5 processing times, which can run up to two years, federal regulations require regional centers to show that their visas generate 10 jobs for each immigrant.
But the rules have been far from airtight. A 2000 expose by the Baltimore Sun found rampant abuse of the program in the 1990s.
"Concerns of insider access, suspicions of abuse, misrepresentation, and fraud surfaced in the mid-1990s at the same time that the EB-5 program was experiencing its most significant usage," said a report released last year by an ombudsman for the immigration service. Some of those concerns led to criminal convictions and a bad reputation that caused investors to steer clear.
Weak or incompetent government oversight combined with crafty immigration brokers leveraged by the Mexican, Colombian and Russian mobs, made a mockery of the program, said one insider.
In many cases, only a small fraction of the total required investment -- often just $10,000 per investor -- went to the participating companies, the Sun reported. Investors were able to shield their funds and put little at risk.
Norton maintains that USCIS, a division of the Department Homeland Security, has cleaned up its act.
"If you don't follow the rules, they'll come down on you like a ton of bricks," he said.
Still, immigration experts see continued shortcomings with EB-5s -- if not outright exploitation.
"I'm not surprised about the fraud," said David North, a research fellow with the Center for Immigration Studies in Washington, D.C. "In many ways, it's an inappropriate program."
North notes, for example, that the 10-job requirement has been fuzzed to include indirect and induced jobs -- thus diluting the impact on employment.
Also, while the USCIS wants to see that an EB-5 applicant's investment is "at risk," funds can be cashed out within two to three years (after the issuance of a permanent green card), North said.
"It has become a way to award investors who put up half a million dollars for about three years in a government-approved investment, one that can be completely passive in nature," he notes.
North cites the example of a prominent British immigration agent, American Life, which currently is placing EB-5 investments in commercial real estate near Seattle.
"The investor need not ever visit the place, just send a check. The agent has hired an economist to figure out the number of 'induced' jobs. American Life, for a fee, will handle the paperwork. The investor and family can settle anywhere they want in the United States and all of them can work legally as soon as they arrive," North explains.
"If you run the numbers you will find that the actual cost of the transaction is considerably below $500,000," he says.
Lake Buena Vista Village and Spa is leveraging foreign investment to fund expansion near Disney World.
Attorney Larry J. Behar stated on the Realty Times website that in addition to putting up $500,000, the resort's visa-seeking investors also pay a $30,000 administrative fee for "expenses." In return, the investor gets a deed to a two-bedroom, two-bath condominium and half interest in the deed for a three-bedroom, three-bath condo.
"He also participates in the resort's rental pool, and if he is one of the first 100 investors his requirement to provide employment for 10 people will be waived," Behar said.
Behar added that investors can sell their stake after 24 months, when their temporary green cards becomes permanent.
"In the meantime, the units are included in the resort's rental pool," he stated.
Larry Cohen, senior vice president of Lake Buena Vista Village and Spa, said he was pleased with his development's EB-5 tie-in. "If we maintain our present absorption rates, I plan to start construction on two more condo hotels in the fourth quarter," he said.
The EB-5 program was recommended by a commission chaired by the Rev. Theodore M. Hesburgh, former president of Notre Dame University.
"It smacked of being able to buy citizenship," said Hesburgh later. "I think I was the only one who voted against it. I just didn't feel right about it."
Since that time, the government liberalized the program by halving the $1 million requirement to $500,000 in "targeted" areas of economic distress. Despite the robust growth of EB-5s, no applications were filed outside the targeted (discounted) areas last year.
To generate additional revenue for regulatory oversight, North recommends that each EB-5 visa recipient also be required to purchase a $50,000 government bond.
Assuming the issuance of 10,000 EB-5s annually, the bond, paying half the Treasury rate and maturing in 10 years, would "guarantee the government an estimated flow of half a billion dollars in newly borrowed funds," North figures.
--
Reach Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.
