US officials and economic developers busy promoting EB-5 investment
From Press Enterprise
March 15, 2012
Economic developers in Temecula and Murrieta, CA, are promoting a government visa program called EB-5 as an alternative financing tool for commercial projects in hopes of attracting new investment to the region at a time when traditional financing streams are running dry.
In a workshop Wednesday, about 40 business owners, brokers and others gathered in Temecula for information on how the program works and what kinds of projects might qualify.
EB-5 already has been used to kick start a handful of recent development projects in southwest Riverside County, CA, including a $12 million shopping center under construction across from Murrieta’s city hall that was financed by 24 investors from China, Japan and South Korea who put in $500,000 apiece.
Christine Damko, economic development analyst for the city of Temecula, said one of the city’s largest structures, the former Professional Hospital Supply building on Zevo Drive, recently closed escrow thanks to a deal that included EB-5 funding. And a four-story mixed-use development planned near Temecula City Hall is also being financed under the program.
EB-5 has been around since the 1990s, but interest picked up considerably in recent years as bank lending and public funds evaporated. It is set to expire this fall, but local economic development officials say they are hopeful it will be extended.
Murrieta Mayor Doug McAllister said the U.S. has a long history of foreign investment, and cities these days have to think globally, not just locally. Cities can help businesses make the connections they need to find capital, he said. Murrieta’s interim mayor, Rick Gibbs, is in China now making contacts, he said.
Although economic development officials see lots of potential for EB-5, qualifying for the program isn’t easy, according to Kraig Schwigen and Tim Sabo, the keynote speakers in Wednesday’s gathering.
The draw for investors is permanent residency in the U.S., and that means the success of any project is crucial, Schwigen said. As a result, projects approved for the program tend to be low-risk.
Sabo, a partner at Lewis Brisbois Bisgaard & Smith in San Bernardino, has helped put together EB-5 deals as part of his work in municipal finance and redevelopment.
Regional centers have sprouted up quickly in recent years as interest in the program has grown. Damko estimated there are about 40 centers that do work in Riverside County.
Schwigen said, many such centers have a specific business focus, such as shopping centers, solar projects or manufacturing. He has facilitated about $400 million in financing for California projects, with investments ranging from $5 million to as much as $120 million per project.