Tuesday, April 27, 2021

EB-5 Program & Real Estate Development

Based in Portland, Oregon, Barclay Grayson serves as senior vice president of BPM Real Estate Group. In this role, Barclay Grayson acquires and develops real estate in Portland while seeking out opportunities for funding, such as Opportunity Zone and EB-5 sources. The EB-5 program allows foreign investors to secure permanent residency by investing a certain amount of money in a commercial enterprise that results in the creation of at least 10 full-time jobs. Because construction jobs count, EB-5 has become a significant funding option for real estate developers.

Unfortunately, however, some developers feel that EB-5 is a quick way to get funding when compared to other lending sources, but the money can actually be quite slow in coming. Counting on using EB-5 funds at the beginning of a project often makes bridge financing necessary, as the EB-5 funding needs to be consolidated and processed before it is disbursed, and this can take time. In the past, this funding has been used with a five-year investment timeline, but this depends on the country providing the money. The Vietnamese timeline is more like seven years, and Chinese investments can take up to 15 years.

A more efficient way of using EB-5 money is by refinancing large construction loans. With this strategy, the developer’s equity gets replaced by cheaper EB-5 funding, and the overall cost of capital can drop by up to 7 percent.