The “American Dream” has powered the hopes and aspirations of individuals for many generations. Beginning as a revolutionary notion in his 1931 book, The Epic of America, writer and historian James Truslow Adams defined it as the “dream of a land in which life should be better, richer and fuller for everyone, with opportunity for each according to ability or achievement.” Plain and simple, according to Mr. Adams, each person has the right to pursue happiness and the freedom to strive for a better life through hard work and fair ambition.
Frisco’s Economic Development Corporation (FEDC) is helping to propel the American Dream for both Americans and immigrants by adding another tool in their ever-expanding tool belt of services and offerings. Established in 2013, the FEDC created the Frisco Texas International Development Center (FTIDC), which exists for two primary reasons: to encourage foreign investment and job creation in the local area market and to allow eligible non-U.S. investors the opportunity to become lawful, permanent residents of the U.S. Wholly owned and controlled by the FEDC, the FTIDC permits development of projects and businesses that are located in Collin, Dallas or Denton County.
“As one of the fastest growing economies in the United States, the City of Frisco takes pride in generating jobs and encouraging economic growth for the surrounding communities. Our workforce, educational institutions and quality of life make Frisco an attractive region for investors,” said James Gandy, president of the FEDC and the FTIDC. “Working with various opportunities over the past two years, the FTIDC is creating more foreign direct opportunities to invest in North Texas, and we will continue to do so.”
Mayor Maher Maso, adds, “In Frisco, we like to think regionally, and the FTIDC can only add to the positive trend in economic growth we are experiencing here in North Texas. It is a tool that helps our community attract foreign investment to spur development projects such as Class A office space and hotels, which promote economic development and tourism benefiting our entire region.”
The history of the EB-5 Immigrant Investor Program dates back to 1990, when the United States Congress established the program to stimulate job growth and capital investment. In 1993, Congress created the “Regional Center Program” to align with and administer the EB-5 Program, and today, more than 97 percent of EB-5 visas stem from investments made from the Regional Center Program design. The FTIDC is one of these centers.
To qualify for the EB-5 Program, applicants are required to invest $1 million (or $500,000 if the investment is in a rural or high unemployment area) and create at least 10 jobs. Foreign investors can invest directly in a job-creating business or through the various Regional Centers located in designated areas throughout the U.S. As of Sept. 9, 2015, a total of 732 regional centers have been created nationwide.
An underused program in its early years, participation in the EB-5 Program has grown dramatically since 2007. Due to the banking crisis and recession, many searched for foreign investments for help. Between 2010 and 2011, the nationwide program contributed $2.6 billion to the gross domestic product (GDP), supported 33,000 jobs and generated $346 million in federal tax revenue. The number of regional centers also grew in 2009 from 74 to 732 in 2015, and according to the American Immigration Council, the program attracted billions of dollars to the U.S. economy and created tens of thousands of jobs.
The EB-5 Program usage has also grown substantially over the past decade due to investors’ desire for permanent residence within the U.S. In the past, citizenship and realizing the American Dream for immigrants has been a complicated maze often consumed with intricate paperwork, visas and green cards. The EB-5 Program, however, simplifies the process significantly. In return for the required large investment, foreign investors using the EB-5 Program are granted a reliable manner to obtain U.S. residency. If the investor’s initial application is approved, he or she will receive conditional residence in the U.S. After two years, the investor can apply to have the conditions removed and have their conditional residency made permanent, but only if the investment has resulted in the creation of a minimum of 10 jobs as required. This “permanent” green card will be issued to the investor and the investor’s immediate family with a reasonable return on investment.
According to the Department of Homeland Security’s 2011 Yearbook of Immigration Statistics, the program granted 142 permanent residencies (PRs) under the category “employment creation (investors)” in 2002. In 2007, the number jumped to 806 and ballooned to 3,340 in 2011. In 2014, the number of PRs exploded to 10,692. Considering the EB-5 Program’s annual authorization accepts 10,000 visas, the huge potential of this program is just beginning to be tapped. Throughout the program’s existence, 44,427 visas have been issued.
It is not just potential immigrants who look to the EB-5 Program as a great opportunity. Domestic U.S. businesses also have great expectations from the program’s ability to provide alternative sources of capital. One investor who worked on a $228 million EB-5 financing project of the Atlantic Yards in Brooklyn, N.Y., was quoted in The Wall Street Journal as saying, “In the past, one had to explain the program to people. No one knew it was around. Now, two Manhattan-based residential projects are planning to use the EB-5 route to raise the $260 million required.” Both the FTIDC and Frisco’s EDC view the program as an exceptional resource to identify high quality opportunities for investment as well as identify opportunities for developers within the area.
Across the nation, the EB-5 Program has been used to finance a variety of different investment opportunities, many of which include mixed-use developments, hotels, sports stadiums, restaurants, manufacturing investments, medical facilities, entertainment venues, office buildings and convention centers, to name some of the more common examples.
In order to become a Regional Center for the EB-5 Program, the FTIDC ventured down a long and winding road. During the summer of 2011, Mr. Gandy and one of his managers, Ms. Elise Back, issued a request for qualification to developers for building additional Class A office space throughout Frisco due to a great shortage of availability at that time. Coincidentally, Mayor Maso had just returned from a seminar on the EB-5 Program and immediately contacted Mr. Gandy to discuss the opportunity.
“When Mayor Maso told me about the EB-5 Program, we both realized the potential impact and opportunity the program could provide for our city,” continues Mr. Gandy. “When we reviewed the potential benefits and myriad of different investment projects that would fall under the program, we understood immediately that we wanted to become an approved Regional Center.”
Ms. Back explains, “Through Mayor Maso’s encouragement, we contacted Jason Barnes, one of the nation’s leading experts on EB-5 Programs, to meet and discuss the program. We understood the EB-5 was a non-traditional, unique method for developers to finance their projects, and we knew we wanted to get involved.”
In June of 2012, Mr. Gandy and Ms. Back approached the FEDC board to request permission to become an approved Regional Center, and they then prepared and submitted their application. They received a request for additional information in March of 2013, and the U.S. Citizenship and Immigration Service approved Frisco’s plan to become a Regional Center in August 2013, 14 months after it was submitted.
“This program is a unique, economic development tool that we wanted to make available to developers who were interested in utilizing this type of funding in their capital stack or projects, and most specifically for ‘spec’ office development,” notes Mr. Gandy. “As we began to understand the magnitude and cost of the project, we decided to extend our hand and let the program run beyond the boundaries of Frisco. We want to allow others to utilize our center and offer the services to them.”
Revisions to the current EB-5 Program are being considered, including changes in the required investment amount per investor. In addition, the immigration agency has undertaken some administrative reforms, and both administrative and legislative changes have been recommended. Typically reauthorized by the federal government and Congress every three years, the EB-5 Program was granted a temporary extension until December 11, 2015, to continue generating foreign direct investments and generate job creation. This extension provides Congress additional time to consider a long-term reauthorization bill, which could occur on or before December of this year. Any applications that are “grandfathered” into the program will reside at the previous investment levels.
Although no formal deals have currently been announced through the FTIDC, many projects are “knee-deep” in the process. “Most of our investors reside from the Chinese market, as they desire their children to attend U.S. schools because of our high-quality educational system, and the types of projects that are most favorable to them include senior living centers, hotels and medical facilities, as well as multi-family housing projects,” adds Ms. Back. “Funds come in via our Regional Center in the form of a loan to the developer, and they are required to pay the loan by the end of the loan term, usually five to seven years.”
Ultimately, the program has attracted billions of dollars of investments and created thousands of jobs according to a Bipartisan Policy Center, and states and localities have been and will continue to take interest in the EB-5 Program.
“Although we are not allowed to disclose details about our current projects, we can say that we are currently working on more than one within the city of Frisco and more than one outside the city,” notes Mr. Gandy. “At the end of the day, if a developer does not follow through on a project, an investor will not be able to secure the desired green card. So, ultimately, it is not the quantity of projects that is our overall goal, but instead, we are working and striving to complete the best deals for our Regional Center, our developers, the investors and ultimately our city.”