(Source: Ali Brodie, Greenberg Traurig)Although the program has been around for a number of years, it is only recently that EB-5 financing has become popular for hotel development with major flags including Marriott, Starwood, Hyatt, and Hilton successfully utilizing this alternative form of financing. With traditional construction financing difficult to obtain, many hotel developers have turned to EB-5 financing, realizing its benefit as both a creative way of attracting financing from foreign investors, and marketing hotel brands internationally.Hotel developers favor raising capital through the EB-5 program as it is considered a relatively cheaper source of financing, frequently offering returns of less than 4%, when compared with higher interest rates on debt and other riskier forms of financing. From the investor’s perspective, the United States is attractive because of its political and economic stability, healthcare, and educational opportunities for children. The investors, the majority to-date being Asian, are primarily concerned with obtaining a green card through investing in a regional center project that creates the requisite 10 new jobs per investor and will return their funds (capital at risk) within 5 years, not necessarily with the return on investment.Many investors select EB-5 regional center hotel projects because they identify with the property operated by an internationally recognized hotel brand, and they see the increasing profitability and stability of the U.S. hotel industry. We suggest the following tactics for EB-5 hotel developers to make your project competitive:
While EB-5 financing can count as a meaningful part of the
capital stack, it is important that the EB-5 funds are used appropriately in
accordance with requirements established by the U.S. Citizenship and
Immigration Services.
Article here: http://www.eb5investors.com/
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