Opinion Piece


Why new administration strongly supports thriving investment visa sector  

By Rogelio Caceres, Co-Founder of LCR Capital Partners, a USA private equity firm that helps international investors earn U.S. residency and green cards via the EB-5 program

While the new Trump Administration’s recent executive orders suspending travel from certain countries has dominated headlines for weeks now, it is not to be confused with legal immigration, particularly when it comes to EB-5 Investment Visas.

Regulated immigration by wealthy individuals looking to do business in the United States is encouraged as it is a key creator of jobs especially in underdeveloped areas, as it stimulates economic growth by creating US jobs attracting foreign direct investment without putting pressure on the local tax base.

Since 2013, approximately 100 South Africans, including their families, have taken advantage of the programme. They have since either permanently immigrated to the USA to retire or set up business interests, or stay at home while offering their children the opportunity to study at American universities at local rates. It is also highly sought after by the Chinese – who account for 90% of the EB-5 market – as well as wealthy Indians, Brazilians, and Arabs.

Administered by the United States Citizenship and Immigration Services (USCIS), EB-5 provides 10 000 HNWI/ UHNWIs from countries around the world the opportunity to acquire U.S. permanent residency, or a green card as it’s more commonly known, for themselves and their immediate families. In return, $500k must be invested for a period of five years towards new businesses – hospitality and mixed use real estate development are the most popular industries – that in turn create a minimum of 10 USA jobs per investor. After five years, funds are returned to approved investors with nominal interest.

The US Department of Commerce recently reported that over 174 000 new jobs were created over a two year period thanks to foreign capital invested into new American businesses and real estate projects under the 27 year old EB-5 programme.  Furthermore, according to Dr Scott Barnhart of the Barnhart Economic Services 8,000 EB-5 visas contribute approximately $3.8-billion to the GDP, create more than 46,000 jobs, raise $532 million in federal taxes, and raise $371 million in state and local taxes.

Alternative finance for developers

EB-5 capital is highly attractive to real estate and franchise developers as it provides an alternative form of finance to the banks, which, since the 2008 financial crisis, have significantly tightened their purse strings. It also has relatively low interest rates – sometimes as low as 4 percent and rarely above 6 percent – and no personal guarantees.

In the real estate sector, the refurbished Surf Club Four Seasons Hotel & Residences – an iconic 1930s property in Miami Beach that was frequented by the likes of Frank Sinatra, Grace Kelly and Winston Churchill – reopens its doors to guests in February 2017. It’s seeking to raise $100-million from 200 foreign investors, including South Africans, to fund the renovation of the historic property into a 77-key hotel, two 12-story residential towers, 13 penthouses and 40 beach cabanas. 9 800 jobs will be created in the process, providing investors with their green cards.

In the franchise sector, Dunkin’ Donuts, the 7th largest US restaurant chain and one of the fastest growing, is aggressively expanding from the East to the West coast with a significant number of new store developments in the pipeline using EB-5 finance. With a store closure rate of 1.3% and job creation of over 20 per investor, the Dunkin franchise fund is an attractive investment. 

Trump’s family is also successfully using EB-5 capital. $50-million, largely acquired through HNW Chinese investors, was raised to part finance Trump Bay Street, a 50-story luxury rental apartment development that Trump’s son-in-law, Jared Kushner’s business Kushner Companies is managing.

A win-win

Real estate has long been an attractive and distinct asset class for investors with many making their millions through commercial property projects. As is widely known, Trump’s own wealth and success is rooted in the real estate sector.

Now, as President of the world’s no.1 economy, he’s turned his attention to aggressively develop American infrastructure and stimulate regional growth. He has vowed to fix inner cities, rebuild highways, bridges, tunnels, airports, schools and hospitals. And he’s looking for $1-trillion in infrastructure investment over the next ten years to do it.

Alternative ways to raise this capital without putting pressure on the American tax base is attractive. Acquiring those funds from wealthy foreign investors, who are looking for options, security or opportunity for themselves and their families, is a viable and mutually beneficial means to do so and should thrive under Trump’s administration.

About the author: Rogelio Caceres is the Co-Founder and CMO of LCR Capital Partners,  a partner-owned global private equity firm that provides growth capital (debt and equity) to fuel top U.S. restaurant franchise and hospitality brands’ geographic expansion via new store and hotel development across the United States. LCR’s source of growth capital comes from a select group of international investors from China, Brazil, India and South Africa who are interested in securing U.S. green cards and permanent residency for themselves and/or their children via the EB-5 Immigrant Investor visa program.

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