EB-5 Foreign Investors are Favoring Senior Housing

Despite recent criticism for perceived lack of supervision, the U.S. Immigrant Investor Program, or EB-5, is a popular way to boost investment in seniors housing development.

EB-5 was created by Congress in 1990 to stimulate the economy through job creation and capital investment by foreign investors. The program grants permanent resident visas (green cards) to foreigners who invest at least $1 million ($500,000 in low-employment areas) into a new or failing company and create at least 10 new full-time jobs -- and is facing some negative press. Fortune magazine recently ran a cover story on an Indian investor who tried to make millions of fake projects through EB-5. Other EB-5 projects have yet to repay investors, like Jay Peak, a Vermont resort.

Recently, PDC Capital Group, in Costa Mesa, Calif., announced that it will invest $750 million in new senior properties through 2017. PDC's investment in 25 new SummerPlace Assisted Living & Memory Care residences includes over $250 million from EB-5 visa seekers. Groundbreaking took place at $26 million SummerPlace Lincoln, a 228-bed facility in Sacramento, Calif., that PDC says will create 135 new jobs.

PDC CEO Emilio Francisco says seniors housing creates the least risk for green card seekers because it strongly impacts jobs and communities. The average senior housing development costs $30 million, he says. EB-5 investment represents 20% to 30% of the capital stack, or $10 million per facility.

EB-5 calls for "regional centers" that coordinate foreign investment. The centers must focus on a contiguous geographic area and promote economic growth through jobs creation, improvised productivity, and increased export sales and domestic capital investment. The number of EB-5 applicants has skyrocketed. There were less than 100 approved centers in 2010; as of June, the USCIS had approved 579 new centers in total.

Omega Communities LLC, in Birmingham, Ala., has centers in Florida and Puerto Rico. COO James Taylor Jr. says the Florida center creates almost 30 new jobs per investor. Omega focuses on senior housing development and acquisition, putting together the capital stack, then bringing EB-5 investors. "It allows us to move much more quickly because the USCIS can be unpredictable in its approval times, and it's beneficial to go to a foreign country and show them a capital stack already in place to operate it for two years without additional funds," he says. "They get significantly more comfort that the project is viable and will be successful, they'll be more likely to get their investment back -- and also their green card."

Taylor says most EB-5 investors are Chinese, and are knowledgeable about the world supply-demand curve for seniors’ properties. Plus, China has its own senior housing crisis, due to its single-child mandate.

San Jose, Calif.-based NES Financial has 250 EB-5 projects with $10 billion in capital, and administers EB-5's Global Premier America Regional Center in California and projects by RockBridge Senior Living Group. Executive Vice President Reid Thomas says about 85% of NEB's EB-5 money comes from China. "There's a lot of positives about this investment vehicle -- and it doesn't cost the U.S. taxpayer a dime."