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American PE firm’s investment proposition to rich Indians: Assured returns, repayment guarantee and a EB-5 visa

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An investment proposition that offers assured returns, full repayment guarantee and a EB-5 Visa, ticket to permanent residency in the US.

This is what Greystone, a New York-based private equity firm, is offering rich Indians in return of a minimum investment of $500,000 (Rs 3.5 crore).

The firm, which has $36 billion assets in management, is in Mumbai to get Indians to invest in their proposed $37-million, 180-bed skilled nursing and rehabilitation centre in Florida. The investment comes with a promise of sponsoring EB-5 visa, a gateway to eventually secure green card in US.

Beyond the enticing green card, Greystone is offering 2 percent assured returns and a full repayment guarantee.

Greystone is showcasing the proposed project as low risk investment on grounds that it had secured necessary approvals from Florida and tied-up finances to meet 90 percent of the project cost.

The PE firm also claims that there is a strong business case as the upcoming facility will be utilised by patients funded by US government medical insurance schemes such as Medicare and Medicaid, and not from out-of-pocket.

Greystone said it is raising $3.5 million through EB-5 platform, meaning it needs to sponsor EB-5 visas for just 7 investors ($500,000 per each investor).

“We already found one, we need to find six others,” said Allison Berman, head of Greystone’s EB-5 programme.

Greystone successfully closed funding for two major real estate projects in New York City, that also has a component of money coming EB-5 investors.

With EB-5 opening up access to cheap long-term funds, US private equity and real estate firms are increasingly chasing investors in Asian countries such China, India, Vietnam and South Korea, home to large number of high-net worth individuals to raise funds.

While the proposition is attractive, analysts advise investors to choose right projects, as many EB-5 investors, who lacked proper due diligence were duped in the past by investing into projects that never gave them any returns.

In 2018, around 179 Chinese and other Asian investors sued the developer of the $165 million Lucky Dragon casino in Las Vegas after it went bankrupt, The investors are in danger of losing their investment and chances of getting green card. The were other cases of investors getting duped by real estate companies in Florida and Vermont.

Rising demand for EB-5 visas

But these cases haven’t made a dent on demand for the visa.

The EB-5 programme was created by the US Congress in 1990, to stimulate the US economy through job creation and capital investment by foreign investors.

EB-5 provides foreign nationals with the opportunity to become conditional residents for a period of two years upon making an investment of $500,000 to $1 million, in a designated Targeted Employment Area, in a new commercial enterprise. The other prerequisite for EB-5 is the qualifying investments should result in the creation or preservation of at least ten full-time jobs for US workers.

But there is one problem, not everyone with money bag can buy an EB-5 visa, as there are limited number of visas issued each year.

The US Citizenship and Immigration Services (USCIS) allocates 10,000 visas every year under the EB-5 programme to immigrants and their families. No country shall exceed 7 percent quota of those visas. So Indians are eligible for 700 EB-5 visas.

With Trump government imposing restrictions on the popular H-1B visa programme used by Indians to settle in US, the EB-5 programme has experienced a surge in demand over the last several years, creating a backlog of applications from investors.

For instance 587 Indians secured EB-5 visas in 2017, which is jump of 66 percent compared to 354 in 2016. Since 1990s, Indian investors have pumped in $742 million through EB-5 programme and helped to create 14,000 jobs in US, according to USCIS.

But soon EB-5 visas may become expensive with proposal by USCIS double the fee. The standard minimum EB-5 investment is expected to more than double from $500,000 to $1,350,000.

The new EB-5 rule may also limit investments in urban areas, such as Southern California, Seattle, New York City, and San Francisco and  encourage investments in rural and less prosperous counties.

But in the short-term, Berman said EB-5 visa is still an attractive proposition to invest and settle down in US.

“There is no question the U.S. government is making variations to its immigration policies, but the EB-5 program remains unchanged today and is an ideal way to leverage an investment in the U.S. economy for a visa,” said Berman.



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