- Comparing Risks in Different Types of Urban EB-5 Projects
- Benefits of Selecting an Urban EB-5 Project
- Experienced Development Team
- Strong Financials
- Sold-Out Condominium Tower
- An Experienced, Independent Regional Center
- All Required EB-5 Jobs Already Created
- Additional Features that Mitigate EB-5 Investors’ Risk
Saltaire St. Petersburg Phase II is a 35-story luxury condominium development in downtown St. Petersburg, Florida. With a host of best-in-class features, Saltaire is one of the most compelling urban EB-5 projects available today at $800,000.
Overview of the Saltaire St. Petersburg Phase II EB-5 Project
Urban TEA Designation. The project is in an urban targeted employment area (TEA). Urban TEA designation enables EB-5 foreign investors to invest a reduced minimum amount of $800,000 and provides them with access to a reserved EB-5 visa category that comprises 10% of the total EB-5 visa supply.
All Required Jobs Already Created. Construction of Saltaire is already underway. Out of the 430 jobs required for EB-5 investors in Saltaire St. Petersburg Phase II, 558 positions have already been created as of March 2022—128 more than are needed.
I-526E Approval Refund Guaranty. The project provides for an accelerated repayment of any EB-5 investor whose I-526E petition is denied.
Independent EB-5 Oversight. EB5 Affiliate Network (EB5AN) controls the regional center and the general partner of the EB-5 investment fund for Saltaire St. Petersburg Phase II and is 100% independent from and unaffiliated with the developer. Independent third-party EB-5 oversight helps prevent conflicts of interest and reduce risk for EB-5 investors.
Excellent Developer Track Record. Saltaire is being developed by the Kolter Group, an experienced luxury condominium developer. In 25 years, Kolter has never failed to complete a project or to repay a loan. Kolter has worked with EB5AN on more than 10 prior EB-5 projects, and all EB-5 investment funds in Kolter projects either have been repaid or remain in good standing.
Sold-Out Condominium Tower. 100% of all condominiums are already sold out.
Phase II Offering. Saltaire St. Petersburg Phase II is the second offering of a USCIS I-924 exemplar approved project, demonstrating project-level EB-5 compliance.
These features make Saltaire St. Petersburg Phase II a best-in-class urban EB-5 project that stands out among the other EB-5 investment opportunities available today. Below, we examine each of these topics in greater detail.
Understanding Urban TEA Designation
To qualify as a TEA, a project location must either be within a rural area or in an area with high unemployment compared to the national average unemployment rate. Certain public infrastructure projects may also qualify for the benefits of TEA designation.
For an area to qualify as an urban TEA, it must have an unemployment rate of at least 150% of the national average unemployment rate. Applications for urban TEA designation must include evidence from the most recent decennial U.S. census data that the area qualifies.
EB-5 investors enjoy significant benefits from EB-5 projects in urban TEAs. EB-5 investors in urban TEAs may invest at the lower amount of $800,000, and they are eligible for reserved EB-5 visas, which may allow them to complete the EB-5 process more quickly.
EB-5 investments in urban TEA projects carry specific risks which differ from other types of projects. Investors should carefully consider the merits of any EB-5 project before investing and should select projects with strong economic fundamentals and low immigration and financial risk.
Comparing Risks in Different Types of Urban EB-5 Projects
All EB-5 investments carry certain risks for EB-5 investors, but some projects are riskier than others. Before selecting an EB-5 project for investment, a foreign national should carefully consider a prospective project’s specific risks. The risks associated with urban projects often have to do with market conditions, competition, and capitalization.
Three popular types of urban EB-5 project are hotel, multi-family home, and condominium developments. Each of these project types presents certain risks.
Risks in Urban EB-5 Hotel Projects
Hotels are largely dependent on consumer travel, for both business and recreation. As a result, hotel revenues are directly impacted by fluctuations in the economy. During economic downturns, fewer people stay at hotels.
Urban hotel projects may experience insufficient market penetration, especially at first. Competition for hotel accommodations in cities is often high, and new hotels may take time to achieve strong occupancy rates.
In order to remain operational, hotels require full-time staff. Scaling back operational staff during periods of low revenue may not be possible. If operating at a loss for long enough, hotels may be forced to fire employees and even close. Eliminating any jobs may prove catastrophic for EB-5 investors: their immigrant petitions are dependent on sufficient job creation. Poor economic performance may also adversely impact repayment of investor funds, resulting in delays or even loss of capital.
Additionally, hotels require significant upfront spending long before any revenues are realized. Increases to costs over the course of development may translate to delays as financing is obtained.
Hotels are also reliant on attractive financing being available. If financing is too expensive, income from operations may not be enough to cover financing costs.
EB-5 investors in hotel projects often face significant financial risk and may also face greater immigration risk if development is delayed.
Risks in Urban EB-5 Multi-Family Home Projects
The success of multi-family home developments is deeply impacted by the real estate market at the time construction is complete, which may not reflect the market at the time development begins. As a result, the financial risks associated with multi-family home developments are higher because changes to the housing market over time can be difficult to predict.
Like hotels, the profitability of multi-family home development projects is dependent on occupancy. This means that reduced occupancy directly impacts the developer’s ability to repay any debts incurred during construction, which increases financial risk to EB-5 investors. Multi-family homes, like hotels, are reliant on attractive financing being available. Without attractive financing, revenues from rent may not cover the cost of financing.
Also like hotels, the time and cost to develop multi-family homes are considerably greater than the time and cost to develop individual homes. While multi-family homes require substantial spending over a period of years before tenants can move in and revenue can begin to flow, individual houses or condominium units can be presold, and that income becomes part of the development capital. For multi-family home developments, increases to costs will force the developer to invest additional equity, take on debt, or obtain additional investments, all of which may take time and delay development. Supply-chain issues during construction can also delay development. Delays in development may affect job creation and negatively impact EB-5 investors immigration efforts.
EB-5 investors in mult-family home projects often face significant financial risk and may also face greater immigration risk if development is delayed.
Risks in Urban EB-5 Condominium Projects
Like hotel and multi-family home development projects, condominium development projects can be vulnerable to economic downturns. Inflation over the course of development can increase costs, and local housing market downturns may directly impact sales, which could in turn affect EB-5 investors’ financial and immigration risk.
Unlike hotel and multi-family home development projects, however, condominium developments are able to benefit from unit presales, which provide a source of capital prior to the completion of construction.
For condominiums, spending often happens at the same time as earning. Ongoing sales reduce financial risk since the costs of construction are offset by real estate revenues.
Compared to other types of urban EB-5 projects, fully financed condominium developments with advanced construction carry lower financial and immigration risks for EB-5 investors and may increase the likelihood of a timely return of EB-5 capital.
Benefits of Selecting an Urban EB-5 Project
Investing in an urban TEA project is a generally less risky than investing in a rural project. Most risks associated with urban projects can be mitigated, at least in part—and in some cases almost entirely.
First, urban TEA projects benefit from the reduced investment amount of $800,000, which helps mitigate financial risks.
Due to their location, urban projects tend to have better access to market data than rural projects. This market data can be relied upon to make better long-term decisions, leading to more predictable outcomes.
Additionally, investing in urban TEA projects grants EB-5 investors access to set-aside EB-5 visas. These reserved visas are especially beneficial for foreign nationals from countries whose number of EB-5 visa applicants exceeds the number of available visas (a situation known as visa retrogression.) Investors eligible to receive reserved EB-5 visas avoid the lengthy delays caused by visa retrogression. Investors with reserved visas are often able to immigrate into the United States years earlier than would otherwise be possible. Investors with reserved visas are, effectively, able to skip ahead of other EB-5 visa applicants.
Under the EB-5 Reform and Integrity Act of 2022, 10% of the total number of EB-5 visas are set aside for urban TEA investors and qualifying family members. The urban category offers a significant supply of reserved visas.
Evaluating Urban EB-5 Projects
EB-5 investors should conduct preliminary research to better avoid risky urban EB-5 projects.
Prospective EB-5 investors can protect their investment capital by thoroughly vetting EB-5 project developers. Investors should seek projects that have experienced development teams with proven track records and backing from institutional lenders.
Investors should also consider how much equity a project’s developer has invested in the project and whether that developer is planning to recapitalize or replace this equity with EB-5 capital. When a developer repays its own equity with EB-5 investment, it reduces its risk at the expense of EB-5 investors, whose risk is increased. As a result, EB-5 investors should avoid any project where the developer plans to use EB-5 capital to repay its own equity investment.
Additionally, EB-5 investors should also consider the type and location of a project. For example, a rural hotel project in a low-traffic, low-tourism town is inherently riskier than an urban condominium project in a major metropolitan area with strong demand for new housing. Knowing the local and regional market conditions of a project is often key to understanding the project’s risk, and so prospective EB-5 investors should carefully research each project to understand current market conditions at the project location.
While vetting the developer and project are important for any investment, the success of EB-5 investments depends on EB-5 compliance with United States Citizenship and Immigration Services (USCIS). As a result, EB-5 investors should carefully examine the track record of the regional center sponsor for the EB-5 project. The regional center should be led by experienced, knowledgeable industry professionals with a track record of USCIS compliance. The regional center should also be 100% independent from the developer. Now more than in the past, selecting a project with an excellent regional center sponsor is vital since the EB-5 program is currently undergoing changes in the wake of the passage of the EB-5 Reform and Integrity Act of 2022. This recent legislation made significant changes to the EB-5 program, including how TEAs work and compliance and reporting requirements for regional centers. As of the date of writing, USCIS has issued no real guidance regarding the EB-5 reform bill’s implementation.
EB-5 investors should select projects in low-risk locations with strong market fundamentals sponsored by experienced regional centers and developed by proven, trusted developers. Settling for less increases financial and immigration risk.
Saltaire St. Petersburg Phase II Is a Best-in-Class Urban EB-5 Project
Saltaire St. Petersburg is a unique urban EB-5 project, offering highly sought-after features that limit immigration risk for EB-5 investors and protect their investment capital. Kolter is a highly experienced development team with a perfect EB-5 track record. The project has proven market fundamentals, an independent regional center sponsor, and has already created enough jobs to satisfy the EB-5 job creation requirement for all its EB-5 investors. These and several other features make Saltaire St. Petersburg one of the most compelling urban EB-5 projects on the market today.
Experienced Development Team
Kolter is an experienced developer with an extensive track record developing mixed-use luxury real estate and condominiums since 1997. As one of the nation’s top 25 largest privately held home builders, Kolter has in excess of $19 billion of expected value in commercial, residential, and hospitality transactions. With an operational footprint in the southeastern United States, Kolter’s market and sector knowledge has positioned the firm to capitalize on emerging U.S. real estate trends.
Beyond its real estate experience, Kolter has extensive experience with EB-5 investment. Kolter and EB5AN have collaborated on more than 10 EB-5 projects, all of which have been financially successful. EB-5 investors in Kolter/EB5AN projects have benefited from ample job creation, and their investment capital has either been repaid or remains in good standing. All prior adjudicated Kolter/EB5AN EB-5 projects have been approved by USCIS.
Kolter has access to institutional senior financing and has never failed to repay a loan. For Saltaire St. Petersburg, Kolter has secured a senior loan through Wells Fargo Bank, the world’s fourth-largest bank by market capitalization.
Developer equity accounts for a significant portion of Saltaire St. Petersburg’s total source of funds for development. With strong condominium presales, buyer deposits also account for a sizeable portion of development funds.
The development of Saltaire St. Petersburg is not dependent on EB-5 investment, and no minimum amount EB-5 capital must be raised.
Sold-Out Condominium Tower
The market for a new luxury condominium tower in downtown St. Petersburg, Florida, is strong. Saltaire St. Petersburg follows another successful nearby luxury condominium developed by Kolter, and 100% of condominium units have already presold.
An Experienced, Independent Regional Center
EB5AN is providing regional center sponsorship for Saltaire St. Petersburg. The regional center is entirely independent from Kolter, and so the regional center is able to focus on meeting the needs of EB-5 investors without conflicts of interest. EB5AN is a highly experienced EB-5 regional center operator; EB5AN has facilitated more than $1 billion of investment under the EB-5 program with total project development costs exceeding $4.1 billion.
EB5AN’s world-class, low-risk investment offerings have served more than 2,000 immigrant investors from more than 60 countries.
All Required EB-5 Jobs Already Created
Under the EB-5 program, each EB-5 investor’s capital investment must result in the creation of at least 10 new, full-time, qualifying jobs for U.S. workers. For projects sponsored by regional centers, investors may count direct payroll jobs as well as indirect employment that results from project construction expenditures and revenues. Meeting this job-creation requirement is essentially for successfully immigrating to the United States with an EB-5 visa and obtaining a green card.
Saltaire St. Petersburg has already created enough EB-5 eligible jobs to satisfy the 10-job requirement for all EB-5 investors who join the project.
Only 430 new jobs need to be created to support the maximum number of EB-5 investors, and 558 have already been created. Beyond this, the Saltaire St. Petersburg Phase II project is expected to create a total of 1,926 qualifying jobs for EB-5 investors—roughly 44.8 jobs per investor. Therefore, investors in Saltaire St. Petersburg will enjoy ample job creation—far beyond what is needed—and thus a higher chance of a successful immigration process.
Additional Features that Mitigate EB-5 Investors’ Risk
The project provides for the accelerated repayment of any EB-5 investor who does not receive I-526E approval.
Saltaire St. Petersburg Phase II: A Unique, Low-Risk Urban EB-5 Project
No EB-5 project can entirely mitigate all risks to its investors. Financial and immigration risks are an unavoidable part of the EB-5 program. While some projects do a poor job at mitigating risk, others significantly reduce risk to EB-5 investors and are much safer investment options.
Saltaire St. Petersburg offers numerous best-in-class features that mitigate financial and immigration risks, providing unparalleled safety to EB-5 investors and making it an excellent choice for urban TEA investment.
For more information on the Saltaire St. Petersburg Phase II project or other TEA projects, please schedule a one-on-one call with EB5AN or send an email to info@EB5AN.com.