If you’re considering US citizenship, no doubt you’ve heard of the EB-5 Visa. Through this program, you can make an investment in qualified businesses in exchange for legal residency. However, there are many questions you should ask yourself before investing in any particular project.
- Is the regional funding center able to create at least 10 direct or indirect jobs through your investment?
- Will these jobs likely last at least two years?
- How many other non-US citizens are investing through that center?
- Is the value of your investment likely to go up or down?
- Will you have any say in how your investment is managed?
- What will happen to your Visa application if the jobs fail to materialize?
- Are the people you’re working with credible?
If and when you decide to invest funds through EB-5, you need to pay particular attention to the last point. Should your advisors focus only on the positive aspects of your application and avoid mentioning negatives or potential problems, it’s important to proceed with caution.
Below, you can find an example of what can go wrong when an EB-5 investor doesn’t take proper precautions.
The Mission Hills Square Project
The planned Mission Hills Square project in Fremont is currently on hold due to a wide range of issues plaguing current and former ownership. Originally planned as a high-end housing, dining, and shopping development, the companies associated with the project have suffered everything from a mortgage default to bankruptcy to multiple lawsuits.
Initially, the project seemed to have excellent potential. Located right next to I-680 and Durham Road, the complex would be in a well-trafficked and highly-visible area of the city. With 54,000 square feet of shops, bars, and dining and nearly 150 residential units, there were little doubt investors would see significant returns.
However, the Mission Hills Square site is currently devoid of activity and covered with graffiti due to a range of legal and financial woes.
Among them is the fact that Fremont Hills Development, the main owner of the project, filed for bankruptcy back in early October. Moreover, at least one lender has issued a default notice on the company's mortgage, with others expected to follow.
On top of this, the SEC filed a civil complaint two years ago, alleging that several individuals that hold ownership in the property have committed multiple violations, including fraud. Specifically, the complaint cites Danghong Chen and Jianyn Ye, two Atherton residents, as having committed visa fraud over an EB-5 scheme. Ye pleaded not guilty to the charges, while Chen has since left the US for Dominica, a small island nation in the Caribbean, where she has changed her name.
The SEC complaint alleges that Ye and Chen acquired and operated an EB-5 center known as the Golden State Regional Center. They then conspired to have clients invest in various projects in which they both had an ownership interest. However, at no point did they inform their clients they directly controlled the enterprises. One such project was Mission Hills Square.
The EB-5 Visa Program is unique in that it allows immigrants to become lawful US residents providing they invest in US companies that fit specific requirements. The goal of allowing regional centers like Golden State was to promote economic development and job creation.
To make matters worse, the SEC also alleges that Chen and Ye embezzled funds contributed by investors, often funneling them back to China. This amounted to some $40 million in the Mission Hills Square Project alone, with each investor contributing around $550,000.
More recently, the un-built Mission Hills Square complex has been purchased by Gadsden Properties to the tune of nearly $240 million. This cast further doubts on the project, as Gadsden was essentially paying $1.6 million per unit, more than three times the average going rate seen in similar projects like the Lex Apartment Complex and 808 West Apartments.
Though it remains unclear why the company would pay so much, what is clear is that Gadsden Properties is not in good financial health. At this point, it is unclear whether they will survive long enough to bring Mission Hills Square to fruition.
EB-5 and Investment Risk
The Mission Hills Square case just reminds us again that the EB-5 program seems like an appealing method to move to the US and have business growing here in the U.S. However, just like all investments, the EB-5 program could be dangerous and lead to a total failure, if you pick the wrong business, partner or lawyer. This is the reason that you will need to find the most professional lawyer team to help you when you decide to apply for the EB-5 program.
American Corporate Services Law Offices Inc. has been helping many foreign investors to obtain better business opportunities and the EB-5 visas for decades. Call us now at 415-688-7989 if you are interested in the EB-5 program. We can help you.