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The U.S. government caps at 10,000 the number of visas that can be granted annually under the EB-5 program, which gains its common moniker from a federal statute on employment-based immigration. (There are also categories EB-1 through EB-4.) But the program has never come near to reaching the 10,000 limit. Moreover, it is no slam-dunk to get from application to green card to U.S. citizen—only 20 percent of the applications remain on track to gain citizenship, according to the federal data.[contextly_sidebar id=”6c657912c6c4e90ce07650e1bcf20c2e”]In the Bay Area, industrious organizers and middlemen have created at least five “regional centers” since 2008, a federal designation that allows foreign investor contributions to be pooled inside specified geographies. The Silicon Valley Regional Center can operate in Alameda, Contra Costa, San Mateo and Santa Clara counties, for example. Investors in regional centers also can take credit for indirect job creation. Regional centers do not have to be economically distressed, but investment must be shown to create jobs. The overwhelming majority of investors work through a regional center.
“This is the first new hotel in the San Jose airport market in almost 20 years, so for us it was a no-brainer in terms of the location,” said Angelique Brunner, president of EB5Capital, which is working with Irvine, Texas, -based Huntington Hotel Group and Swenson on the San Jose hotels.
Swenson is acting as the general contractor for the project, which entails a 175-room Residence Inn and a 146-room SpringHill Suites that share amenities. It is expected to take 30 months to build. The Residence Inn is an extended-stay hotel designed for visits of a month or more.
It is the second Marriott Hotel project that she has helped finance through the EB-5 program, Brunner said. The first was in Washington, D.C. She estimates that about half of the $35 million in financing her company will raise to complete the San Jose project will come from Chinese investors. She has been able to document that the neighborhood in which the hotel sits is suffering from inordinate unemployment as defined under the law, meaning that each investor will be able to contribute $500,000 to the project.
“I like to do projects that would be built anyway, not because it is EB-5 money,” Brunner said. The immigrant investors care deeply about their success, she said. Even though they are most interested in gaining citizenship, they also want to get their investment back. If a business fails, they could receive neither. Their interests make them willing to accept a lesser return on capital, thus creating an indirect subsidy to the project but one that does not cost the government any money.
To meet the requirements for the federal visa program, the San Jose hotel project will have to create 700 direct and indirect jobs, 10 for each of the 70 investors. While she believes it will likely create more, Brunner prefers to be cautious. Brunner has offices in Washington, D.C., and the Bay Area.
Case Swenson, president of Barry Swenson Builder, said the company has six extended-stay and other Marriott-branded hotel locations in the Silicon Valley already and that they routinely achieve occupancies of 95 percent or more, even in the throes of the bust. Contract engineers, consultants and other technology-company workers doing short-term or special assignments keep the rooms occupied. “I can almost say they are always full,” he said.
“We are trying to make San Jose a more attractive place for these high-tech companies to live and work,” he said. “We are fighting the northward shift toward San Francisco and Palo Alto.”
Kevin Keefer, principal of Huntington Hotel Group, said he is confident of the hotels’ long-term success because of the San Jose airport expansion and the investment being made to build a new $82 million private, general-aviation terminal. He is not worried that San Jose airport traffic has been depressed. Instead, he is more enthused that the airport has capacity to expand. The new San Francisco 49ers stadium also should help. “It will bring business to the area for sure,” he said. “It just puts this part of Northern California more on the map.”
Despite Silicon Valley’s wealth, San Jose looks to have a deep vein of viable properties for EB-5 financing, Brunner said. “I think San Jose has pockets that need economic development surrounded by a booming economy. I think this is an incredibly strong place for EB-5 investors.”
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