The US state of Maine is looking to start its own EB-5 regional center to help attract more direct foreign investment, according to the Maine Department of Economic and Community Development (MDECD).
“The state is interested in establishing a state-run EB-5 regional center in the absence of activity within existing EB-5 regional centers in Maine,” said George Gervais, commissioner of the MDECD.
Three privately state-run EB-5 regional centers cover the state of Maine, but none of them have been able to attract the investment seen in other states. “In all three cases there’s been no activity [within Maine],” says Gervais.
The lack of activity has prompted the move by the state government to capitalize on the EB-5 program that allows foreigners who invest $500,000 to $1 million in regional centers to gain a fast-track path to US citizenship.
Gervais says the first project for any regional center has to be a strong one.
“For a regional center, your first project that you come out of the gates with needs to be something solid and have a very high probability of success,” says Gervais. “If it were to fail, then your ability to attract further investments to your regional center would be almost impossible.”
One of the three private state-run EB-5 regional centers that cover Maine, USA Lifestyles Inc. is run by the owners of the Saddleback ski resort. One of the owners, Mark Berry, says the resort is working to secure $3 million in investment to finance a new chairlift, but has been unable to attract foreign investors so far.
Saddleback’s general manager Chris Farmer traveled to China in 2013 as part of a state trade mission to recruit EB-5 investors, and says the EB-5 program has become much more competitive, with investors looking to not just preserve their capital along with a pathway to US citizenship, but also becoming interested in obtaining a healthy return on their investment.
Farmer says the scale of the project is the key to drawing foreign investors, with most of them preferring projects that are not completely dependent on their money but also involve around 20 to 30 per cent funding provided by US investors. EB-5 projects that are backed by the state government are also viewed favorably by Chinese investors.
“You have to make your project the most attractive,” says Farmer. “The other piece that we found is the reputation of the regional center is very key to these people who are placing people in play, these recruiting companies.”
Farmer says several EB-5 regional centers across the US have been facing problems.
“There have been regional centers that have failed, there have been regional centers that have absconded with money, all these things,” says Farmer. “We felt, as a group, that we wanted to make sure that the first project that we did was clearly going to be successful, both financially and to fruition for the project.”
The announcement by the state government to set up its own EB-5 program follows the decision in 2011 to provide funds to the MDECD to set up a state-run regional center.
The decision was made following the success of Vermont’s state-run EB-5 programs, which have been held up as an EB-5 success story. Vermont has attracted hundreds of millions of dollars in investment to upgrade ski resorts with new hotels, chair lifts and even an indoor water park.
The EB-5 program is set to undergo a round of reforms later this year, with federal lawmakers looking to renew the program that is set to expire in September.
Proposed legislation would reauthorize the program and change some of the rules, including increasing the minimum investment amount to $800,000, and directing most of the investment to rural parts of the country with struggling economies. The bill would also increase the oversight of the program by the Department of Homeland Security in order to reduce fraud and misuse of the program.
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Source: bangordailynews.com