EB-5 Investors Seek Better Future for Children

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So just who are these Chinese investors willing to fork out $500,000 with the fair chance of never getting it back?

The vast majority are male business owners from the upper middle class of China who want an even better life for their children.

“Many work in import-exports and lots of manufacturing. A lot of people who made a lot of money because the West went to China and set up manufacturing facilities,” said Michael Homeier, an attorney at Homeier & Law and expert on the EB-5 program. “Once here, they may operate the same kind of business that they had.”

No Chinese investors were willing to speak with the Business Journal, sensitive to criticism that they are “buying their way” into the United States. Some are even said to have received nasty e-mails once their identities were discovered. Even so, they are willing to put up with the trouble.

They are attracted by the personal freedoms and the high quality of life in the United States. But more than anything, they want their kids to get a degree at a top U.S. university.

“They want (their children) to go to school here,” said Gary Melman, director at L.A.’s Tobin & Co. who is raising EB-5 funds for the Hercules Campus.

Even with the financial wherewithal and compelling motives, many potential foreign investors are leery of pouring a half-million dollars into a development project across the globe with a developer they hardly know.

If the project fails to accomplish its promised goals, the investor and his family will likely lose the entire investment and be deported. In the case of a project that creates 99 of 100 required jobs, the last investor to be signed up likely would be the one to be deported, Homeier said.

Because of these pitfalls, most developers have begun to ensure that their projects will create at least one-third more jobs than are necessary to satisfy the EB-5 requirements. But the developers still must convince each investor that the money will be well spent, said Joseph McCarthy, principal at American Dream Fund in Los Angeles, who helped raise EB-5 financing for the W Hollywood Hotel bar and restaurant expansion.

“There’s not a line of people at the Beijing airport with a suitcase full of $500,000 waiting to make an investment,” McCarthy said.

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