JACKSONVILLE — Jacksonville city and business leaders are working to develop a regional foreign investment group to encourage more international economic investment in Jacksonville.
The groups, sometimes also called centers, are a pilot program connected to the EB-5 immigrant investor visa offered through the U.S. Citizenship and Immigration Services in the U.S. Department of Homeland Security.
The EB-5 groups include at least one person or a group of entrepreneurs who invest a pool of foreign money for U.S. businesses and projects while giving wealthy foreign nationals a path toward permanent legal residence. A local immigration attorney said a lot of success stories come out of these groups, but there are also some real risks for the foreign investors.
“My charge from [Jacksonville Mayor Alvin Brown] is to explore what it would take for Jacksonville to establish a regional center under the EB-5 criteria,” said Michael Breen, senior director of the international department for JaxUSA Partnership, the economic development arm of Jax Chamber.
Fewer banks lending
The EB-5 immigrant investor visa was created by Congress in 1990. It’s a complicated process, but it grew in popularity after the economic crisis resulted in fewer U.S. banks lending. Foreign citizens can apply as individuals and pay at least $1 million to start a business and create 10 direct full-time jobs per $1 million or invest at least $500,000 in a center in a rural or high unemployment area that will invest a pool of money to projects that will meet the jobs criteria. Foreign investors receive U.S. conditional resident visas that must be renewed every two years.
It’s seen as an alternative for those who can afford it and have no other immigration alternatives or those who don’t want to wait through the traditional process, which can take 10 years or more. As of January, an estimated 2,364 EB-5 visas have been used in 2012, said Giselle Carson, an attorney at Marks Gray PA in Jacksonville specializing in U.S. and global immigration and business.
“Nobody was using it until the meltdown,” Carson said.
Funding a startup
Reynolds Marion wants to raise $10 million in capital for his company, Marion Hyper-Submersible Powerboat Design LLC. He is on the fence about either working with investors in his company to develop an EB-5 group and create 100 direct, full-time jobs or trying to raise the money through venture capital.
Marion, the company founder and inventor, manufactures hydrosubs, a speed boat that can move underwater like a submarine. It’s designed for several markets, including law enforcement, research and salvage, oil and gas and charters.
Marion is the only direct company employee at the small office in Lake City. He’s working to finalize deals with companies around the world to market his boats, which can cost less than $9 million and up to $30 million. If he goes the visa investment center route, he would switch from using subcontractors and bring all the work in-house, which would raise labor costs. If he sells equity to a venture capitalist to raise the money, he would likely lose ownership of his company, which he doesn’t want, he said.
“A regional center is attractive because I could get my hands on the funding without having to dilute the owner interest in the company,” Marion said.
Once the boats go on sale, there’s more than $700 million in immediately accessible sales potential outside the U.S., he said.
“Several different countries have expressed a need for these kinds of vehicles,” Marion said.
Doing the homework
The EB-5 program is not a loophole to get into the country, Breen said. The visa program and groups attract investment that may or may not have come in on its own. Plus, it creates American jobs. There’s an added incentive for foreign citizens because it speeds up the immigration process.
“It ensures that somebody who’s coming in wants to invest in new jobs and in the U.S.,” Breen said.
Carson said foreign investors need to do their homework before committing to the program. Risks can include the immigrant visa not being granted, losing the investment money, legal claims and jobs not being created.
Foreign investors who directly invest in a business and the entrepreneurs who create the regional group must have business plans approved by U.S. Citizenship and Immigration Services. Foreign citizens investing in a group adopt that plan.
“You don’t have to show the dream can be a reality,” Carson said. “You just have to show the dream.”
EB-5 centers are part a pilot program connected to the EB-5 foreign investment visa that allows foreign citizens who invest money in the U.S. to get a two-year visa.
— Foreign citizens must invest at least $1 million in a U.S. business and create at least 10 full-time jobs for U.S. workers.
— The required investment is $500,000 if the entity is in a rural or high unemployment area.
— Centers are groups of investors who manage a pool of foreign investment funding.
— A center must promote economic growth through increased export sales, regional productivity, job creation and domestic capital investment.
— Florida has EB-5 centers in Miami, Sarasota, Fort Lauderdale, Hollywood and Tampa.
Source: Staff research