For the past several months, the global markets have shifted into unpredictable financial territory. Nonetheless, a recent data report by Wealth-X found that the number of global high-net-worth individuals is continuing to steadily increase, establishing an expanding potential investor base to match the growing number of countries offering high-net-worth investors second citizenship.
These programs have doubled in the past five years and tend to vary worldwide, however, most offer one of the following categories: investment in private sector assets, such as real estate or a business venture; investment in an entity or instrument issued by the government, such as a bond or promissory note; and contributing to a government development fund.
If you work with high-net-worth clientele, understanding which programs yield the best opportunities is key to choosing the right citizenship-by-investment program (CBI), especially when considering which real estate investment opportunities can be the most financially sound approach for clients pursuing a second passport.
These programs can be mutually desirable for both the investor and participating country as they offer legal and permanent access to an area that can be more financially desirable or provide an improved quality of life for an investor, while helping to stimulate the local economy of a participating country through the injection of direct investments.
Currently, about 20 countries offer real estate investment programs that yield citizenship or residency. The benefits and minimum investment requirements will vary from country to country, but for the purpose of this conversation we’ll look at the U.S. EB-5 program and the Caribbean CBI programs.
Investment in U.S. EB-5 program
First, let’s review the U.S. Immigrant Investor Program known as EB-5. Established in 1990, the EB-5 program was developed specifically to stimulate job opportunities and U.S. economic growth. Over the past several years, there has been exponential growth of EB-5 developments across the U.S., as according to the American Immigration Council, EB-5 has become an increasingly important source of investment for U.S. economic development projects. The Chinese in particular have shown great interest in this program, pumping billions of dollars into the U.S. real estate market.
For many foreign investors and their families, permanent residency in the U.S. can be considered coveted. Qualified wealthy foreign investors can choose to invest in one of these two EB-5 sub-categories: the traditional direct program, a direct investment into an enterprise that plans to create and maintain 10 permanent full-time jobs for U.S. workers; or a regional center program, an investment in an organization approved by the United States Citizenship and Immigration Services (USCIS) that facilitates job-creating economic development projects—typically a privately owned or public-private partnership. Advisors need to do their due diligence when counseling foreign clients on these programs as each program has different investment requirements.
Projects in what the USCIS calls target employment areas (TEA) like parts of Los Angeles, New York City and Las Vegas are becoming a popular for many foreign investors as interest continues to grow with commercial property development. Facilitated by this cash infusion, developers are rapidly producing luxury condominiums, even through renovating well-known hotels like the Waldorf Astoria New York and Waldorf Astoria Beverly Hills, as well as Las Vegas strip malls and office buildings using funds raised through the EB5 program.
For these TEAs, the minimum investment is $500,000.