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WALL STREET JOURNAL
Real-Estate Developers Look to Vietnam for Cheap Financing
Vietnam
gains on China as one of the biggest participants in U.S.
foreign-investment program By Konrad Putzier As Chinese investors
sour on a program that offers American residency in exchange for certain
real-estate investments, U.S. developers are turning to a new,
fast-growing source of cheap capital: Vietnam. The Southeast Asian
country is rapidly gaining on China as one of the biggest participants
in the foreign-investment initiative known as EB-5. The program offers
green cards in return for investing in job-creating U.S. businesses or
real-estate projects. About 20% of the current
EB-5 investment in U.S. real estate comes from Vietnam, trailing only
the 25% from India and 30% from China, according to estimates by
Nicholas Mastroianni II, chief executive officer of the EB-5 regional
center U.S. Immigration Fund. These centers pool money from investors
and invest it in real-estate projects. The number of EB-5 visas
issued to Vietnamese nationals increased to 693 last fiscal year, up
from 471 in 2017. Only four years ago, Vietnamese accounted for barely
1% of all EB-5 visas issued, a total of 121, according to the State
Department. A number of prominent
New York City developers are advertising their projects to Vietnamese
investors through local agencies. That includes the third phase of
Related Companies’ massive Hudson Yards development, which is seeking
$380 million from EB-5 investors, and Extell Development’s Hard Rock
Hotel project in Times Square. Because the program’s
main draw is a green card, these foreign investors are often willing to
accept lower returns, making it a cheaper source of financing. The surge in Vietnamese
participation couldn’t come at a better time for U.S. developers, which
have bemoaned the decline of cheap funding as Chinese investors pull
back. “In the past, any
large-scale capital raise, anything over $50 million or $100 million,
particularly in New York, you had to go to China,” said Phuong Le, an
immigration attorney and partner at David Hirson & Partners, LLP. Now, he added, “most of
the big New York real-estate developers who were in China before are
certainly all in Vietnam now.” The Chinese have
dominated EB-5 for years, fueled by a growing affluent class and desire
for U.S. residency. In the fiscal year 2014, when the number of EB-5
visas issued to Chinese-born investors peaked at 9,128, the country
accounted for around 85% of such visas. But as Chinese interest
boomed, so did the wait times for a visa, thanks to an annual cap on new
EB-5 green cards that can be issued to citizens of any one country.
Chinese citizens could initially expect a green card in mere months.
Someone in China who filed a visa petition in October 2018 could expect
to wait 14 years for their green card, according to the State
Department. High-profile defaults by
developers who had taken EB-5 money and the deteriorating political
relationship between the U.S. and China have further undermined the
program. The number of Chinese petitions plummeted. “As soon as [the wait
time] got over five years, that’s when the market shut down,” said Bruce
Thompson, president of the regional center American Lending Center. Instead, he found an
ideal target in Vietnam, a country with a booming economy, a growing
class of wealthy business owners and improved ties with the U.S. ALC
opened its first Vietnam office in Ho Chi Minh City in June, adding an
India office in Delhi later last year. Meanwhile, the company shut down
its Shanghai office. When An Nguyen, a Hanoi
native, graduated from the University of California, Los Angeles in 2014
and was looking for ways to stay in the country, she had three options:
find an employer that would sponsor her, marry an American or get an
EB-5 visa. The first option proved challenging and the second was out of
the question, since she was dating a Vietnamese citizen who became her
husband. In September 2014, the
couple invested $500,000 in a real-estate project. The following June,
they got their green cards. Today, she works as a Vietnam business
development director at David Hirson & Partners, LLP, the EB-5
immigration law firm that helped her get the visa, and travels to the
country several times a year. Other U.S. visas can be
hard to get for Vietnamese citizens, immigration attorneys say, and fear
of political and economic instability means many wealthy Vietnamese want
to be able to move abroad if necessary. Even with growing
interest from Vietnam, India and other countries, overall EB-5
investment volume is still down considerably from its peak, observers
say. Vietnam’s estimated visa wait time, up to 7.2 years last October,
could become a problem. And then there is the
uncertainty over the program itself. One reform proposal would raise the
minimum investment from $500,000 to $1.35 million. “That,” Mr. Thompson
said, “could shut down the whole industry.” Write to Konrad Putzier
at Konrad.Putzier@wsj.com |