EO:Fernando has one of the most popular blog items that we’ve had in terms of hits and traffic volume. So, we wanted to come back and follow up and focus on one particular issue of the E2 Visa in regards to buying a restaurant. Why don’t we start off first by just giving a brief recap. We went in pretty deep last time with the E2 Visa, so why don’t you give a real brief summary of what the E2 Visa is and then we’ll go from there in terms of a restaurant.
USA Visas: Restaurant Investments
FP:Sure. The E2 Visa is also called the Treaty Investor Visa and it is a categorical Visa that is available to nationals of certain countries. Not every country. Certain countries with which the United States has a qualifying treaty, and for those countries, nationals of those countries who make an investment in the United States that is able to generate enough money for that investor and their family to live in the United States as a result of that investment-that foreign national can come to the United States and live here really indefinitely.
EO: Is there a minimum amount essentially that they’re having to put in to be able to get that E2 Visa?
FP:That’s one of the big myths about the E2 category. The information that’s on the Internet actually doesn’t help, because there are a lot of attorneys when you look at their websites, that tell you it requires a $250,000 investment or it requires a $100,000 investment. The fact is, there is no minimum amount. I’ve done them for as little as $7,000. Now, there are other things that are going to be involved to make a $7,000 investment work, but the key point here is that there is no minimum amount that a foreign national needs to invest. I also want to interject that this should not be confused with the EB5 Category which requires a million dollar investment. That one does have a specific investment threshold. We’ve talked about that one before, that’s a whole different animal.
EO:I think that’s where people get confused – they get the $500,000/the million, what does this mean?
FP:E2 – no minimum.
EO:E2 no minimum…since we had the original interview there have been a lot of follow up questions, and I think most of them for me personally, have been in regards to convenient stores, gas stations and restaurants. Why don’t we focus a little bit on the restaurants and go through a step by step – lets say you’re an Italian national, and you want to open an Italian restaurant here in Tampa, Florida. How would you go about doing that?
FP:Well, the first thing you would consider is, am I going to start one from scratch, in other words am I going to go and lease space and buy the equipment, or am I going to buy an existing restaurant which is maybe already Italian and change the name? The reason that’s important in the E2 context is because one of the things that you have to do is; even though there is no minimum investment amount, the immigration office here in the United States or the US Consulate, needs to be convinced that whatever amount you’ve invested, whether it’s $7,000 or $700,000, is the amount that is required to make that business viable. And the reason that’s important is, if you buy an existing restaurant, which you are buying at fair market value prices, the government is not going to question whether you invested the correct amount, because obviously whoever you bought it from is selling it for the maximum amount they could get. On the other hand, if you are starting from nothing, then you could have a situation where the government comes back to you and says, “Ok. Prove to us that the $50,000 you put into this space is enough to really make this a viable business.”
EO:So it almost sounds like it’s a better option to consider buying an existing business, is that a fact?
FP:Generally that’s what I recommend to clients. Obviously if you’re investing three, four or $500,000 to develop something from the ground up, they’re not going to question that, but most people aren’t doing that. For most people, their investment might be substantially less than that, and I always tell clients, we can do it either way, but it’s going to be a lot tighter from the standpoint of getting an approval than if you’re buying something on the open market. EO:What about franchises?
FP:Franchises are great. The reason franchises are great is because one of the things that is very key, and we’ll talk about this probably later, but one of the things that is key to the whole E2 category is the ability to show that whatever your investment is, it is going to have the ability within 5 years to generate more than a minimal living income. The nice thing about franchises is that they have all the documentation. They’ve done all the feasibility studies. They really do most of the work in connection with that 5 year forecast that you’re going to prepare when you submit your application showing that Yes! Obviously if this franchise information showed that this thing was never going to make money, you’d never buy it. So franchises are great…..love them.
EO:Let’s talk a little bit about buying an existing business and owner financing? How does that fit in? Frequently the issue is how you are going to do that – it might be $500,000 to buy this business and how you do that?
FP:Well, there are a couple of ways, and one of the things that’s unique to the E2 category, because the E2 category is premised on an investment. As a result, the regulation limit is the amount that can be financed. The limitations are a little stricter than what you would normally find in the open market. So a 20% down, 80% financing; from an E2 standpoint probably wouldn’t work, but you have to understand what the limitations actually apply to. The limitations on financing only apply to loans that are secured by the investment itself. Ok, so let’s look at the restaurant example. Let’s say that it’s a $300,000 restaurant. I only want to put $100,000 down and finance the other $200,000. There are a couple ways you can do that. If the owner finances that $200,000 and it is an unsecured loan, that’s going to be classified as cash, that’s going to be ok. This is something that comes up with a lot of my clients, they’ve been coming here to the United Sates……
EO:But realistically, you’re not going to find owners that do that – finance without collateral.
FP:No, but I’m going to get to that. There are other options. A lot of my clients have been coming to the United States as visitors for years. Let’s say they own a condominium or home, and it’s worth three or four hundred thousand dollars and they’ve paid cash for it, or maybe there’s $200,000 equity on it. You can finance the investment and secure the $200,000 loan with your home. And that’s ok, because you’re not securing it with the investment. That’s also treated as cash. If you borrow the money back home, so that it’s secured by your assets back in the UK or wherever your from, in this case Italy, again, that’s going to be treated as cash here. So there are methods that you can try and use to be able to structure that financing.
Another thing that we’ve done sometimes, and the business would have to be feasible for this, is we split the transaction, and if the person, for example, is buying a business that includes real estate, we separate the real estate purchase from the purchase of the restaurant management business as a going concern, and by doing that, because most of the money is in the equipment and the real estate and all that, we’ve put the bulk of the financing there and then we can pay the $100,000 as an all cash purchase to buy the restaurant management business. Then the restaurant management business, not holding company, the “restaurant management business” basically rents the space from your other company, and that works. So there are a lot of things that we can do. We can get creative with that.
EO:We talked about the difference between convenience stores and restaurants, and you said to me that from an E2 standpoint, a restaurant is a better selection. Why don’t you talk about that a little bit?
FP:Well, the benefit of a restaurant over a convenience store is that in my experience, convenience stores have very few employees. Restaurants, and obviously it depends on a lot of things, but restaurants will usually have more employees. The potential benefit, although not an absolute benefit, but the potential benefit is the key to the E2 – like I said before – the amount you invest doesn’t matter as long as you can show that the investment within 5 years is going to generate more money than what the investor needs to live on. So that’s sort of the first threshold and the term that the government uses for that is marginality – a business that doesn’t have the ability within 5 years to generate that kind of income is deemed marginal, and doesn’t qualify for the E2. So what the regulations say is; if a business can’t generate that kind of income within 5 years, but has employees, then you can say, “Ok, maybe I’m not putting as much money in my pocket as I’d like to, but I’m creating jobs for 6 U.S. workers,”…. I say 6 just to pick a number – there’s no magic number in the regulations. If the business is still in the process of developing to the point where its generating the kind of income you want during those years, you can rely on the fact that you’re creating jobs as a way of keeping those extensions going until you’ve really gotten the business developed. And that’s something that nowadays might be more crucial because given the economy the way it is, it might take a little bit longer.
EO:How about family members? How do you compensate family members and who can you compensate? I mean, can you bring your second and third cousin over with you off this E2 Visa, or is it just immediate family that’s able to come in on that visa and work in that restaurant?
FP:At a base level, the only people that you can bring in with you, is you, the investor, and then the investor can bring in their spouse, and any unmarried children under the age of 21. Spouses can get permission to work once they arrive in the United States. And the permission to work that the spouse gets allows him/her to work anywhere. The investor, however, can only work for the restaurant. The spouse could work for the restaurant or if the spouse, let’s say, is an IT professional – they could go work and do something else, because they might make more money doing that. Children will never get permission to work. They’ll be able to go to school, but they’ll never get permission to work. However, that doesn’t prevent your family from volunteering. Your not paying them anything. They are just there and that’s ok. Now as far as other family members: Aunts, Uncles, things like that, you can’t bring them in unless you do something – well, there are two things: A treaty investment only requires that the investor own 50%. Obviously they can own more, but the minimum is 50%, which means that a single investment can accommodate two investors.
So let’s say this restaurant, is worth $300,000 now and that you and I are brothers. We each have our own family. So instead of me having to pony up $300,000, I’m only responsible for $150,000. You’ve got the other $150,000 covered. So then we’re both coming in, we’re both bringing our families, and let’s say we’ve got a third brother, and we have a way of bringing him in as a manager of the restaurant, because he’s the one that’s had management experience back in Italy for the last 30 years. You and I have been doing something completely different. And that’s something that’s also very important: You don’t have to have any prior experience with the type of business that you’re investing in to get the investment visa. You can make the investment which is the only thing that is required and then you can hire other people to actually run the business for you. So you can be as involved as you want or if you want to be out playing golf the whole time and have your third brother who has the restaurant experience actually running it, you can bring him in in a managerial or executive capacity with his own E2 visa and he brings his own family in.
EO:That really plays right into the franchise model, doesn’t it?
FP:Sure.
EO:Subway Sandwich or McDonalds or anything like that. That really plays into that very well. So now we’ve got a pretty good summary of how the E2 works in relation to a restaurant. Why don’t you give us a real quick summary of how that works? Essentially it’s an investor’s visa, you can be as involved as much or as little as you want. It really plays well with the franchise…. family members, in terms of being paid, kids not being paid, the spouse having another job and there is no minimum investment, but realistically you’re going to have more than a $7,000 on most..
FP:It really depends – I wouldn’t want anyone listening to this to focus on how much they’re going to have to spend, because it really depends on the business. So, don’t let that be your focus. By the way that was a great summary. There’s really not a whole lot for me to do. The only thing is, and this is sort of the key point with the investment, the key point on what an investor needs to focus is what the potential profitability of this investment within 5 years is. That’s really the key point, because if you have something that’s got a profitability factor, and it doesn’t need to make a lot of money like I said we’re talking about minimal living requirements, which I characterize as what I call hard living cost. This isn’t what your actually spending to live in the United States. This is what it’s going to cost to put a roof over your head, and to feed yourself and your family, and pay utilities and gas. So, for example, I have clients who already own a home here, so they don’t have a housing expense. But, the bottom line is, they may only need $1,000 or two per month for their minimal living costs, which means that that investment, at the end of the day, doesn’t have to generate that much profit for it to work.
EO:To close out, this really is not suitable for the European restaurant chain that wants to expand, like “Pret A Manger” the great UK sandwich shop or some of the other chains (Porcão – Brazil, Señor Frog’s – Mexico, Coffee Republic – UK, Giraffas – Brazil) that are going to be establishing over here. Why don’t you give a 15 second overview of what we’re going to talk about next time?
FP:Okay, next time we’re going to talk about the L1A Category. It’s for multinational executives, so that’s where somebody who owns a business overseas, creates a US subsidiary or affiliate and by doing so is able to transfer an executive or managerial person over to personnel with specialized knowledge. The big difference with that is that the L1A does have the ability to be converted to a green card at a certain point down the road.
EO:So, hold that thought, and we’ll come back to that with the next part of the series……
The reeling housing market has come to this: To shore it up, two Senators are preparing to introduce a bipartisan bill Thursday that would give residence visas to foreigners who spend at least $500,000 to buy houses in the U.S.
The provision is part of a larger package of immigration measures, co-authored by Sens. Charles Schumer (D., N.Y.) and Mike Lee (R., Utah), designed to spur more foreign investment in the U.S. (see complete Wall Street Journal Article)
I am sure this bill is going to garner some criticism in some corners. It certainly appears on the surface to be selling US visas in exchange for foreigners’ help in bailing out the real estate market. But, maybe these visa change proposals ALWAYS should have been in place. Real estate is a “hands-on” investment, unlike other passive investments. The money invested in real estate is also “sticky,” meaning investors are more likely than not to have a time frame exit strategy of longer than one year….5 to 7 years realistically at a minimum. The investors will improve the properties, buy furniture and use local services. All of this is good for the local economy and the financial commitment closely matches programs already in place, such as the EB5 visa.
The Florida and National Associations of Realtors reports that approximately25% of all real estate sales in Florida were to foreignors for the 12 months ending June 2011. Most of these investors are from Canada, the UK and Germany. I am not sure how much this bill will effect sales to nationals from these countries as it is not currently necessary for citizens of these countries to obtain a visa before coming to the US. But, it is logical to assume passing of the bill will have positive influence on sales of real estate to Brazilian, Indian and Chinese nationals to name a few, that now have stricter requirements for entry in to the US. With a minimum of $500,000, the bill will largely attract investors that are capable of immediately contributing to the economy, perhaps start businesses here and employee US workers. There is an enormous amount of wealth being created in the emerging economies . The US has historically made it difficult on these countries’ citizens to obtain visas. To ignore their growing financial influence is not beneficial to US or Florida’s interests.
Recently, we have seen a number of duplex and quadruplex homes in and around the beach areas in Pinellas County that would be ideal for this type of investor (to live in one unit and rent the remainder). While our firm does not focus on residential property,we have assisted some of our clients acquiring second/vacation homes near the beaches. I do not anticipate the bill having a direct effect on the commercial side, but there would undoubtedly be some secondary benefit. I believe it is a good bill and hope that it is passed.
Finding Creative ways to Keep Business Moving in a Tough Economy
EO: Welcome to another update on the market with Net Lease Commercial Advisory. Again, I’m Eric Odum, Principal at Net Lease Commercial Advisory and today, we have with us Scott Jacobsen who is with – why don’t you introduce yourself…
EO: Scott has been a banker in this area for ….gosh Scott, it’s probably been 22, 23 years now?
SJ: At least…
EO: So, you’ve been around a little bit and he (Scott) presented me the other day with an opportunity I thought was very interesting in the Commercial Real Estate market in terms of the financing. Of course, there’s been a lot of discussion about illiquidity in the market. We have our feelings about illiquidity. It really has less to do, in my opinion, with the banks and probably more to do with the borrowers. But, we’re going to talk about a program today that can help on some of those illiquidity issues. So let’s talk about it. It’s the Small Business Administration’s 504 Loan Program. Why is this program a program that people should pay attention to, Scott?
SJ: The 504 Program’s been around for a long time, as long as I can remember and there are some key components to it which if you don’t know it, is very attractive — One being the 10% equity requirement for the borrower, where most banks typically will require anywhere from 20 to 30% equity.
EO: That has been going up recently (on traditional commercial loans), right?
SJ: Yes, that’s been going up – banks are requiring more equity (on traditional loans). Everybody knows rates are so low today and the SBA rates are very low as well, and the way the program is set up, the SBA takes 50% of the loan amount and actually fixes in a rate, and that rate is in the low 5’s (percent), and they lock that in for 20 years. So you get a 20 year fixed rate on the SBA’s portion of the loan, which is half of it, and 40% portion of the loan which the bank holds is locked in anywhere from 5 to 10 years.
EO: So you still have a balloon, its just there’s a smaller portion of the amount that’s going to be subject to the balloon. The government portion is a 20 year fixed loan which is pretty attractive. I know dealing with a lot of small business owners when they’re purchasing their property…physicians and lawyers too, their thought is that ‘gosh in 5 years, I don’t know what the interest rate, I want to be a little bit more sure about what my payments are going to be’ and this seems like a really good way to stabilize their payments over that period of time and not worry about the balloon, the adjustment, interest rate, that sort of thing.
EO: Let’s talk a little bit about who you think might be suited for this type of a product.
SJ: It can be and For-Profit business that…we’re going to look at underwriting this credit to typical standards, which would be: a business has to be performing well, even in this tough environment, has to be in business for at least 2 or 3 years, has to have a little equity in their balance sheet, and you know, doctors, professionals, manufacturing distributors, they all qualify. Where this program is really helpful, is if there’s something with the credit that just doesn’t quite get the approval in a traditional manner; the SBA program can push it over the top, because the bank actually at the end of the day, the bank is in at 40% LTV and the SBA is in for 50% so the capital or the equity so that the bank’s first position is very well secured.
EO: So the SBA is essentially taking away some of the risk of the bank which makes it a more attractive deal for the bank to go ahead and make the loan.
SJ: Yes, absolutely.
EO: I think you talked about there was a chiropractor you had worked with…
SJ: Yes, we had a case here just recently….. we had a Chiropractor that owns a half dozen locations, sorry, leases a half dozen locations throughout Tampa Bay and felt like this was a great time to negotiate those leases to purchase and was a little concerned about putting 20 to 30% equity into the traditional financing and thought this SBA program would be a good avenue for him to acquire those offices, lock in a fixed rate for 20 years for half of it and take some of the risk out of the balloon which you mentioned could sometimes give heartburn to clients when they know there’s going to be a balloon after 5 or 10 years.
EO: Great! So let’s talk about in terms of size…can you do this with $10k, can it be $50mil, what are the size requirements?
SJ: Minimum size is $125k and maximum is $10mil. So it’s pretty wide – it covers most transactions.
EO: Most transactions. In Tampa, your typical physician practice was less than $1.5mil. Certainly more than the $125k – it’s going to be right there. I don’t want to make this sound like it’s only for physicians, because of course, you guys have had experience with manufacturing companies and distributors, but it seems to me that the professional practices tend to gravitate toward this more. Maybe that’s because they tend to be more balanced in the Tampa Bay area toward the professional industries.
SJ: Well particularly if you’re a physician or anybody for that matter – if you’re going to be in your building and be there a long term – one of the requirements is that you have to occupy at least 51% of the space so it’s an owner occupied facility that we’re talking about. But if you’re going to be there for a while and if you’re going to pay somebody, you might as well pay yourself.
EO: It’s not a speculative investment then, this is something for owner occupied’s, running their business, has a sound business, has an established business, so that is what this loan program is really all about. Let’s talk about some of the folks that perhaps can’t get this loan, because we talked about who can. Let’s talk about some who can’t.
SJ: The ones that jump out at you: If you’re a not-for-profit corporation, you do not qualify, and if it’s real speculative then you wouldn’t qualify either. Those are really the two big ones, and there are a few other ones: gambling establishments. You know! .….the obvious ones that jump out at you.
EO: Ok, very good. So, how does this compare with the fees to traditional bank financing?
SJ: The fees…… the SBA’s got some programs now that they’re reducing fees to make it more attractive for borrowers. There is a little over a 2% fee on the SBA portion to run it through and so that has to be an embedded cost, so that at the end of the day, if the SBA’s running 20 years on their fixed rate portion at around 5.25% then throw another 2% of closing costs, you’re going to be somewhere in the 7.5% range all in which is still very, very attractive.
EO: Then you throw in the balloon-free government portion, the SBA portion of it and it becomes pretty attractive. So you have the origination fees which are a down side, but then of course you get extended lower rates through the term….. even with the fees included, it’s relatively inexpensive debt.
SJ: Now, you compare that – it you walked into a bank today and asked for a traditional owner occupied mortgage, putting 20 or 30% down, and look at a 5 year balloon, our rates would be somewhere in that 6.5% range fixed for 5 years, and we’re going to charge anywhere from .5pt to 1pt so your cost is somewhere in that 7 to 7.5% range anyway for 5 years, where you can lock in the SBA portion for almost the same time but for 20 years.
EO: Great. Terrific. Well, why don’t we just shift a little bit here and summarize. In terms of why we want to do this or why we at least want to consider this is
the SBA’s guaranteeing it, so you’re able to be perhaps a little bit more aggressive on underwriting than you guys typically would be.
It’s only 10% down and the government portion of the debt is for 20 years amortization with no balloon.
So, those are certainly the benefits to it. People that we’re looking for (the folks you want to try to lend to) they’re going to be anybody with a track record, purchasing real estate, between $125k and $10mil. Is there anything else that I’m leaving out here in terms of summarizing this program?
SJ: We haven’t really talked about – but there is the opportunity of throwing some of the equipment into the acquisition purchase and roll that into the loan amount. So, if there’s a capital intensive business or any business for that matter, we can roll that cost into the SBA as well as a significant portion of the fees can be rolled into the SBA loan as well.
EO: Oh, that’s nice.
SJ: So, there’s some great creative ways to make this worth while, and if you’re a business owner that your in a lease and you have the option to buy out that lease, we’ve seen a lot of activity recently as people recognize it’s a good time to be a value shopper for real estate and if you can lock in these rates for long term, it’s a good time to move on it.
EO: Good point. Scott, I’d like to thank you again for taking the time today to talk to us, and hopefully you guys got something out of it. If anybody wants to get in touch with you Scott, how would they reach you on this program?
SJ: Call me at 813-549-5030, or you can email me.
EO: NorthStar Bank is located in the Beer Can building in downtown Tampa. Again, we appreciate you joining us today and hopefully you got something out of it. Feel free to contact Scott if you’d like to have more info on the 504 SBA Lending Program. Thank you again, Scott.
(TAMPA, FL) — As vacancy in the metro Tampa office market climbs and rents recede, property owners and investors continue to look for the turning point that will signal the onset of an economic recovery.
Marcus & Millichap predicts a 20.5 percent vacancy rate by year end. Rents are forecast to slide 7.9 percent to $17.23 per square foot.
I had the pleasure of sitting down with attorney Fernando Perez, of Perez and Associates in Tampa, Florida this week to discuss immigration issues with real estate investors. Mr. Perez has been practicing immigration law since 1982. He is a regular contributor on FOX News and Univision related to immigration issues. He is a “go-to” guy in Florida when it comes to business and commercial immigration.
I attended the recent OPP LIVE conference in London, UK this past October and was asked repeatedly about the process of acquiring a visa by those interested in managing distressed properties in Florida or buying investment properties to manage. With the currently weak dollar and the depressed real estate prices in the State of Florida, I certainly understand why there was such keen interest.
While this interview focuses on commercial real estate investment, many of the points Mr. Perez covers can be utlized for other purposes, such as buying or starting a business in the US, or a buying a beach vacation home. The important point I took from our discussion is the US is open for business and investment from foreign investors, but one needs to understand the visa laws and work with a professional that can help them guide the way.
Mr. Perez’ website is a wealth of information about visa requirements. Click here for more information.
Full Transcript
INTERVIEWER: Eric W. Odum, Lic. Real Estate Broker, Net Lease Commercial Advisory, Inc.
INTERVIEWEE: Fernando Perez, ESQ.
Eric: Hello, and welcome to another series from Net Lease Commercial Advisory. Today we have with us Fernando Perez. Thank you very much for joining us Fernando.
Fernando: My pleasure.
Eric: Fernando is an attorney that has been specializing in immigration law over the past 27 years. We’re very fortunate to have him sit down with us today to talk a little bit about some of the investment and visa requirements for investments, primarily with real estate, but also in covering a wide range of other types of activities in terms of buying business and whatnot.
Fernando has been a consultant in both the State Department and Congress, and he also has a face for television. We know he’s been on FOX news and Univision, in terms of consulting on immigration matters, and so we’re very fortunate to have him with us today.
So hopefully you will be able to get a lot out of this and it will be able to help you make some decisions. Thanks again Fernando.
Fernando: My pleasure.
Eric: Let’s talk a little bit about the immigration visa. Typically, what people understand is that to get into the United States when you’re buying real estate or a business, you’re going to have to put down a million dollars—invest a million dollars, and hire 10 employees. When I go out and I speak to people, that is the common perception, is that really accurate?
Fernando: Well it depends, which is a great lawyer answer. What happens, Eric, is that there are two separate investment visa categories under the immigration laws, and people tend to confuse the two. Now, there is a visa category which is called the EB-5. It’s also been referred to as the Employment-Creation Visa or the Immigrant Investor Visa. Now, the characteristics of that are that persons from any country can qualify, but it does require in most instances, an investment of at least a million dollars in a US business, and as a result of that investment, 10 jobs for US workers have to be created.
Eric: Okay.
Fernando: Now, while we’re talking—
Eric: Which is not really ideal for a real estate investor—
Fernando: Exactly. It’s not going to be feasible in a lot of situations. Now, there is a new variation that I will touch on with the EB-5 before I get into the Treaty Investor category. There is a variation of the EB-5 that is an investment in something called a regional center. Those are areas of the United States that have been designated by the government as distressed. Now, if somebody makes an investment in a regional center, the investment amount is reduced to $500,000 and there is no requirement that you create employment because the investment itself, which has been pre-qualified, is already structured to create employment in the local community. So that’s the EB-5.
The other investment category, and this is the one that really is the most practical to most individuals, is what’s called the Treaty Investor Visa or the E-2. The differences are that the E-2 is only available to nationals of countries with which the United States has a qualifying treaty.
Eric: Generally, what kind of countries are they? How many are there, do you know?
Fernando: There’s probably, off the top of my head, over 50 or 60.
Eric: It’s a lot, close to half of—
Fernando: It’s a lot. Most of Europe qualifies. England, Spain, France, Italy; all those countries qualify. Canada and Mexico qualify.
Eric: Those are the big three that are investing in the United States. It’s the UK, Canada, and Germany.
Fernando: Columbia, Australia; they are all over the world. So, for somebody like that who is interested in doing something like that, just basically contacting someone like me and saying, I’m from such-and-such country, is there a qualifying treaty? And we can tell them right away, yes there is.
So, assuming there’s a qualifying treaty, the next thing—and this is the thing that’s really important—is that when you’re dealing with the E-2, there is no minimum investment required.
Eric: A big difference from the E-5, which is a million dollars to $500,000.
Fernando: Huge difference.
Eric: I mean, really, no minimum amount.
Fernando: Exactly. And if the investment is packaged correctly, for example, I’ve had investments qualify with an investment of $7000. Now, that’s rare and there were a lot of other factors involved, but the point that someone needs to take away from this conversation is, don’t think that you have to have a certain sum of money ready to invest to be able to qualify for the E-2. That’s the biggest difference between the E-2 and the EB-5.
The second thing is that with the Treaty Investor category, there is no requirement that you have employees. If the investment in the United States, is able to generate enough income to support the investor and their family, there is no requirement to have employees.
Eric: Wow. That’s another big difference.
Fernando: Huge difference. Let’s just use a real example. Let’s say that you have a British family that comes over here and buys a strip center. It’s a commercial investment because their job is that they are renting this. That clearly qualifies for E-2 treatment.
Now, the only “employees” they may have may be independent contractors. Maybe they hire a company to mow the lawn to keep up the landscaping and somebody else to do repairs every now and then, but they don’t really have to have any internal employees that they, themselves, are supervising. That’s perfectly fine. As long as that investment generates enough money to support that family in the United States, then they are good to go.
Now, when somebody comes here in E-2, the spouse can get permission to work in the United States and the children are automatically authorized to go to school. The children don’t have to qualify for a separate student visa, the wife doesn’t have to qualify for some separate type—it’s automatic. Obviously there is a paper process, but it’s not going to be denied.
Eric: So let’s talk a little bit about the types of investments you can do. If I wanted to buy a residential property down the street, am I able to do that?
Fernando: Well, yes, you can do that. There’s nothing stopping you. This is nothing to do with investments per say, but this is something that’s also misunderstood, and unfortunately it’s also misunderstood by immigration sometimes.
If somebody is here as a visitor, which is a B1, B2—or for a lot of Brits and people from European countries, they can come in under the Visa Waiver Program, which allows them to be here for 90 days without a visa. Persons like that, it’s perfectly legal for them to buy a residence in the United States. They don’t need any special permit, they don’t need to change their classification to buy that residence.
So if they want to come here and, for example, buy a vacation home, and they want to rent it out for part of the year and come back and live in it part of the year, that’s perfectly fine. They don’t need a special category for that. On the other hand, if they want to really use this as an investment that will allow them to live in the United States on a longer term, then simply buying a residence won’t do it.
Eric: Essentially, we talked about four options for them today. So why don’t you go ahead and quickly summarize for our audience what those four options that we discussed—actually there are a lot of different options, but why don’t we talk about those four that we discussed, again, just to summarize things for our viewers.
Fernando: In the area of investment, and particularly in investment that’s real estate related, the four options are these:
The Treaty Investor category, which, as I mentioned before, is available to nationals of countries with which we have a qualifying treaty, requires no minimum investment amount, does not require any number of employees, and does not require the day-to-day management of the investor.
Then we have the EB-5 category in it’s purest sense, which does require a million dollar investment and does require the creation of jobs for 10 US workers. When it is a million dollar investment, it does require the active management of the investor, it does result in a green card, and it’s available to people from any country in the world. There is no qualifying treaty that precedes that.
A subset of the EB-5 is investment in a regional center. The similarities are that it’s available to anyone and it still results in a green card, but if you’re investing in a regional center, the investment amount is $500,000, you do not have to create any jobs, and you’re not going to be actively involved in operation of the business.
The last area that we talked about is if somebody just wants to come here and buy a vacation home that they are going to use three to six months out of the year, even if they are going to rent it the rest of the time or just leave it closed the rest of the time. It’s perfectly legal for someone to do that while they’re in the United States and simply a visitor for business or pleasure status, which can be someone who enters with a natural B1 or B2 visa, or somebody who enters under the Visa Waiver Program without a visa.
Eric: Perfect. So that summarizes, essentially, the four options that we have for real estate investors to get involved in the United States. Certainly, Fernando, as an attorney, has a considerable amount of experience in this area. We’re very thankful he was able to join us today. So Fernando, again, I appreciate your time, and hopefully our viewers got something out of it. I’m sure they did.
Fernando: My Pleasure Eric.
Eric: Maybe it will help some people in the future. Thank you very much.
This is significant news out of Washington, but not unexpected, at least by this blogger. I have long maintained that the regulators, Congress and other government bodies will do what is necessary to mitigate a commercial real estate collapse. Information of upside-down loan values and the huge number of performing/non-performing loans* is well known to the industry and regulators. The banks are in no condition right now to take massive hits to their balance sheets so close on the heels of the credit freeze and residential meltdown that we just experienced.
In their guidance, the FDIC is opening the door for banks to rework, negotiate through and prudently modify loans that are essentially deemed salvageable, even if they are considered high risk, according to current underwriting standards.
Separately, it should be noted that the IRS also recently provided guidance regarding CMBS loans to allow for an improved tax environment for lenders renewing ballooning notes that have excessive loan to value ratios.
*Performing/non-performing loans are those loans that do not meet current credit underwriting standards, but the borrowers continue to pay scheduled payments. This is a term that we will hear a lot in coming months. As bleak a picture has been painted about the CRE market, most of the issues with commercial real estate debt revolve around performing/non-performing loans.
Canadians and Brits have long been significant investors in US real estate and Florida is one of their most sought after markets. We posted on here recently about the pick up in activity many of us have seen in regards to inquiries about real estate investments from international buyers. We are headed to the Overseas Property Professional show in London this week and are anxious to check the pulse of the world markets. News from the Expo Real show for commercial real estate, held in Munich earlier this month, was surprisingly upbeat. We will definitely provide an update on the show upon our return to the US next week.
In the mean time, we came across this article regarding RioCan’s (Canada’s largest REIT and retail landlord) increasing interest in the US market.
RioCan Real Estate Investment Trust, the largest real estate investment trust in the country, is getting closer to a major move into the United States –even getting RBC Dominion Securities’ opinion on a potential deal.
“We are looking around down in the United States,” Edward Sonshine, chief executive of RioCan, said in an interview with the Financial Post. “There are just so many opportunities down there. There will be individual opportunities that we will ask one of the investment-banking outfits to look into for us.” (…..complete article on RioCan’s search for US commercial real estate )
…..All told, Tampa ranks 46th out of 65 metro areas by highest rate of distressed commercial property, factoring in the size of each market. Las Vegas ranked first, with an estimated 32 percent of its commercial properties in some type of distress, followed by Detroit, at 24 percent.
Comments:Daily, we receive phone calls from individuals looking for commercial real estate in the Tampa Bay area. Usually the prospective tenants will quote articles and facts about the commercial real estate market and then proceed to use these “facts” as evidence as to why they should be entitled to seriously under-valued rent or the right to purchase a property at pennies on the dollar. Adjusting the expectations of some clients can be particularly challenging. The reality of the situation is, however, that as sluggish as the market is in the area, it is really not that bad, particularly when compared to the rest of the US. Yes, vacancies are high. Yes, there are more distressed properties on the market than 2 years ago. Yes, you can find better deals that you could back in 2006. But, Tenants are still moving to the area (albeit at a reduced rate) and deals are still getting done. As of right now, the market is soft in Tampa….but it is not dead.
The Tax Foundation is a Washington DC based think tank that collects data and publishes research studies on tax policies at the federal and state levels. The group is most famous for its annual calculation of Tax Freedom Day for the United States, which it has produced since the early 1970s. The Foundation’s mission is to “educate taxpayers about sound tax policy and the size of the tax burden borne by Americans at all levels of government.”
The Foundation recently released their their 2008 “Consensus Survey” on owner-occupied property taxes of 775 counties across the US. Not surprisingly, Pinellas Counties fared pretty well, ranking 405, lower than the national average in Taxes Paid ($1641 compared to $1897), and Taxes as a Percentage of Home Values (.8% compared to 1.0%). Pinellas County residents did, however, pay a higher percentage of taxes in relation to household income than the national average (3.1% compared to 2.9%).
Hillsborough County did not fair as well, ranking as 277 highest. Hillsborough County ranked higher than the national average in Taxes Paid, Taxes as a Percentage of of Home Value and Taxes as a Percentage of Income. Below is the comparative chart, with Hillsborough and Pinellas Counties in relation to the US average.
I would be negligent if I failed to note that this report takes in to consideration homesteaded/owner-occupied property only. Data and rankings in this report would be considerably different for Hillsborough and Pinellas Counties (and presumably the entire State of Florida) if one were to include non-homesteaded property in this survey. Commercial real estate, multi-family housing and investment or second home owners pay CONSIDERABLY higher taxes than their owner-occupied neighbors. It is not unusual to see vacation home owners pay 5-6 times their homesteaded neighbors, with both properties being identical in every physical way.
For those interested in trivia, Apache County, Arizona pays the lowest property taxes in the country, $126/yr. We wonder if there are any governmental services provided by the county.
The Tax Foundation ranked Florida #5 in 2010 as the State with the “Best Business Climate” Index. This was unchanged from their 2009 report. South Dakota topped the list as number 1, while Wyoming slipped to number 2.
Address 8206 Citrus Park Dr Property Type FedEx & Verizon – Store Building Sales Date 01/31/2012 Sales Amount $3,500,000 Amount/Sq Ft $531.67 (price includes .29 acres of adjacent parking) Prior Sale Amount $1,750,000 Prior Sales Date 05/11/2007 Exterior Wall Brick Address 15412 N. Dale Mabry Hwy Property Type Sonny’s BBQ – Restaurant Building Sales Date […]
Chicago group’s $4 million bid for Channelside complex rejected Two weeks ago, the Tampa Bay Times reported that at least two well-connected local groups have submitted bids to buy Channelside. Tampa Bay Lightning owner Jeff Vinik has teamed with Andrew Wright, head of Tampa commercial real estate firm Franklin …continue reading Breakfast menus serve up [... […]
Completion of Winn-Dixie and Bi-Lo’s merger means fuelperks program can continue The Hutton Company, representing Family Dollar Stores, secures former Coffee Cup commercial location JP Morgan Chase, Regions bank and Citibank all receive healthy ratings from BauerFinancial as real estate market improves and recession subsides With British Airways already on i […]
You are starting to imagine every aspect of the new restaurant you are about to open, the satisfied customers, the busy tables and the waiters buzzing round ensuring everything is perfect. You can visualize the space, where the kitchen is in relation to the dining area, where you’re going to greet the multitude of guests and how […]
Address 401 E Jackson ST Property Type SunTrust -Office Building Sales Date 12/15/2011 Sales Amount $82,500,000 Amount/Sq Ft $140.33 Prior Sale Amount $114,500,000 Prior Sales Date 09/17/07 Exterior Wall Glass Address 7911 W Hillsboroug AVE Property Type McDonald’s -Restaurant Building Sales Date 12/19/2011 Sales Amount $250,000 Amount/Sq Ft $91.47 Prior Sal […]
ULI Tampa Bay Commercial Real Estate Conference, held at A La Carte Event Pavillion, hear of economy that is slow to recover Tampa Bay Lightning, Wilson company and Tampa Tank team up to find real estate for homeless in Hillsborough County Columbia Restaurant and Metro Bay Real Estate win bid to Renovate Tampa Heights’ Waterworks […]
Owners of Belleview Biltmore hope to demolish property and replace with townhouses Retail or Medical office space to be put on Palma Ceia church site Wellcare, HCPCI and ConnectWise help put positive spin on Office Real Estate lease market Lee Roy Selmon’s Restaurant to Fill Space Vacated by Giordano’s Mexican Restaurant Taco Bus looks to […]
Attendees: Eric Odum with Ken Evans, Principal at Evolution Advisors Date: January 9, 2012 Subject: The Market Minute EO: Good afternoon and welcome to today’s Market Minute. I’m Eric Odum, principal Real Estate Broker for Net Lease Commercial Advisory. Today we have Ken Evans with us. Ken is a friend of mine now, but we […]
Purchase of Schalamar Creek Golf and Country Club the largest Commercial Real Estate transaction of 2011 Retail Real Estate showing signs of improvement according to LandQWest and Franklin Real Estate services Office Real Estate sector worst affected by turbulent market LongHorn Steakhouse, Kohl’s and Dick’s Sporting Goods just some of the new businesses alo […]
Real Estate values move in a continuing economic cycle. Understanding the general principles of the economic cycle is key to successful real estate investing.tampacommercialrealestate.com/real-estate-cycles/ […]
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CoStar introduced CoStarGo™ to about one hundred commercial real estate brokers in Tampa The event held at the Westshore Marriott was asuccess as CoStar ...article.wn.com/.../Top_of_the_list_Commercial_real_estate_br... […]
Tampa Commercial Real Estate, a commercial real estate brokerage firm based in Tampa FL, is inviting local commercial real estate brokers and associates to ...www.prweb.com/releases/.../prweb9485525.htm […]
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The broker, Steven Silverman of Tampa Commercial Real Estate, recently located a suitable building for Freedom Scientific. They required a building that ... […]
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The new home for Freedom Scientific is an 11500 sf building located close to Tampa International Airport and close to the Veterans Expressway Freedom ...topics.dallasnews.com/article/0fdY7lu2V64qz?q=Florida […]
Tampa Commercial Real Estate, a commercial real estate brokerage firm negotiated the lease of an Office Warehouse to Freedom Scientific.www.prweb.com/releases/.../prweb9454203.htm […]
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TAMPA — Commercial real estate company CBRE announced it has signed a long-term lease for approximately 25000 square feet of office space at the Bank of ...www.review.net/section/detail/4-25-2012-cbre-signs-lease/ […]
This is significant news out of Washington, but not unexpected, at least by this blogger. I have long maintained that the regulators, Congress and other government bodies will do what is necessary to mitigate a commercial real estate collapse. Information of upside-down loan values and the huge number of performing/non-performing loans* is well known to the industry and regulators. The banks are in no condition right now to take massive hits to their balance sheets so close on the heels of the credit freeze and residential meltdown that we just experienced.
