EB-5 Investment Insights Warns of Poor Outlook for Casino and Tenant-Occupancy Projects

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Not all EB-5 projects are created equal; EB-5 Investment Insights comments on the impact of USCIS policy and economic trends on immigrant investment projects.

One does not have to look far to find evidence of the U.S. casino industry’s recent struggles. It appears that even multi-billionaires can’t make the casino business model work as it once did in the U.S.

EB-5 Investment Insights, a third party research group specializing in analysis of investment sectors within the EB-5 pilot program, warns that immigrant investors should use caution when considering financing a casino-related or tenant-occupancy EB-5 project. This advisory is due to policy changes of United States Citizenship and Immigration Services (“USCIS”) as well as tenuous economic trends within the casino sector, as documented by NBC News.

EB-5 is a United States government-approved program that offers foreign investors the opportunity to gain permanent residency in the United States in return for financing job-creating domestic projects with a half-million dollars or more. Start-up enterprises across the U.S. have successfully leveraged the EB-5 program to obtain financing when traditional forms have proven more difficult to obtain, and the result has often been in job and economic growth for surrounding communities according to USCIS records. However, failure for an enterprise that receives EB-5 funding to create the prerequisite number of jobs can result in a denial of visas to immigrant investors.

"Casino EB-5 projects in particular may face an uphill battle with creating the number of jobs required by the EB-5 program," said Adrienne Bakelmun, an International Development and EB-5 Specialist with offices in London, Sri Lanka, and Hong Kong. Bakelmun noted some of the biggest names within the industry have taken significant losses in the recent past, including Trump Entertainment Resorts with the February sale of Trump Plaza in Atlantic City for “a scant $20 million,” leaving the company with $250 million of debt on the property.

“One does not have to look far to find evidence of the U.S. casino industry’s recent struggles,” Mr. Bakelmun said. “It appears that even multi-billionaires can’t make the casino business model work as it once did in the U.S.”

As the U.S. economy remains rife with uncertainty, casinos are failing across the country; Atlantic City’s Revel Casino filed for bankruptcy in February of this year, according to a March 25 Reuters report. In 2012 The New York Times featured an article on the struggles of the Foxwoods Casino Resort, which has since been forced to restructure $2.2 billion in debt.

“No one is saying the casino industry is doomed,” Mr. Bakelmun added. “However, casino spending in the United States is as low as it has been since the global economic crisis. And proliferation of casinos outside of places such as Las Vegas and Atlantic City means you have more casinos fighting for a shrinking U.S. market. As existing casinos battle for a dwindling spend, and many are struggling or failing all together. For this reason we encourage EB-5 investors to think carefully before financing a casino-related project.”

Tenant-occupancy EB-5 projects face a different sort of challenge according to Mr. Bakelmun. The recommendation for investors to carefully examine tenant-occupancy projects stems from increasing USCIS scrutiny being applied to projects that depend on third parties to lease space within new construction and create indirect jobs. Based on a December 20, 2012 memorandum from USCIS, project applicants will be forced to show “how a specific project will fill an existing investment void in that area to generate new demand for the tenant business.”

In addition, the memorandum states USCIS will not give credit to situations of “job shuffling,” or moving jobs from one part of town to another, meaning that projects must demonstrate that new jobs will be created. The result of this, according to some EB-5 analysts, has been increased delays or even denial of projects submitted to USCIS, which could prove detrimental to the immigration status of EB-5 investors.

EB-5 Investment Insights is a privately-owned third party research group that specializes in analyzing areas of investment within the United States EB-5 program.

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Jason Edwards