First it was Mauritius. Then came Portugal, Malta and Cyprus. And now it’s the US that is becoming a destination of choice for wealthy South Africans looking to obtain a second passport through a property purchase.
About 300 SA families have apparently already applied for a green card by investing $500,000 in real estate projects in dedicated areas — known as targeted employment areas (TEA) — across the US. But the minimum investment required by the US EB-5 Immigrant Investor programme will nearly double to $900,000 on November 21.
"Anyone who is seriously considering applying for a green card through the EB-5 programme needs to do it now, to take advantage of the current $500,000 threshold," says Chris Immelman, head of Pam Golding International, one of a number of real estate agents and investment advisers promoting EB-5 opportunities in SA.
Europe has traditionally been the top relocation choice for SA families in search of an offshore bolt hole, but Immelman says the US is now appearing more regularly on SA radars, particularly among families that want to secure a quality tertiary education and future job opportunities for their children. "After all, the US is the biggest economy in the world. Its top-end universities count among the best globally and offer a multitude of study disciplines," he says.
That English is spoken in the US is of course a further incentive, as South Africans won’t need to learn a foreign language to obtain citizenship as in the case of Portugal’s Golden Visa programme, for instance.
Immelman says another key attraction of investing in a property venture using the EB-5 plan is that the initial capital investment is returned. The investment period varies from project to project, but is usually from five and eight years. Investors also have the opportunity, in some real estate schemes, to earn an income on their capital in the interim — albeit typically only at about 1%-2% a year — and potentially to share in a portion of the net profits once the capital is paid back.
It is the first time in the 28-year existence of the EB-5 that the US government has increased the minimum investment amount. Daniel Ryan, MD of the Africa division of US private investment firm Atlantic American Partners (AAP), says the 80% threshold increase accounts for inflation in the US over nearly three decades. The US government also wants to bring the minimum capital requirement in line with similar schemes offered by other countries. Ryan says Australia requires a minimum US$1.5m for its foreign investor programme.
So what exactly is the EB-5? It was created in 1990 under US legislation to stimulate foreign investment and job creation. It allows immigrants from any country to become permanent residents (commonly known as green card holders) by investing in new commercial business enterprises or property developments in TEAs that create at least 10 jobs for US workers.
The minimum investment amount for the US green card programme will soon almost double
— what it means
EB-5 applicants will typically invest in a single property asset. For instance, Pam Golding International’s EB-5 offering is a residential development in downtown Chicago. However, some promoters offer exposure to a portfolio of property assets. AAP’s latest EB-5 fund includes three new real estate developments in different cities: a residential apartment project, a hotel and a high-end student housing community.
James Bowling, CEO of Joburg-based immigrant investor adviser Monarch & Co International, says the EB-5 programme is widely regarded as the fastest way to obtain a green card for SA families as it provides benefits to the applicants and to their dependants under the age of 21. It usually takes 18 to 24 months to obtain a temporary green card from the time an application and investment is made, but Monarch & Co claims through its investment and lawyers it can fast-track the process to just nine months.
Bowling says once applicants receive approval for a temporary green card they have to enter the US within six months. Temporary green card holders can immediately start a business, work or study anywhere on US soil. And they will need to apply for a permanent green card (ultimately citizenship) once they are living in the US. It generally takes five years to obtain citizenship status, which Bowling says can be extended to parents.
However, industry players warn that an investment in the EB-5 is not without risk. Immelman says it is crucial for promoters to be able to vouch for the integrity of the developer they choose to partner with and for them to have first-hand knowledge of the project in which investors are entrusting their funds.
Ryan shares the sentiment, saying investors need to investigate the various EB-5 schemes that are being promoted properly to avoid potential pitfalls. Despite the looming November 21 deadline for the current minimum investment requirement, he cautions investors not to rush into anything. He says your entire investment — and thus green card approval — can be lost if an inexperienced or dodgy developer goes out of business before the project is completed.
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