State Takes Closer Look At EB-5 Projects
The state of Vermont is looking more closely at development projects financed with EB-5 money. That's the federal program that grants visas in exchange for foreign investments in the United States.
There have been some investor complaints; but the state says its tighter scrutiny does not imply any wrongdoing by developers.
Under the EB-5 visa program, foreigners who invest a minimum of $500,000 in projects in the U. S. that create at least 10 new jobs get a permanent green card if they are approved by U.S. Citizenship and Immigration Services.
In Vermont, Jay Peak Resort owner Bill Stenger and his partner Ariel Quiros are seeking about $600 million EB-5 dollars to upgrade two ski resorts, re-develop the downtown and add a bio-tech center to Newport, and expand the nearby state airport at Coventry. Stenger says he welcomes increased state oversight as he recruits investors.
“It will allow all the projects to be in better compliance in a timely way, and it will make Vermont an even stronger regional center because, frankly, it’s the best regional center in the country now and it will be even stronger going forward,” Stenger said.
"It will allow all the projects to be in better compliance in a timely way, and it will make Vermont an even stronger regional center." - Bill Stenger, owner of Jay Peak Resort
Vermont is one only two states to operate its own regional EB-5 Center, under the umbrella of the Agency of Commerce and Community Development. Now state scrutiny will increase and be shared by two agencies. Commerce officials will continue to promote EB-5 investments, but a project cannot proceed without approval from the Department of Financial Regulation’s Commissioner, Susan Donegan.
“We want to make sure that the private placement memorandum – that’s the document given to investors – adequately explains the risks as well as the project and potential result of a project, so that people can make an informed decision about whether they want to invest and give their money,” Donegan said.
The increased state oversight was first reported by VTDigger.org.
Commissioner Donegan says that more robust regulation was triggered by the growing complexity of EB-5 projects, not by investor complaints. Stenger’s Jay Peak Resort expansion has drawn fire from a few early investors who say that the terms of their agreement were changed without their knowledge.
It's not clear whether state review will include such already completed projects.
One project now under the microscope is AnC Bio, a bio-tech facility proposed for Newport. The prospectus date expired, and the amended document will now need new state approval.
“And we chose to update the marketing plan and we’ve had a great result,” Stenger said.
Stenger says state regulators will get, among other documents, a new, independent report showing a growing market for the artificial organ devices, liver dialysis machines, and blood pumps AnC Bio wants to make in Newport. That, he says, is likely to attract more investors to a project that is already three-quarters financed. Still, Commerce Secretary Pat Moulton says EB-5 investors should realize that none of these projects is risk-free.
"You cannot guarantee any kind of return on this investment - that's one of the very clear rules with EB-5 - so the investor needs to understand that this investment is at risk. The benefit, should the jobs be created, is the visa to reside in the U.S." - Commerce Secretary Pat Moulton
“You cannot guarantee any kind of return on this investment – that’s one of the very clear rules with EB-5 – so the investor needs to understand that this investment is at risk. The benefit, should the jobs be created, is the visa to reside in the U.S.,” Moulton explained.
She says Vermont's reputation as a good place for EB-5 development is solid, and that so far every investor has qualified for a green card.
Neither Moulton nor Donegan will set a deadline for project approval for AnC bio. Stenger says he still expects to break ground at the former Bogner Skiwear factory site in Newport this spring or summer. Stenger says several other big projects are moving along smoothly, more or less on schedule. An entire block in Newport is being demolished to make way for a new retail, office and hotel space, and construction is underway on a new ski lodge at Q Burke .