Specialists in EB-5 Investments

General Questions

Many countries have investment treaties that enable their nationals to obtain treaty investor visa status and promptly relocate to the US based upon their investments. South Africa does not. Fortunately there is a solution for wealthy South Africans who want to immigrate to the US. The solution is called EB-5. Very popular in Asia, this program has only recently come to the attention of many in the South African community.

The EB-5 investor visas allow wealthy individuals wanting to relocate their family to the US or large foreign corporations that wish to establish a strong business presence in the US to essentially buy a green card for themselves and their immediate family (spouse and children).

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Approved EB-5 investors will receive a US green card within 18-20 months. There are two options for investors who want to obtain green cards for themselves and their family members through the EB-5 program. If the investor wants to start his own business in the US, the investment must be either $500,000 or $1,000,000 (depending upon the geographical area of the investment), and the business must directly employ 10 full time US workers.

This program has proven to be of very limited popularity. The option that is chosen by more than 95% of investors is the “regional centre EB-5” program. This program enables affluent South Africans to obtain a green card with a $500,000 investment in a construction or export-related project within a government-approved regional centre that also generates 10 full time jobs.

EB-5 investors are required to maintain their $500,000 investment in the regional investment centre for 5 years when such money is returned with interest or a share of the profits. As you can see from the graph below, the cost of the US EB-5 program compares favourably with other immigrant investor programs.

The EB-5 Immigrant Investor Program is the fastest, simplest and most reliable way to gain a Green Card or permanent resident status in the US.

The EB-5 program was initially approved by Congress in 1990 and currently allows for up to 10,000 visas to be issued annually to investors in a US business or real estate enterprise that creates employment. The investor is granted a permanent Green Card for themselves and their immediate family (children up to the age of 21) within 4 years from the start. They can however move to the US to live, work or study once a conditional Green Card is issued, which only takes 18 – 20 months.

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The EB-5 visa program requires an investment of $500,000 into a new business or real estate project that creates 10+ jobs. The capital is returned after 5 years and the investor earns interest on their investment. LCR Capital Partners assists its clients to obtain their Green Cards by guiding them through the application process and facilitating this investment in the US.

The United State Citizenship and Immigration Services (USCIS) require proof that the investor has not been convicted of a crime, have a history of fraud or has previously violated US immigration laws. The capital must be fully invested in the project for a period of 5 years.

The whole process takes about 18 – 20 months for an EB-5 applicant to get a conditional green card. Once an applicant has a conditional green card he and his immediate family (children up to the age of 21) can move to the US. Permanent resident status usually takes another 2 years.

South African EB-5 applicants must be mindful of exchange control regulations. Individuals over the age of 18 may invest up to R10 million (approximately $647,000) abroad, per calendar year.

Doing so requires the individual to provide an authorized bank with a tax clearance certificate issued by the SARS. The R10 million limit on exchange controls would not be a problem for EB-5 investors, unless the US Congress elects to raise the current minimum amount of $500,000.

The South African Treasury Department requires that the purchase of foreign currency be conducted through authorized dealers, a list of which is available on the South African Reserve Bank’s website.

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Children’s education: The biggest benefit often cited is the ability to provide one’s children with a college or university education in the US. Investors children may qualify for state and federal financial aid and pay reduced “in-state” tuition and have a higher likelihood of acceptance at many top schools.

  • Tuition rates for International students are significantly higher than those paid by US residents.
  • Foreign student’s tuition rates at top US public universities may be as much as $200,000 higher than “in-state” tuition over a four year period.
  • Most US universities limit foreign student populations to 20% or less of the student body.
  • At UC-Berkeley for example the 2014 in state acceptance rate was 19.5% compared to the international acceptance rate of 8.8%.
  • A foreign student under an EB-5 visa is treated as a US resident applicant and thus will not be impacted by the limitation applied to international students.

Expanded Work Opportunity: Live and work anywhere in the US and pursue the full range of professional and business opportunities in the world’s largest economy independent of where the EB-5 investment is made.

Removes Uncertainty: The EB-5 program does not require any specialized skill or qualification nor is it subject to a lottery system like other visa options (including H1-B, L1). For example the H1-B visa that allows US companies to employ foreign workers in specialty occupations has a less than 30% likelihood of success. In April 2015 the USCIS held a lottery for 65,000 H1-B visas from over 233,000 applications.

Direct Path to US Citizenship: Can apply at the five year anniversary of receipt of their conditional resident status.

It is important to be mindful of the fact that the US taxes its citizens on their world-wide income, no matter where they live. Green Card holders are required to file US tax returns no matter where they reside. South Africa, on the other hand, only taxes individuals that reside in South Africa.

The top federal tax rate in the US is however slightly lower than in South Africa and the US tax code is complex (over 72,000 pages long) which allows for tax optimization strategies that can reduce the burden significantly. LCR Capital Partners can put you in touch with Grant Thornton, a pre-immigration tax planning firm.

The current requirement is for a $500,000 investment for a 5 year period. LCR Capital Partners structures this investment as a senior secured loan in a business that creates 10+ jobs.

The capital is returned to the investor after 5 years. The loan has an interest rate of 0.25% payable to the investor annually. There is a $60,000 administration fee that LCR Capital Partners charges which covers the setting up of the investment structure and administering the investment over the 5 year period.

In addition immigration attorney fees can range from $10,000 to $30,000 and government fees are an additional $6,000. The $500,000 investment is returned after 5 years.

LCR Capital Partners groups various investors (up to 98) together to invest in 70+ Dunkin Donuts stores in Florida. The fund invests in the construction of the new stores and purchases the land on which the stores are built. The funds revenue is boosted by the rental income and the sale of the land at the end of the holding period. To date, the Dunkin Donuts franchise averages 24+ jobs per investor (10+ is the required rate).

Dunkin Donuts Statistics: Publicly traded company (NASDAQ: DNKN) with 60 years of brand heritage and track record. 12,000 restaurants in 44 countries around the world, including South Africa. $10.1 billion Revenue (2015) The future growth of Dunkin Donuts continues to accelerate.

EB-5 investments have backed many fantastic real estate projects all over America.

  • EB-5 capital from China breathed new life into in Las Vegas, pumping millions into The Downtown Grand casino hotel project and also injected $50 million to part finance Trump Bay Street, a 50 story luxury rental apartment development, which is managed by President Trump’s son-in-law’s business, Kushner Companies.
  • The EB-5 immigrant investor programme enables foreign investors and their immediate families to obtain American green cards or permanent residency by investing $500,000 (R6, 725, 000) in businesses or real estate projects that create at least 10 full time jobs for Americans.
  • If you want to gain access to the American green card by adding luxury real estate to your international investment portfolio this can be done through LCR Capital’s real estate fund, which will help finance the development of the iconic Surf Club Four Seasons Hotel & Residences. This 1930s property at 90th Street and Collins Avenue in Miami Beach, was frequented by the likes of Frank Sinatra, Grace Kelley and Winston Churchill See Surf Club Page for more info.

LCR Capital Partners has created EB-5 investor funds which group the investors (up to 98 investors) into funds of approximately $49m, called Atlantic American Opportunity Franchise Funds. To date 4 such funds exists. These funds ensure greater protection in the event of store closures because the investment is spread over 70+ stores and not just one store.

Dunkin Donuts has one of the most successful new store development rates in the US with an annual closure rate of less than 2%. The fund loans the money to experienced multi-unit Dunkin Donut operators who in turn put in 25% of their own equity to build new Dunkin Donut stores in Florida.

LCR Capital only provides EB-5 loans to experienced multi-unit operators that typically have a net worth of $15m. These loans are senior secured loans, meaning in the event of bankruptcy the loans are repaid before any other parties receive payment.

The funds revenue is boosted by the rental income and the sale of the land at the end of the holding period. The investor receives his $500,000 investment at the end of the five year period.

LCR is a firm founded by first generation US immigrants. We therefore understand the challenges of starting a new life in the United Sates and are committed to enabling a successful US transition for all our clients. The LCR senior management team met at Harvard Business School in the mid-1990s and built distinguished track records while working at many of the world’s premier investment and consulting organizations.

We are a partner owned private equity investment firm that facilitates EB-5 investments in top franchised US brands, in the quick service restaurant sector, which has high job creation and principal protection characteristics, as well as the real estate sector.

Which has high job creation and principal protection characteristics. LCR uses the best EB-5 support teams in the market place. LCR combines expertise in lending, franchise strategy and franchise operations and applies this expertise to benefit EB-5 immigrant investors.

Immigration is not for the faint hearted and can be one of the hardest things to do. Nevertheless South Africans seem to have the right ingredients to make successful immigrants in the US. Although still a small community in the US of less than 100,000, South Africans have made huge strides in many different fields.

There are several networks of South Africans in various parts of the country that we can put you in touch with that can be very helpful in terms of getting established. Please reach out to our representative in Cape Town, Douglas van der Merwe, if you would like further information on LCR Capital Partners EB-5 program.