Experts not sure investors will be interested in a hybrid vehicle plant in Mississippi
The start-up automotive company that hopes to build a hybrid vehicle manufacturing facility in Tunica is relying on a funding mechanism that has not made much of a footprint in Mississippi and one that can be cumbersome and frustrating for the investor.
When GreenTech Automotive CEO Charles Wang announced Oct. 5 that he wanted to build a facility, the first phase of which would employ 1,500 people and cost $1 billion, he said part of the start-up capital would come from the EB-5 Immigrant Investor Program.
The EB-5 program became law as part of the Immigration Act of 1990, designed to encourage foreign investment in the United States.
To participate, a foreign investor files an application with the U.S. Center for Immigration Services (USCIS) and agrees to spend $1 million on an economic development project in exchange for a temporary Visa. The investment number is reduced to $500,000 if the investor agrees to invest in an economically depressed region, such as Tunica, through a regional center. In both cases, the investment has to create a minimum of 10 jobs.
It’s not an easy process. For almost every other employment-based green card petitioner, the USCIS allows for a $1,000 fee that will expedite the application’s movement through the federal bureaucracy, a mechanism called “premium processing.” So far, premium processing has been unavailable to EB-5 petitioners. Another hindrance is separate adjudications for each application related to the same project. In other words, one EB-5 applicant can choose to invest in a project such as GreenTech and gain approval, while another applicant can invest in the same project and have to go through a separate adjudication process that gauges the validity of the project that has already been found to be legitimate.
“The only thing an adjudicator should review is an individual investor’s source of funds,” Stephen Yale-Loehr, executive director of Invest In the USA, which advocates for EB-5 investors, told the U.S. Senate Judiciary Committee in July.
Separate adjudications can delay an investor gaining clearance for several months, exacerbating the need for premium processing, Yale-Loehr said.
At his announcement in Tunica, Wang acknowledged that EB-5 funds would be a part of the start-up capital, but did not say exactly how much foreign investment he hoped for or needed. A source close to Wang admitted that there would have to be a “substantial amount” of non-EB-5 capital raised before the project could move forward. “This will not be a total EB-5 project,” said the source, who requested anonymity.
Aside from the event in Tunica in which four prototypes were unveiled, there has already been at least one major sales pitch to a large group of investors. On Aug. 8, officials with Gulf Coast Funds Management, the regional center dedicated to raising EB-5 funds for GreenTech, and Paul Swenson of the Mississippi Development Authority (MDA), who serves as the state’s China representative, met with investment firms and individual investors in Beijing to solicit EB-5 money for the Tunica plant. A GreenTech press release says multiple “exclusive agreements” were made but provided no details. Swenson had not returned e-mails seeking comment by the time the Mississippi Business Journal went to press last week. Reached at his office in New Orleans, Gulf Coast Funds Management president Taylor Beery declined to offer specifics, other than to say GreenTech becoming a reality “will clearly have a transformative impact on this part of Mississippi. There is a long road ahead, but the management of (GreenTech) has also come a long way.”
Gulf Coast Funds Management was incorporated in Aug. 2008, and serves as the EB-5 regional center for Louisiana and Mississippi. Beery said GreenTech is currently the only project for which it is handling EB-5 funds.
That might provide the biggest clue as to how many Mississippi companies have used EB-5 Visas to raise capital. The stipulation that regional centers only involve themselves in projects within their designated region and Gulf Coast Funds being little more than a year old would all but eliminate the possibility that EB-5 money had flowed into Mississippi before.
An MDA representative could not confirm that.
That makes Mississippi’s first confirmed foray into the EB-5 market akin to a politician’s first campaign experience coming in a run for the White House.
By virtue of size and cost, GreenTech is the largest project to ever depend upon the EB-5 program for at least a part of its funding.
The project’s first phase, Wang said in Tunica, will cost $1 billion. That is only $12.5 million less than the total amount of EB-5 money that has flowed into the U.S. since Oct. 2006, according to July testimony before the Senate Judiciary Committee from Robert Kruszka, deputy chief of Service Center Operations for the USCIS.
“I just don’t know how much funding they’ll be able to raise, or how many investors outside the United States will be interested in a hybrid vehicle plant in Mississippi,” said Dr. Fan Chen, assistant professor of economics at Ole Miss, and an expert on the EB-5 program. “I would say this is brand new for Mississippi. It’s certainly not common.”
By CLAY CHANDLER I STAFF WRITER
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