Price for a Green Card: $500,000 Stadium Stake
Tuesday, 17 May 2016 | 8:54 AM ET
The New York Times
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For years, sports teams have tried to defray the multimillion-dollar costs of their new stadiums by asking fans to pay thousands for personal seat licenses that entitle them to buy season tickets.
Flávio Augusto da Silva is taking the concept further. In what may be the first deal of its kind, Mr. da Silva, the majority owner of Orlando City of Major League Soccer, is asking investors from Brazil, China and elsewhere to pay $500,000 each for a stake in the stadium he is building near downtown Orlando. In return, the foreign investors receive annual dividends, two season tickets and something even more valuable: a green card that allows them, their spouses and sometimes even their children to live and work in the United States.
The visa offer is legal, and it uses a 25-year-old federal program, known as EB-5, that is under renewed scrutiny in Congress. Created in 1990, the program was intended to help pay for infrastructure projects in rural areas and poor urban neighborhoods. After bank lending dried up in the last recession, developers turned to the program to finance hotels, condominiums and other projects from Manhattan to Miami. As a result, the number of EB-5 visas awarded grew to almost 9,000 last year, from fewer than 100 in 2003.
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Mr. da Silva, though, is building a $156 million stadium, not a high-rise building or a shopping mall, and he is marketing to foreigners not because lending is tight, but because lawmakers in Florida would not provide subsidies for the stadium in the Parramore neighborhood of Orlando.
"For us, it was a business decision," said Mr. da Silva, who expects to raise about half the construction cost through the cash-for-visa program. "There was already demand from people who want to move to the U.S., have a green card and have a good opportunity to participate in the growth of the club."
Orlando City's use of the visa program, which was criticized by a leading Republican in March as "riddled with corruption and national security vulnerabilities," is a new approach for sports teams looking for ways to pay for stadiums without financial support from local communities, where officials are under pressure from voters opposed to using public money to help wealthy owners.
EB-5 financing helped pay for infrastructure work connected to Barclays Center in Brooklyn, but not for the arena itself. Developers previously tried to use the EB-5 program to finance stadium-only projects in California, Florida and elsewhere, but they hit roadblocks, including the unpredictable pace of getting EB-5 investors approved for projects that often have to be opened on specific timelines.
The Orlando project features a 25,000-seat stadium, scheduled to open for the 2017 seasons of both Orlando City S.C. and the Orlando Pride, the women's team that Mr. da Silva owns with his partner Phil Rawlins. Originally, the city and county agreed to subsidize the project. But when state lawmakers balked at approving a sales tax rebate, Mr. da Silva turned to the EB-5 program, something Orlando's mayor, Buddy Dyer, cheered.
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The team's solution "ended up being a win-win-win for everybody," Mr. Dyer said in his office near the 10.55-acre building site, where the skeleton of the stadium is taking shape. "What I tell other mayors is that I'm the happiest mayor in America, and I go through the whole litany, including soccer."
Mr. da Silva knew about the EB-5 program because he obtained his own green card in 2009 by investing in a now-troubled project in Vermont. While the strongest demand for EB-5 visas is from China, Mr. da Silva, who made a fortune — his net worth was $444 million in 2014, according to Forbes Brasil — building a chain of English-language schools in his native Brazil, decided to single out his countrymen.
Brazilians are soccer-mad and some even follow Orlando City, whose games are broadcast in Brazil and who are led by Kaká, a World Cup winner for Brazil and a former world player of the year.
Mr. da Silva's sales pitch has benefited from several years of political and economic turmoil in Brazil, where some of the country's elite are rushing to move money offshore.
The club said it had already attracted 30 investors, bringing in $15 million, or 10 percent of the project's cost. Mr. Rawlins, the team's founder and president, said about $5 million in new commitments is secured each month.
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"I don't know why people haven't taken more advantage of it, because it's a perfect thing when you're building a stadium," Mr. Rawlins said of the visa program. "The program is really about economic development."
Mark Abbott, deputy commissioner of M.L.S., said the league had reviewed the financing proposal and found it "innovative."
"The league doesn't permit this type of financing for clubs," Mr. Abbott said, "but for stadium projects, we thought it was appropriate."
In addition to their stakes in the company that runs the stadium, investors in the project receive two club seats for 10 seasons. (The investors have no control over the team itself, which is part of a separate company.) But Mr. da Silva and others did not dispute that the visas were the real draw.
Using the EB-5 program, though, can be complicated because the construction site must be in an area with high unemployment. To qualify, boundaries are sometimes gerrymandered to create an economically challenged (but essentially manufactured) neighborhood.
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Developers also must spend millions of their own money to start the construction because it can take months and even years for the government to approve each EB-5 visa. Visa applicants must pass a background check and prove that the project is viable and will create at least 10 jobs for each visa issued. The visas can be made permanent after a two-year probationary period.
Some financial advisers recommend that foreigners who are considering putting $500,000 into a real estate project choose a hotel, mall or other more certain venture — anything but a sports stadium, whose main tenant could have unpredictable results.
"When these guys win games and championships, great, but if they're not, that cash flow could change," said Michael Gibson, who helps foreigners invest in EB-5 projects. "Why invest in that when you can invest in something steadier?"
It is unclear how long other sports franchise owners will have the EB-5 program as a financing option. It is facing new questions on Capitol Hill, where lawmakers are trying to close loopholes that allowed money to be steered from projects in needy areas toward wealthier districts. Some EB-5-funded projects have turned into boondoggles, producing little or no economic benefit. In other cases, foreign investors have accused developers of misspending their money and not paying promised returns.
For now, opponents of the program have been unable to get the votes to overhaul or eliminate it, so other teams may be able to follow the path Orlando City has blazed.
In M.L.S. alone, a group led by David Beckham, the former soccer star from England, has been trying to assemble a plan for a stadium in Miami, and the owners of teams in New York, Los Angeles and Washington are in various stages of the same process.
Last edited: 19-May-16 01:23 PM