A Simplified Guide to EB-5 Visa Requirements and Availability.
- What is the EB5 visa?
- What are the EB5 visa requirements?
- How to apply for an EB-5 visa.
- Tips on choosing an investment pathway.
- How to evaluate EB-5 investments to make the right choice for you.
- What are Targeted Employment Areas (TEA) and why are they important?
- How to choose your EB-5 investment amount.
- What is the full cost of the EB5 visa.
- What are the benefits of the EB-5 visa.
- Understanding EB-5 visa processing times (including a step-by-step breakdown and table).
- Ready to invest? Here are the next steps.
- Understanding the EB-5 Visa Timeline: From Application to Green Card.
- Taking the next steps with Peachtree.
- FAQs
The EB-5 Immigrant Investor Program supports economic growth by stimulating job creation and capital investment and provides investors and their families with the opportunity to live, work, and study in the United States without company sponsorship or cumbersome renewal processes.
The program was established by the United States Congress in 1990 and offers foreign nationals the chance to obtain permanent residency by investing in U.S. businesses.
How does EB-5 differ from other immigration.
This investment-centric approach sets the EB-5 visa apart from many other U.S. immigration visa programs by directly linking immigration benefits to economic development and job creation and providing an investor with the chance to obtain permanent residency.
Unlike visas based on employment, family ties, or humanitarian grounds, the EB-5 visa requires applicants to make a significant financial investment in a U.S. business. Additionally, if the EB-5 visa requirements are met, the program provides a pathway to permanent residency (a green card) not just for the investor, but also for their immediate family members, including spouses, and unmarried children under the age of 21, offering a comprehensive solution for families seeking to relocate to the United States.
Yearly Distribution of Immigration Visa Slots
About 1 million immigrant visas are granted each year.
- A base allocation of 620,000 is from “preference categories”
- Preferences are broken down into family-based (480,000 annual allocations) and employment-based (140,000 annual allocations)
- There are five versions of employment-based
- EB-5 is the fifth “preference”, i.e. the 5th version
EB-5 visa requirements are simple in theory; would-be immigrants invest capital (at least $800,000) into a designated project or business that will create at least 10 jobs for workers in the U.S.
To dive a little deeper into requirements, the full EB-5 process includes several steps:
- Minimum Capital Investment: $800,000 invested over 4-7years.
- Background Check: No U.S. immigration law violations, criminal convictions, or history of financial fraud.
- Documented Lawful Source of Funds: Requires documentation proving the capital investment was earned legitimately, typically documented by an immigration attorney.
- Investor Petition Form I-526E: An investor pooling their investment with one or more qualified immigrants participating in the Regional Center Program uses this form to petition USCIS for status as an immigrant to the United States.
- “At Risk” Investment: The investment must be fully invested in the U.S. economy for a minimum of twenty-four months, and until the required jobs are created.
- Create Jobs: The investment must lead to the creation of at least 10 jobs per investor petition for U.S. workers.
Below we’ll break down the nuances of EB-5 visa requirements, including the minimum cost of an EB-5 investment.
We’ll explain the factors involved in calculating EB-5 visa processing times and visa allocations, and touch on how to evaluate the requirements of EB-5 investment projects.
In the simplest terms, these are the steps involved in what you will need to do to secure your green card through EB5 investment.
- Decide if it's the right immigration pathway for you.
- Determine if you meet the EB-5 visa requirements.
- Get experienced EB-5 immigration counsel. If you haven’t already engaged with one, the Peachtree team can give you recommendations for an attorney from our network of trusted legal experts who specialize in the EB-5 Visa.
- Select an EB-5 investment. Keep reading to learn more about how to choose the right project.
- File form I-526E. This solidifies the promise that you’ll invest money, create jobs, and otherwise comply with all EB-5 Visa requirements.
- Answer all questions and get approved (note: there is no guarantee).
- Start two years of conditional lawful permanent residence. More information on what constitutes ‘conditional’ here.
- File form I-829. This form shows that you kept your promises and fulfilled all your EB-5 investment requirements.
- Receive a permanent green card (which also includes the removal of conditions).
- Optional: apply for citizenship after maintaining the green card requirements for five years.
You have two primary pathways to choose from: Direct EB-5 Investment and the and the Regional Center Program. They are quite different approaches to securing your U.S. permanent residency.
Direct EB-5 Investment Approach
Direct EB-5 Investment involves investing directly in a business you manage yourself, giving you full control over the project. This EB-5 visa type requires you to actively manage the business and to directly hire at least ten concurrent, full-time workers.
While this model offers direct involvement in the operation, it also places the responsibility of managing all aspects of the business, including payroll processing, record-keeping, and EB-5 compliance.
This includes:
- Finding someone you trust in the U.S. to run and manage your investment while you are in your home country.
- All of the legally required reporting, including compliance with U.S. employment laws and record-keeping for several years.
- Fulfilling all stringent paperwork requirements, both quarterly and annually.
The Regional Center Approach
In contrast, Peachtree sponsors projects pursuant to the Regional Center program. By doing this, we simplify the entire process for you.
Under the Regional Center Program, your investment is managed by Peachtree Group, and your EB-5 visa job-creation requirements are satisfied by a widely accepted econometric formula instead of employee payroll records.
The Regional Center program allows you to pool your investment with others as long as the econometric models show the creation of at least 10 jobs per EB-5 investor.
Peachtree Group Projects
Peachtree has completed billions of dollars in loans and has a robust pipeline of deals. We make sure a quality subset of those deals become EB-5 investments as long as they qualify and meet all of our criteria and that of the regulations of the EB-5 Immigrant Investor Program as outlined by USCIS.
This means there is a constant stream of reliable EB-5 opportunities in our pipeline. Here is a list of our latest featured deals, or contact Victor Espinosa (Vice-president, Global Business Development) for more information about our process, read this article on the Peachtree Advantage.
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Choosing the right EB-5 investment is a core pillar of your success.
There is a lot of pressure to choose the right project because it impacts your path to U.S. residency and your financial contribution.
This section outlines the key factors you should consider when evaluating the EB-5 visa requirements.
Criteria for Evaluating EB-5 Projects
Character:
Always evaluate the character and experience of the professionals with whom you do business. Peachtree’s 17-year history and the decades of finance work of our professionals have taught us that the most important factor in any finance or business dealing is the character of the people with whom you work.
Peachtree’s reputation as a smart company with smart, approachable people with integrity is important to us. We are listed as one of the best places to work by USA Today and Inc. Magazine and our principals were just named the best bosses in commercial real estate by the trade publication GlobeSt.
Complexity:
Make sure you can understand the business and financing plan of the deal you’re considering. Some EB-5 deals have very complicated structures with many multiple layers of entities and sources of capital. Complex does not necessarily mean bad, but a simple deal allows you to understand how your investment goes into a deal, how it will be used, and when you’ll get paid back.
Job Creation Potential:
The core EB-5 visa requirement is to stimulate the U.S. economy through job creation. Because of this, a major criterion for evaluating an EB-5 investment is its potential to create at least ten full-time jobs for U.S. workers per investor.
For example, at Peachtree, we our Boone project creates 13.5 jobs per EB-5 investor.
Investor Rights and Protections:
You already know that understanding your rights as an investor is always important. You want to look for projects that offer clear terms on investment returns, capital repayment, and the administrative fees involved.
Your EB-5 projects should also provide transparency around your exit strategy and the conditions under which your funds will be returned. You also want to assess the legal protections in place to safeguard your investment against potential disputes or failures.
Financial Structure:
An EB-5 project’s financial health is also central to its success. You need to evaluate whether the project is well-capitalized and has strong funding beyond just the EB-5capital.
This includes examining the capital stack, which should have a balanced mix of equity, debt, and EB-5 investment, reducing the reliance on EB-5 funds as the primary source of capital.
Peachtree’s EB-5 projects retain the senior position on all debt. This means we don’t we don’t need to wait for any other loan to be repaid before we get repaid.
It’s another unique advantage of partnering with Peachtree Group. Our projects are also fully financed, which ensures that our projects will not have to wait for the EB-5 capital to be raised in order to commence construction.
The U.S. Government allocates visas based on the project type. A portion of the total 9,940 available EB-5 visas are reserved for Targeted Employment Areas and infrastructure projects.
Of the 9,940 EB-5 visas, 20% (1,988 visas) are allocated to rural projects. A further 10% (994 visas) are reserved for projects in areas of high unemployment. Finally, 2% (198 visas) are earmarked for infrastructure projects.
Before the EB-5 law was updated in 2022, the demand for visas from certain countries far exceeded the annual limit, leading to potentially years-long waiting times for investors. The new law created separate, reserved categories that currently have no backlogs.
Rural Projects
Projects in Areas of High Unemployment
Infrastructure Projects
Distribution of EB-5 Visa Allocations by Project Type
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The EB-5 minimum investment amount for the EB-5 visa program depends on the location of the investment project. Currently, EB-5 visas require:
- $800,000 for projects located in Targeted Employment Areas (TEAs) which are either rural areas or areas with high unemployment., or for projects that qualify as infrastructure projects.
- $1,050,000 for projects that are not in Targeted Employment Areas or do not qualify as infrastructure.
These investment thresholds were adjusted in 2022, reflecting an increase from previous amounts to account for inflation and other economic factors.
It is worth noting that the minimum is set to be adjusted for inflation every five years, if you wait, you could end up paying more.
Beyond the EB-5 visa’s required investment amount, there are several additional expenses. Applicants must account for legal fees, which can vary significantly depending on the complexity of the case and the attorney's expertise.
There are also administrative fees charged by the regional center or the direct investment project, which cover the costs of managing and processing the investment.
Government filing fees, including those for Form I-526E (Immigrant Petition by AlienInvestor) and Form I-829 (Petition by Entrepreneur to Remove Conditions on PermanentResident Status), add to the financial outlay.
Additionally, applicants need to budget for EB-5 visa costs related to medical examinations, translation, and certification of documents, and travel expenses for themselves and their families.The EB-5 minimum investment amount for the EB-5 visa program depends on the location of the investment project. Currently, EB-5 visas require:
The EB-5 visa offers numerous benefits that make it an attractive option for investors seeking U.S. permanent residency and a chance to truly call the U.S. home. One significant advantage is that an EB-5 visa provides a direct path to a greencard, with fewer bureaucratic hurdles compared to other immigration options.
Recent reforms and streamlined procedures have led to enhanced accuracy in the adjudication of applications, ensuring that investors receive timely and reliable decisions. These improvements have also contributed to faster processing times, allowing investors and their families to secure their residency status more quickly. That said, it is important to be realistic about visa processing times and to understand the process.
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EB-5 visas require processing to be administered by two departments of the U.S. government. The USCIS reviews EB-5 petitions for qualification and approval. USCIS also processes “adjustment of status” for applicants who are lawfully in the United States to get their green cards.
The section of the law that covers the allocation of immigrant visas is called 8 USC 1153. You can read the official U.S. code here.
The U.S. Department of State issues EB-5 visas to petitioners outside of the United States which allow the petitioners to enter the country and obtain their green cards.
The USCIS has target processing times for reviewing the EB-5 Visa Petitions, and then they have the actual EB-5 petition processing time based on data from previous years. These figures are different.
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EB-5 visa processing times vary and no one can know in advance exactly how long processing will take in any individual case.
Criteria for Evaluating EB-5 Projects
Step 1: EB-5 Visa Petition Approval Time.
This measures the time from the date on which the investor’s petition is received by USCIS to the time USCIS issues its decision.
There may be one or more rounds of questions from USCIS about the petition (called “Requests for Evidence” or “RFEs”) during this period.
- Target EB-5 Processing Time according to the EB-5 Reform and Integrity Act of 2022 (the “RIA”): Less than 120 days (4 months) for TEAs or less than 240 days (8months) for non-TEAs.
- Typical EB-5 Visa Processing Time Range: 19 to 52 months, reflecting recent trends due to USCIS workload.
Step 2: EB-5 Visa Number Wait Time.
This measures the time some investors with approved petitions may have to wait if demand for the EB-5 visa and overall immigrant visa demand from their country exceeds certain annual quotas.
- Typical EB-5 Green Card Processing Wait Time: Currently, there are no waiting times for investors from any country, including EB-5 investors from China and India who invest in the new “reserved” categories established under the RIA.
- Extended Wait Time: The process can take several years if the number of EB-5 applicants surpasses the available visa quota. Currently, these wait times apply only to EB-5 investors from China and India, and only for those investors who applied before the RIA.
Step 3: Time from EB-5 Approval to Visa Issuance.
After approval, EB-5 investors must submit documentation to the National Visa Center within the U.S. Department of State, and then they must attend an interview in a U.S. consulate abroad.
Approved investors who are legally within the United States may apply for “adjustment of status” with USCIS, instead.
- Expected EB-5 Visa Processing Time: This can vary significantly depending on USCIS and Department of State staffing.
- Historical EB-5 Visa Processing Time: Around 6 months, potentially extending under high-demand scenarios.
Step 4: Conditional Permanent Residence Duration
- Fixed EB-5 Green Card Processing Time: Exactly 2 years, starting from the date of admission under the EB-5 visa.
Step 5: EB-5 Permanent Green Card Finalization; the “Removal of Conditions”
- Target Processing Time for EB-5 Visa: Less than 90 days to remove conditions.
- Actual EB-5 Green Card Processing Time Range: 26 to 49months, since 2019. Note that the EB-5 immigrant and family may remain in the U.S., work and travel while the removal of conditions is pending.
Key Points to Remember:
- Target EB-5 Visa Processing Times are ideal processing durations set by regulatory goals
- Actual EB-5 Visa Processing Times offer a realistic look at durations based on the current USCIS processing landscape.
- Delays in EB-5 processing times are generally influenced by application volumes, visa availability, and administrative (staffing) capacity.
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Your EB-5 FAQs, answered.
The U.S. Congress created the Employment Based fifth preference immigrant visa program (the “EB-5 Program”) in 1990 to stimulate the U.S. economy through job creation and capital investment from foreign investors. The EB-5 Program allows investors, and their spouses and unmarried children under 21, to apply for U.S. lawful permanent residence by making a qualified investment into a new commercial enterprise with the intend of creating or preserving ten (10) permanent full-time jobs for qualified U.S. workers.
In 1992, U.S. Congress created the EB-5 Immigrant Investor Program, also known as the Regional Center Program, which sets aside EB-5 visas for participants who invest in commercial enterprises associated with regional centers approved by USCIS based on proposals for promoting economic growth, including prospective job creation and increased domestic capital investment. On March 15, 2022, President Biden signed the EB-5 Reform and Integrity Act as part of the Consolidated Appropriations Act, 2022 (Public Law 117-103), which created new requirements for the EB-5 immigrant visa category and the Regional Center Program. Immigrant visas are authorized under the Regional Center Program through September 30, 2027.
Based on the current requirements under the EB-5 Program a qualified immigrant investor must invest $1,050,000. The amount of capital required is reduced to $800,00 for an investment in a targeted employment area or in an infrastructure project. The administrative fee, legal and application fees are not included.
Minimum Capital Investment: $800,000 invested over 5-7 years.Background Check: No U.S. immigration law violations, criminal convictions, or history of financial fraud.Documented Lawful Source of Funds: Requires documentation proving the capital investment was earned legitimately.‘‘At Risk "Investment: The investment must be fully invested in the U.S. economy for a minimum of twenty-four months, and until the required jobs are created.Create Jobs: The investment must lead to the creation of at least 10 jobs for U.S. workers.
- Minimum Capital Investment: $800,000 invested over 5-7 years.
- Background Check: No U.S. immigration law violations, criminal convictions, or history of financial fraud.
- Documented Lawful Source of Funds: Requires documentation proving the capital investment was earned legitimately.
- ‘‘At Risk "Investment: The investment must be fully invested in the U.S. economy for a minimum of twenty-four months, and until the required jobs are created.
- Create Jobs: The investment must lead to the creation of at least 10 jobs for U.S. workers.
A targeted employment area is a rural area, or an area designated by the Secretary of Homeland Security as a high unemployment area at the time of the investment. The term “rural area” means any area other than an area within a metropolitan statistical area (as designated by the Director of the Office of Management and Budget) or within the outer boundary of any city or town having a population of 20,000 or more (based on the most recent decennial census of the United States). A high unemployment area is an area that has experienced unemployment at a rate that is at least 150% of the U.S. national average.
- Select the Project
- Review and sign the offering documents
- Deposit the $800,000 capital contribution and administrative fee
- File Form I-526E, Immigrant Petition by Regional Center Investor with USCIS;*If you are already in the US studying / working under a different visa, at the time of the Form I-526E filing, you will be eligible for concurrent filing, which allows you to remain in the U.S., and to work and travel in and out of the U.S. while your Form I-526E is pending.
- Once the Form I-526E is approved if you are residing in the U.S you may submit your Form I-485 Application to Register Permanent Residence or Adjust Status to USCIS; or if you are abroad, the National Visa Center will notify you to visit a US Consulate to obtain an EB-5 visa for admission to the U.S. The green card issued to you at this stage is a conditional green card which is valid for two (2) years.
- Between 21 – 24 months after receiving you conditional green card, you will submit Form I-829, Petition by Investor to Remove Conditions on Permanent Resident Status to USCIS, which would provide documentation to prove that the investment has been sustained and the job have been created. Once the Form I-829 is approved, you will become a Permanent Resident of the U.S.
- The EB-5 visa is available to citizens of all countries
- The immigrant petition covers the investor, his/ her spouse, and all unmarried children under 21
- The investment amount may be gifted or loaned to the immigrant investor
- To qualify for the EB-5 visa, there is no age, education, business experience or language requirements
- The EB-5 visa provides a quick path to permanent residence and U.S. citizenship
- Provides freedom to live, work, study and own property in the U.S.
- The right to attend public school and college
- You and your family are protected by all of the laws of the U.S, the State in which you reside, as well as local jurisdictions.
More on theEB-5 Visa program.
A Path to Permanent Residency
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Stay informed.
What is Form I-829 for EB-5?
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Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.EB-5 Investment Thresholds Set to Rise: What You Need to Know
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The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.Static and dynamic content editing
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A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!How to customize formatting for each rich text
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Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.The Peachtree Advantage in EB-5 Visa Investment
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The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.Static and dynamic content editing
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A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!How to customize formatting for each rich text
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Peachtree Group Launches Restaurant Management Division
ATLANTA (SEPT 4, 2024) – Peachtree Group, a vertically integrated investment management firm, has launched a restaurant management division. Under the leadership of Daniel Puglisi, SVP of corporate operations for hospitality management, this division will focus on operating quick-service restaurants, starting with coffee shops.
This new venture underscores Peachtree Group's commitment to expanding its footprint in the hospitality industry, beginning with a high-profile partnership with AdventHealth and launching a Starbucks location in its AdventHealth Orlando hospital.
The U.S. Quick Service Restaurant (QSR) market was valued at approximately$320 billion in 2023, encompassing major chains like McDonald's and smaller regional players. Coffee shops, including big names like Starbucks, Caribou Coffee and Dunkin', make up 12-15% of this market, contributing tens of billions in annual revenue.
"Since our founding in 2007, we have consistently grown by identifying inefficient markets and capitalizing on them to achieve strong returns and build sustainable businesses," said Greg Friedman, Peachtree Group’s managing principal and CEO. "The expansion into restaurants from our existing hospitality management capabilities was a natural evolution. Our partnership with AdventHealth marks a significant milestone as we look to replicate this successful model across their network and other captive locations."
The Starbucks at AdventHealth Orlando is now open and is the first storeto be opened under this new division. It is strategically positioned within the hospital's flagship university campus, featuring a two-story glass storefronton a prominent corner. This initiative is part of a broader strategy to enhance patient satisfaction and provide convenient, high-quality service to hospital visitors and staff.
Peachtree Group is also in discussions with other coffee franchise offerings and aims to extend its reach to high profile or high demand markets with captive audiences. The goal is to establish a robust portfolio of high-profile quick-service coffee shop locations nationwide.
The new division will oversee all new and existing restaurant locations not within its own portfolio of hotels. This includes transitioning its downtown Orlando Starbucks location at its dual-branded Hilton Garden Inn andHome2 Suites by Hilton to the restaurant management division.
"Our commitment to excellence in service and operational efficiency sets us apart in the industry. By leveraging our extensive hospitality expertise and premium brand partnerships, we are able to deliver exceptional experiences to our customers and value to our landlord partners," Puglisi said.
This initiative follows a year-long development process, beginning with a lease agreement signed in August 2023 and construction commencing in February2024. Peachtree Group has toured several other AdventHealth campuses, laying the groundwork for future expansions.
Peachtree Group's strategic approach and customer service mindset have been key factors in securing this partnership. As other hospital systems observe the positive impact on AdventHealth's patient satisfaction scores and asset enhancement, Peachtree Group anticipates a growing demand for similar arrangements.
"We are excited about the potential to grow this venture rapidly, with an initial goal of reaching five stores as a beta test and ultimately aiming for 100 locations," Puglisi added. "Our focus is on hospitals, universities and other high-traffic, high-visibility locations where we can make the most significant impact."
About Peachtree Group
Peachtree Group is a vertically integrated investment management firm specializing in identifying and capitalizing on opportunities in dislocated markets, anchored by commercial real estate. Today, the company manages billions in capital across acquisitions, development and lending, augmented by services designed to protect, support and grow its investments. For more information, visit www.peachtreegroup.com.
Contact:
Charles Talbert
678-823-7683
ctalbert@peachtreegroup.com
Peachtree Group Hosts Mark Zandi of Moody’s Analytics: Insights on U.S. Economy, Commercial Real Estate, and Investment Opportunities
Peachtree Group welcomed Mark Zandi, Chief Economist at Moody’s Analytics, for our most recent Market Update. Mark is responsible for directing economic research across macroeconomics, financial markets and public policy and offered his insights into the U.S. economy's performance and near-term prospects, highlighting reasons for optimism while focusing on the stabilizing benefits for commercial real estate and private credit investments amid moderating inflation.
Here are some key highlights from his presentation:
Economic and Market Performance:
- 2023 Real GDP Growth: Approximately 2.5%, surpassing expectations and indicating a strong year despite initial downturn concerns.
- 2024 Real GDP Growth: Projected at around 1.5% for the first half, with an expectation of about 2% for the full year.
- Unemployment: Currently just over 4%, a slight increase from previous years but still considered low.
- Inflation: Continues to moderate, with current levels very close to the Federal Reserve's target of 2%.
- Long-Term Rates: The 10-year Treasury yield is expected to stabilize around 4-4.5%, with mortgage rates potentially settling just below 6%.
- Commercial Real Estate: The market is adjusting, particularly in the office sector, but overall price declines and transaction volumes are expected to stabilize over the next couple of years.
Positive Developments:
- Supply-Side Improvements: Increased immigration, productivity, and a surge in U.S. oil production have helped ease inflationary pressures.
- Consumer Spending: High-income households are in a strong financial position, driving the economy forward despite struggles among lower-income households.
Potential Risks:
- Federal Reserve Policy: Concerns that if the Fed does not cut rates soon, it could lead to financial instability.
- Election Outcomes: Potential for social unrest and policy uncertainty depending on the results.
- Long-Term Fiscal Issues: High debt-to-GDP ratios and the potential for future fiscal crises if long-term fiscal challenges are not addressed.
Investment Environment:
We, too, are optimistic about the economy and believe a soft landing is the most likely scenario, aligning well with how we are investing our capital. While certain commercial real estate investments will experience challenges as they're calibrate to a higher-for-longer interest rate environment, it still remains a favorable climate for Peachtree Group’s near- and long-term capital investments in credit, as well as opportunistic strategies, including development in the hotel sector for the coming years. Overall, many of the overarching themes Mark discussed echo what we have observed in the market, specifically:
- Stabilizing Interest Rates: The highly dislocated lending environment, with $2 trillion in loans maturing in the next three years, becomes more manageable as 10-year Treasury yields and mortgage rates stabilize, creating a predictable environment for financing and refinancing commercial real estate projects. This could lead to increased investment activity.
- Inflation Moderation: As inflation moderates, cost pressures on property operations and development ease, enhancing profitability and investment returns.
- Consumer Spending: Strong consumer spending, especially from high-income households, supports demand for commercial spaces in retail and hospitality sectors, despite current challenges.
- Private Credit Opportunities: The dislocation in traditional lending markets creates significant opportunities for private credit investments, offering attractive, equity-like returns with relatively lower risk due to substantial equity buffers in transactions.
- Regulatory Environment: Regional banks facing pressures may retreat from commercial real estate lending, opening opportunities for alternative lenders. This benefits private credit investors and those with capital for loan purchases and recapitalizations, leveraging the firm's disciplined processes and strategic real estate ownership.
Mark Zandi is chief economist of Moody’s, where he directs economic research. Moody’s is a leading provider of economic research, data and analytical tools. Zandi was a co-founder of Economy.com, which Moody’s purchased in 2005. He is on the board of directors of MGIC, the nation’s largest private mortgage insurance company; is the lead director of Policy Map, a data visualization company; and is on the board of the Coleridge Institute, a non-profit that facilitates the use of data across federal, state and local governments. An influential source of economic analysis for businesses, journalists and the public, Zandi frequently testifies before Congress. He is the author of Paying the Price: Ending the Great Recession and Beginning a New American Century, which assesses the monetary and fiscal policy response to the Great Recession. His other book, Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis, has been described by the New York Times as the “clearest guide” to the financial crisis. Zandi earned his BS from the Wharton School at the University of Pennsylvania and his PhD from the University of Pennsylvania, both in economics.
Peachtree Group Closes $40 Million in CPACE Financing for AC Hotel in 23 Days
ATLANTA (June 24, 2024) – With ongoing credit market dislocations, Peachtree Group originated a $40 million retroactive CPACE loan to BLG SAN DIEGO, LLC (BLG) for its recently opened 147-room AC Hotel San Diego Downtown Gaslamp Quarter in Calif. The Commercial Property Assessed Clean Energy (CPACE) financing was amortized over 30 years and required no payment for a year, followed by five years of interest-only payments. Also, the proceeds allowed BLG to pay down its senior loan with California-based Preferred Bank and E. Sun Commercial Bank, Ltd. to under $20 million, there by mitigating the banks’ exposure.
“This innovative capital structure significantly alleviated the immediate financial pressures, enabling the hotel to establish a solid cash flow foundation during its initial years of operation,” said Greg Friedman, Peachtree Group’s managing principal and CEO.
Despite the U.S. hotel industry's strong RevPAR performance, multiple headwinds exacerbate financial stress for owners. These headwinds include the lagging profitability of U.S. hotels, persistently high interest rates and historically high property insurance costs.
“When we opened the AC Hotel San Diego Downtown Gaslamp Quarter in March 2023, there was a sizeable disconnect between hospitality fundamentals, which are strong, particularly in San Diego, while the debt markets were deteriorating meaningfully,” said Brad Honigfeld, founder, chairman and co-CEO of the New Jersey-based Briad Group®.“ The Fed’s tightening process and rising fund rates drove up the cost of debt considerably.”
Hotel and commercial real estate owners face a tough few years as trillions of dollars in debt come due, and refinancing gets harder, compounded by banks' tightened lending standards.
According to JLL Research, by the end of 2024, $5.8 billion worth of U.S. hotel-securitized loans will be due for repayment, requiring full payment, refinancing, extension or sale. However, if these loans were refinanced at current interest rates, most would struggle to generate enough income to cover their debt costs.
In this challenging lending market, Commercial Property Assessed Clean Energy (CPACE) financing has become a vital source of liquidity. This option is growing in importance as owners face impending debt maturities and scarce refinancing opportunities.
CPACE financing has rapidly gained traction in the commercial real estate market, reaching a cumulative $7.2 billion in the U.S. in just over a decade, according to PACENation. This significant milestone underscores the growing acceptance and adoption of CPACE financing as an innovative and effective solution. Peachtree Group, a key player in this market, has demonstrated its commitment to CPACE financing, with over $800 million in CPACE originations.
The AC Hotel San Diego Downtown Gaslamp Quarter is in downtown San Diego's Gaslamp Quarter, known for its restaurants, shops and nightlife.
“Our hotel was benefiting from its location and performing to its original underwriting, but the debt costs were straining cash flows,” Honigfeld said.
Retroactive CPACE funding offers unique advantages for property owners. It operates similarly to normal pre-project funding, with one key difference: 100% of the loan proceeds can be used to reimburse the property owner for costs already incurred. This feature makes retroactive CPACE a valuable resource for property owners seeking better loan terms or improved cash flow for completed projects.
“The financial relief it provides not only ensures the hotel's success but also positions it for long-term stability. By reducing the financial burden in the early years, owners can focus on delivering exceptional guest experiences and achieving operational excellence,” Friedman said.
This strategic approach paves the way for the asset to transition to a more favorable financing market in the future, ensuring its sustained profitability and growth.
About Peachtree Group
Peachtree Group is a vertically integrated investment management firm specializing in identifying and capitalizing on opportunities in dislocated markets, anchored by commercial real estate. Today, the company manages billions in capital across acquisitions, development and lending, augmented by services designed to protect, support and grow its investments. For more information, visit www.peachtreegroup.com.
Contact:
Charles Talbert
678-823-7683
ctalbert@peachtreegroup.com