12.07.2016  
 

Washington Vineyards Attract Immigrant Investment

EB-5 visa program allows wealthy foreigners to seek permanent residency while providing cheap financing

 
by Peter Mitham
 
wine vineyard grape E'ritage E-5 investors
 
Workers plant vines at E'ritage, north of Walla Walla, Wash., which Regional Centers Holding Group is developing with backing from immigrant investors.

Walla Walla, Wash.—A little-known financing vehicle that garners funding from immigrant investors is fueling a 368-acre vineyard-oriented enclave in Eastern Washington.

E’ritage, located north of Walla Walla in the Palouse, will have 180 acres of vineyard planted to Cabernet Sauvignon, Merlot, Cabernet Franc, Syrah and Malbec. Development began in 2013, and the first phase (a bed and breakfast with 10 rooms and on-site restaurants) is set to wrap up in early 2017. Commercial cottages as well as a winery, tasting room and event/tourism center also are planned.

Walla Walla County has approved applications for up to 20 additional lodging units and associated guest amenities to be developed on the property, located at Bergevin Springs and McInroe Road.

Justin Wylie, winemaker at Va Piano and the project’s onsite manager, gave media a preview of the ambitious project this past summer. The advisory board includes former California lawmaker Bruce Thompson, geologist Kevin Pogue of Vinterra Consulting, Garrett Buckland and Ben Sinner.

Originally launched in 2008, E’ritage attracted Thompson’s interest in late 2012, after an earlier attempt to launch the project foundered in the wake of the financial crisis of 2008.

Thompson, through Business Growth Capital LLC, acquired the site out of bankruptcy proceedings in early 2013 for approximately $2 million.

Thompson, as principal and CEO of Regional Centers Holding Group, saw an opportunity to realize Wylie’s vision for E’ritage.

Based in Long Beach, Calif., Regional Centers Holding Group (as the name suggests) focuses on developing so-called regional centers, an economic development vehicle backed by funding from immigrant investors through the EB-5 visa program.

What is EB-5?

Up to 10,000 immigrant investors are granted EB-5 visas annually in exchange for significant U.S. investments in new businesses, an existing business undertaking an expansion, or a troubled business with the net result of 10 full-time jobs being created (or, in the case of a troubled business, saved). The investments set visa holders on a path to permanent residency.

Regional Centers Holding Group currently has nine regional centers. E’ritage became a venture of Farm for America LLC, a regional center established in 2011 to invest in agricultural ventures in Eastern Washington.

Thompson had acquired Farm for America at the end of 2012 from Columbia Agricultural Development LLC of Seattle, Wash. Though originally vegetable farms and vineyards, Farm for America also has handled financing for two hospitality projects, the La Quinta Inn and Suites in Tumwater, Wash., and The Lodge at Columbia Point, an upscale 82-room hotel in Richland, Wash.

E’ritage, which received approval from U.S. Citizenship and Immigration Services in May 2015, returned to its roots. Documentation associated with the project indicates that E’ritage will create 288 jobs in Walla Walla, backed by at least $14.5 million of immigrant investment. (Total development costs are $24 million.)

Wylie declined to speak to Wines & Vines for this article, explaining, “It’s too early in the building process for me to talk about the investors,” however, approximately 90% of EB-5 participants are from China.

Several Chinese-language websites address the project, however, indicating that developers are seeking 29 investors willing to contribute at least $500,000 each.

Similar programs exist in other countries. Canada, for example, has long had a program for immigrant investors.

When concerns arose two years ago regarding potential abuses of the program, changes followed that diverted interest to U.S. alternatives.

“When Canada decided to restructure its immigration program, that’s when EB-5 took off,” said Tobin Butcher, principal of Bridge Capital in Seattle, which originally set up Farm for America to finance vineyard and tomato ventures. “Our model was well sought-after by others, so we got an offer that we couldn’t refuse to buy the license,” he says.

Documents filed in support of the vineyard project outline plans to acquire 500 acres adjacent to Wallula Vineyards, acquired by Long Shadows Vintners. Allen Shoup of Long Shadows was a partner in the project, which would see 400 acres of vineyard developed.

Butcher told Wines & Vines that vineyard-oriented EB-5 investments continue to see strong demand.

“We get a lot of vineyard requests as a ratio of the amount of (EB-5) investments available in the country,” he said. “In the past year or so, interest is the highest it’s been.”

Butcher’s firm has established three regional centers focused on vineyard development, and it is working on a fourth—a tally that works out to about 10% of the 35 to 40 regional centers he’s set up during the past decade. Another five parties have approached him about the possibility of establishing vineyard-oriented regional centers in Washington.

Butcher saw agricultural ventures as prime investment opportunities when he left Goldman Sachs in 2006 to set up his own investment firm. Appreciation in land values over the past decade has confirmed that, with vineyards, orchards and specialty crops like mint and asparagus being particularly attractive.

In order to secure the capital needed to finance such ventures, the EB-5 program was ideal.

“We needed to find alternative financing sources, and EB-5 was a perfect fit, so we registered a regional center for EB-5 for our company so we could participate in investments alongside our clientele,” he said. Bridge Capital now has offices in Beijing as well as Seattle, with offices planned for the Chinese cities of Shenzhen and Shanghai in the near future.

Pairing a long-term investment from wealthy immigrants seeking permanent residency fits the needs of vineyard operators who also have a long-term view for capital investments in their operations.

“People realize that vineyards are one of those investments where you need a lot of money to start it up and you’re not going to have any revenue for the first three to five, maybe seven years,” Butcher said. “How are you supposed to service a bank loan?”

The financing from immigrant investors comes at an attractive interest rate for start-ups (0.5% annually, versus many times that for a standard bank loan), and interest is first paid after five years, eliminating near-term servicing requirements.

“EB-5 comes in, can take 40% of the capital stack down (at) 0% interest for five years, and when you pay the interest it’s relatively cheap,” Butcher explained. “For the agricultural industry, particularly vineyards, I think it’s the best solution.”

 

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