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Casino Developer Seeks Chinese Investment Through EB-5

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Casino Developer Seeks Chinese Investment Through EB-5

Marylan Live!

Marylan Live!

SHANGHAI – In a high-rise on Nanjing Road, Shanghai, 50 investors listened to what, we here atEB5Magazine, consider a normal sales pitch.  They were asked to invest $500,000 in exchange for a return on the investment plus a fast track green card for the United States.

The place for the investment – Maryland.  The project – a casino, called Maryland Live!. The largest being developed in the state, rapidly rising out of a parking lot at the sprawling Arundel Mills mall.

The pitch only took an hour to complete and afterwards came the questions. What are the prospects for the casinos in Maryland? What would be the return on their investment? How soon could they get their green cards? And one man was torn: He and his wife wanted to move to America, but like so many Americans who do not understand their own religion he thought that as Christians they worried that “investing in the casino industry might violate our religious beliefs.”

 

China, with its booming economy and growing ranks of newly rich, has become an attractive source of funding for American-based development projects, With the United States still struggling to recover from the 2008 recession.  And for the Chinese, “investment immigration” has become an increasingly popular way to move to the United States without the delays and vagaries of America’s immigration lottery.

The casino, which aims to spur job creation and makes a priority of luring investment to regions with relatively high unemployment, being built in Anne Arundel County by Baltimore-based Cordish Cos., is poised to be the latest beneficiary of the incentive program.

“A lot of countries have started to let investors have easy access,” said Ning Shao, director of the Maryland Center, an office partly funded by the state that facilitates trade and investment between Maryland and China.

Casino gambling is “a new industry that is very key to the state economy, especially in generating needed revenue to fund education in Maryland,” said Shao, who has been helping recruit casino investors, though not, Maryland government officials say, at their behest. The EB-5 visa program has existed for two decades but has grown rapidly as the U.S. economy stalled. Under its auspices, foreign investors have been sought for a variety of projects, including assisted living centers and amusement parks in Florida and dairy farms in Iowa.

Three “regional centers” have been set up in the District and Northern Virginia to lure investors, including one to develop real estate projects and small businesses in Wards 7 and 8 in the District.

Cordish’s more recent overtures to China also reflect the challenges private developers have faced in securing financing for Maryland’s fledgling slot-machine gambling program. Launched in late 2008, when most gaming companies were overextended and credit markets were frozen, the program is still without qualified operators for two of five authorized locations.

That may — or may not — change on Friday, when the latest round of bids is due for building and operating those casinos, including one in downtown Baltimore. In previous rounds, would-be bidders have attributed their lukewarm interest in part to a lack of access to more traditional credit. They have also cited the state’s high tax rate: About two-thirds of slots proceeds go to education programs and other initiatives.

Maryland Live! is a $440 million development that Cordish has said it could afford to build without debt financing. But the company has been looking at options, and the EB-5 program emerged as the most attractive way to pay for part of the project, company officials said.

Shao said the plan is to raise $100 million globally for the casino, with at least $75 million of that coming from Chinese investors, each putting up $500,000 — figures that Cordish officials confirmed.

To qualify for residency, an investor must show that his or her investment created 10 jobs; Maryland Live! is supposed to generate at least 4,000 jobs, Cordish officials said.

EB-5 foreign investment is a win on so many levels,” said David S. Cordish, the company’s chairman. “Having wealthy persons move to the U.S., and then create more jobs with new investments, isn’t a good thing. It’s a great thing.”

The casino, which Cordish said is on track to open in June, qualifies under the EB-5 program because the area is in one of 173 federally approved “regional centers” across the country.

Maryland’s unemployment rate is about 2 percentage points lower than the nation’s. But by using selected census tracts from the city of Baltimore and Anne Arundel and Baltimore counties, the Maryland Live! project was certified as being in a “targeted unemployment area,” meaning that an investment of only $500,000 is necessary for a EB-5 visa. Otherwise, the buy-in would be $1 million.

Cordish officials cited a Pennsylvania casino that had been financed in part by the EB-5 program. But several gambling analysts said such arrangements are not yet commonplace.

“It looks very odd, but if it’s legal, why not?” said Jeffrey Hooke, a Bethesda-based analyst. “I’m sure they’re just trying to save a few bucks. I can’t blame them.”

The strategy was relayed by Cordish representatives to state regulators on Friday, after inquiries by The Washington Post, and will likely face some scrutiny in coming weeks.

“Given the chaos in the debt market, it’s not unusual that vehicles like this would be used,” said Stephen Martino, director of the Maryland Lottery, which has regulatory authority over the state’s casinos. “I’m comfortable with what I know up to this point . . . but we’ll obviously need to get the details from Cordish on the size and scope of this investment.”

Arundel Mills mall, a massive collection of retail outlets and restaurants, draws more than 14 million visitors a year to Hanover, a few miles from Baltimore-Washington Marshall International Airport.

Just outside the entrance to a food court is a bustling construction site the length of two football fields. Four cranes tower above the mall’s highest buildings. Banners ringing the site proclaim: “COMING SOON! A World-Class Gaming & Entertainment Destination.”

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