Some years ago, winemaker Justin Wylie discovered what he thought would be perfect growing land north of Walla Walla, Washington.
The former wheat farm of 386 acres that he purchased had all the ingredients for growing great grapes. The only problem was the money needed to convert the land, and that seemed insurmountable. Banks were not interested. His dream looked busted. Then one day he learned about an obscure federal program that allows wealthy foreign nationals to gain visas if their investments created verifiable new jobs in the U.S.
Today, on the rolling Palouse hills rises a vineyard and resort complex called Eritage. The vineyard is producing “fantastic fruit” and luxury suites will open this year. What caused the change? Money from wealthy people in China who invested in the project through EB-5, a program created in 1990 and so named for the fifth-based preference visa the participants receive.
To receive visas, immigrant investors must put up $1 million (or $500,000 in targeted distressed areas of need) in new enterprises that benefit the U.S. economy by generating at least 10 full-time jobs. Since the program began, the U.S. government estimates more than 11,000 immigrants have invested $5.8 billion in 562 projects that generated 174,000 jobs.
By some estimates, EB-5 provides about 30 percent of capital needed for a project. Two Washington projects with EB-5 money include The Lodge at Columbia Point in Richland and La Quinta Inn and Suites in Tumwater. The federal agency that administers EB-5 does not track investments by sector, such as farms.
Wylie, founder of Va Piano Vineyards, said the funding through an EB-5 program requires expenses, time and complex paperwork, but it represents an attractive source of alternative funding for growers. “It’s been great,” he said. “My group has been great from the beginning. There haven’t been any issues.”
Tobin Butcher, a principal with the Bridge Capital financial company in Seattle and a consultant for EB-5 projects in Washington, said agriculture can be very attractive to foreigners, but the sector is less active because farming is more of a closed community and it is difficult for investors to know what projects are available.
Butcher said many of his projects involve Chinese investors, but EB-5 is open to any qualifying foreign participant. Butcher’s company has an office in Beijing and soon will open an office in Ho Chi Minh City because Vietnam has generated considerable new wealth and potential EB-5 investors. “Vietnam is China 12 years ago,” he said.
Should you pursue it?
Before U.S. growers start practicing their Mandarin, there are some cautions.
For starters, navigating EB-5 is complex and requires professional consultants. Second, while the EB-5 program may provide an alternative source of capital, it does not change the basic principles of farm economics.
For example, Wines & Vines magazine reported in early 2017 that one of Washington best-known winemakers, Allen Shoup, was looking at buying 500 acres for a vineyard near Walla Walla using some financing from EB-5. Months later, he said the deal never went through because the land costs were too high. Even so, Shoup, of Long Shadows Vintners, wouldn’t rule out considering EB-5 again.
EB-5 as a concept works for vineyards, he said, in part because wine growing areas in Washington could classify as economically distressed. To have a better shot at meeting the job-creation requirement, a vineyard would most likely need a winery.
Shoup said if he were to do an EB-5 project, he would be scrupulous about making sure his foreign investors got reasonable returns and new jobs were really created. He referred to “sleight of hand” issues in some EB-5 projects that have generated controversy, including criticism of the Kushner family, who are linked by marriage to President Donald Trump.
In May of last year, the New York Times complained in an editorial that the Kushners were highlighting their White House connections to entice Chinese investors to family developments.
The newspaper went on to call the EB-5 program a “scandal magnet” because of fraud and illicit sources of foreign money.
In a response to the editorial, a spokeswoman for a trade group known as the EB-5 Investment Coalition agreed that reforms were needed to prevent fraud and protect national security, but the program as a whole was a valuable generator of new jobs and investments in neglected communities.
Eritage in Walla Walla has seen none of those problems.
Wylie’s stalled hopes for a vineyard gained life when a group called American Lending Center (ALC) bought his land for $2.3 million, modified the business plan to better fit EB-5 requirements, and brought in needed capital.
Based in Long Beach, California, ALC has done about 65 projects with EB-5 money for a total investment of about $250 million, mostly in new hotels. Its president, Bruce Thompson, is a former California state assembly member and a former regional administrator of the U.S. Small Business Administration.
Thompson estimated ALC’s total investment in Eritage to date at $20 million. EB-5 investors provided about $13.5 million, he said. Eritage is the only agricultural project ALC has done in Washington, and he’d like to do more. “We’d love to talk to farmers about doing projects in Washington,” he said.
Wylie is happy with his relationship with ALC and the Chinese investors
“I know there’s been a lot of bad publicity both in Seattle and New York, but this group has been very honest, and it’s been a true honor to work with them.”
Wylie hasn’t met all his investors, just some who visited Walla Walla to see what he’s planted, mainly out of curiosity. As passive investors, the Chinese made no decisions on what is planted or other operational issues.
Wyle said the quality of the grapes he’s raising is excellent. He’s planted a large number of varieties, including Malbec, Merlot, Chardonnay, Cabernet Franc, Cabernet Sauvignon, Syrah and others. His Chinese investors are pleased with what they’ve seen, said Wylie, though their top priority isn’t a beautiful resort and winery — or even profit on the loan.
What they really want is that visa. •
—by O. Casey Corr