After the hour-long presentation, many in the audience approached the speakers and peppered them with 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 as Christians they worried that “investing in the casino industry might violate our religious beliefs.”
With the United States still struggling to recover from the 2008 recession, China, with its booming economy and growing ranks of newly rich, has become an attractive source of funding for American-based development projects. 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, being built in Anne Arundel County by Baltimore-based Cordish Cos., is poised to be the latest beneficiary of the incentive program, which aims to spur job creation and makes a priority of luring investment to regions with relatively high unemployment.
“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.”
As envisioned, the casino will feature 4,750 slot machines, making it one of the largest gaming facilities in the country. As part of the project, Cordish is also constructing a live music venue and several new upscale restaurants, including one run by celebrity chef Bobby Flay.
The pitch to investors in Shanghai on a recent weekend was one of several in China put on by the Maryland Center, along with Cordish and the local Jinghong Exit-Entry Service Co., which assists Chinese investors hoping to emigrate.
David Cordish said the idea of seeking foreign investment for the casino through the EB-5 program was initiated by the Columbia-based Maryland Center for Foreign Investment, or MCFI, a “regional center” with a focus on gaming and entertainment.
Maryland Gov. Martin O’Malley — who talked up the importance of “engagement abroad” when he returned in June from a 10-day economic development trip to Asia, including China – said he was unaware of Cordish’s overtures for Chinese investment.
But in an interview last week, O’Malley (D) added, “It doesn’t terribly surprise me that Cordish is looking to China for financing. . . . Hell’s bells, everyone else is going there.”
O’Malley said he was not asked to pitch the Maryland casinos during his trip. Shao said he planned to have O’Malley make a personal appeal, but “at the time, it was not final that Cordish would use EB-5 financing.”
The Shanghai Jinhong Exit-Entry Service Co., which has offices in New York, San Francisco and Orlando — the main destinations for Chinese immigrants to the United States — sent an American-based staffer to Maryland to inspect the Arundel Mills site.
Cindy Shi, manager of Jinghong’s immigration department, said that about a half-dozen Chinese investors have preliminarily signed on to support the Maryland casino.
Before the EB-5 program became well known, Shi said, Canada, Australia and Singapore were the main destinations for “investment immigration” for well-to-do Chinese. But she said the United States remains the preferred destination, mostly because of the quality of American higher education, and the quality of life.
As of Sept. 12, the United States had issued more than 3,700 EB-5 visas during the current fiscal year, which runs through the end of the month. That is up from 744 five years ago — but still well shy of the 10,000 annually authorized by Congress.
Muzaffar Chishti, director of the Migration Policy Institute at the New York University School of Law, said there is risk for both the developer and the investor in the EB-5 program. For the developer, there is no guarantee the solicitations will pan out. And for the investor, the business must still be standing two years later to have an EB-5 visa converted into a green card for permanent residency.
Some potential casino investors interviewed — who asked not to be quoted by name, because they did not want friends and business colleagues to know they were trying to emigrate — said they were interested in the Maryland casino because it seemed to offer a near-guaranteed return on the $500,000 investment.
A 40-year-old woman, whose surname is Chen, said she was worried about the future for her son, now in second grade, because of a number of food safety scandals in China.
Another woman, 50, surnamed Wang, said her son is majoring in information technology in Shanghai, and wants to go to postgraduate school at the University of Southern California. Tuition would be a third cheaper if their son had a green card. “It’s a good deal for us to spend that amount of money and get three green cards,” she said.
Wagner reported from Hanover. Researcher Wang Juan in Shanghai contributed to this report.