+ Why is SPACE now focused on projects in the U.S.?
As Americans with 13 years of experience developing and managing award-winning hospitality and residential projects in Asia, we believe that the U.S. real estate market is on the upswing and that we are well positioned to capitalize on the current opportunities. Given the growing demand in China to invest in safe, high-return projects, we have focused our investments on major gateway cities in the U.S.
+ What is SPACE’s development strategy?
Our investment and development strategy is based on a set of strong fundamentals:
- Attractive Location: Acquire thoroughly vetted properties in the fast-developing districts of Hollywood and Downtown Los Angeles.
- Strong Demand: Our developments address the city’s severe shortage of hotel rooms – Downtown LA currently has a deficit of 4,000 hotel rooms.
- Favorable Financing Terms: Use EB-5 program to secure equity project financing with little to no debt, creating higher returns and safer investments than projects that utilize conventional financing.
- Added-Value Expertise: Utilize extensive local network from combined 30+ years of local real estate experience to obtain building permits and increases to FAR to provide immediate added value to property.
- Strong Team of Partners: Collaborate with best-in-class, internationally-recognized hotel and F&B management companies to optimize asset performance.
+ Who are the different parties involved in the construction of your projects?
Our development partner, Hollywood International Regional Center (HIRC), is the main principal in the development and construction of the hotels under construction. HIRC has over 30 years of experience developing various real estate projects in the Los Angeles area and has already successfully utilized the EB-5 program for prior hotel projects.
Other partners that we are working with include:
- Wyndham Hotels Group, the largest hotel management company in the world
- Jeffers Mangels Butler Mitchell, a Los Angeles-based law firm specializing in hotel transactions with over $50 billion in transaction experience
- PKF, the largest hotel consulting firm in the world
- Visas Consulting Group, a China-based immigration agency with over 35 years of experience
+ Why is SPACE focused on investing in Los Angeles?
Los Angeles has many strong fundamentals that make it an attractive investment destination:
- Second largest city in USA with 18 million residents
- Downtown LA has a shortage of 4,000 keys
- Hollywood is undergoing revitalization with $4 billion in development projects in the pipeline
- Direct visitor spending totaled $16.5 billion in 2012
- 1 in 10 Los Angeles residents are employed in the hospitality industry
+ What is the current state of the hotel market in Los Angeles?
Downtown Los Angeles has a shortage of 4,000 hotel rooms due to the revitalization of the submarket, spurred by the 3.5-million-square-foot L.A. Live Development and the recent upgrades to the Los Angeles Convention Center.
Hollywood is undergoing a massive gentrification process with $4 billion in development projects currently proposed and under construction. Developers are attracted to the area due to the already vibrant nightlife and entertainment vibe, the local government’s focus on creating a safer and more attractive neighborhood, and lower construction costs compared to nearby cities.
+ What is EB-5 and why are you using this program for your projects?
EB-5 is a United States federally approved program that enables foreign nationals who invest money in the U.S. to obtain a green card. Founded in 1990, the program has many variations but for the purposes of our endeavors, Investors who invest US $500,000 and whose investment creates 10 jobs in our designated projects are eligible for U.S. residence.
Our development partner, Hollywood International Regional Center (HIRC), assists international investors in receiving lawful permanent U.S. residence through secure real estate investments or loans secured by real estate. The EB-5 program in this case allows HIRC to secure equity project financing with little to no debt, creating higher return and safer investments than projects that utilize conventional financing.
Program utilization is at an all-time high with investor petitions more than doubling between 2011 and 2012. 2013 was yet another record-breaking year of EB-5 capital formation, with 6,434 foreign applicants. Over 80% of the USA EB-5 investment market comes from China. To date, the program has raised $8.6 billion and created at least 57,300 jobs.
+ What happens to the project if EB-5 capital cannot be raised?
We can use traditional debt financing or raise other sources of equity. When EB-5 capital is raised, it can replace the conventional debt financing (i.e. bridge financing).
For Dream Hotel Hollywood (Phase I), HIRC secured a $12 million line of credit from an institutional bank in the event that EB-5 capital was not successfully raised. It was not ultimately used.
+ What is the investment timeline of the projects?
EB-5 investors have an investment period of at least 5 years.
For equity investors, in the event that we receive an attractive offer, we are able to sell a Project upon receiving an attractive effort. However, we conservatively estimate that it could take up to 5 years after investment for the Investor to fully exit.