For the past several months, the global markets have shifted into unpredictable financial territory. Nonetheless, a recent data report by Wealth-X found that the number of global high-net-worth individuals is continuing to steadily increase, establishing an expanding potential investor base to match the growing number of countries offering high-net-worth investors second citizenship.
These programs have doubled in the past five years and tend to vary worldwide, however, most offer one of the following categories: investment in private sector assets, such as real estate or a business venture; investment in an entity or instrument issued by the government, such as a bond or promissory note; and contributing to a government development fund.
If you work with high-net-worth clientele, understanding which programs yield the best opportunities is key to choosing the right citizenship-by-investment program (CBI), especially when considering which real estate investment opportunities can be the most financially sound approach for clients pursuing a second passport.
These programs can be mutually desirable for both the investor and participating country as they offer legal and permanent access to an area that can be more financially desirable or provide an improved quality of life for an investor, while helping to stimulate the local economy of a participating country through the injection of direct investments.
Currently, about 20 countries offer real estate investment programs that yield citizenship or residency. The benefits and minimum investment requirements will vary from country to country, but for the purpose of this conversation we’ll look at the U.S. EB-5 program and the Caribbean CBI programs.
Investment in U.S. EB-5 program
First, let’s review the U.S. Immigrant Investor Program known as EB-5. Established in 1990, the EB-5 program was developed specifically to stimulate job opportunities and U.S. economic growth. Over the past several years, there has been exponential growth of EB-5 developments across the U.S., as according to the American Immigration Council, EB-5 has become an increasingly important source of investment for U.S. economic development projects. The Chinese in particular have shown great interest in this program, pumping billions of dollars into the U.S. real estate market.
For many foreign investors and their families, permanent residency in the U.S. can be considered coveted. Qualified wealthy foreign investors can choose to invest in one of these two EB-5 sub-categories: the traditional direct program, a direct investment into an enterprise that plans to create and maintain 10 permanent full-time jobs for U.S. workers; or a regional center program, an investment in an organization approved by the United States Citizenship and Immigration Services (USCIS) that facilitates job-creating economic development projects—typically a privately owned or public-private partnership. Advisors need to do their due diligence when counseling foreign clients on these programs as each program has different investment requirements.
Projects in what the USCIS calls target employment areas (TEA) like parts of Los Angeles, New York City and Las Vegas are becoming a popular for many foreign investors as interest continues to grow with commercial property development. Facilitated by this cash infusion, developers are rapidly producing luxury condominiums, even through renovating well-known hotels like the Waldorf Astoria New York and Waldorf Astoria Beverly Hills, as well as Las Vegas strip malls and office buildings using funds raised through the EB5 program.
For these TEAs, the minimum investment is $500,000.
Investment in the Caribbean’s Citizenship-by-Investment Program
Now let’s take a look at Citizenship-by-Investment in the Caribbean, considered one of the most significant regions for citizenship application. What makes the Caribbean region programs so unique is that they are the only region to offer real estate investment opportunities that yield citizenship, whereas other programs like the U.S. EB-5, offer only permanent residency. Further, since the first CBI program was established in St. Kitts and Nevis in 1984, there have been a growing number of Caribbean islands launching their own programs with real estate development as a key citizenship investment vehicle.
Much like EB-5, investors also have the opportunity to invest in hotel development projects such as the Park Hyatt St. Kitts or the Cabrits Resort Kempinski. Depending on the country, the minimum investment requirements vary:
- St. Kitts and Nevis: $400,000 investment minimum
- Antigua and Barbuda: $400,000 investment minimum
- Grenada: $350,000 investment minimum
- Dominica: $100,000 investment minimum with $1,800 application fee
For clients seeking luxury beachfront real estate investment options, development communities like Christophe Harbour in St. Kitts houses a community of diverse global high-net-worth investors who chose to both invest and live in the Caribbean.
It is important that financial advisors and wealth managers inform their clients of the benefits of second citizenships, including issues related to international diversification of financial assets as well as personal assets. They should also caution each client to consider their lifestyle. America is a great country for a lot of reasons, and despite what some may say are the drawbacks of living there, you do become accustomed to the benefits. Advisors should be transparent when speaking with their clients considering living abroad that they will undergo a change in day-to-day lifestyle for themselves and their families, were they to move abroad permanently. Other than that, there really are no drawbacks of pursuing a second citizenship, as the U.S. certainly allows dual citizenship. At the end of the day, HNWI are seeking options, and second citizenship gives more options without any apparent downside.
Nuri Katz is President at Apex Capital Partners, a leading global investment advisory firm specializing in investment consulting and wealth management for multinational high-net-worth clients.