Spotlight on the Latin American Market with Manuel Ortiz of Civitas – Episode 44
Spotlight on the Latin American Market with Manuel Ortiz of Civitas
Mona and Mark are on the line with Manuel Ortiz of Civitas Capital Group to talk about EB-5 in the Latin American market. They address the most sought-after projects, the Civitas approach to attracting Latin American investors, and Manuel’s best advice for developers working with Latin American clients.
If you stop to look at the EB-5 Investment Voice audience data, Mexico comes in at number six, and Brazil is not far behind at number eight. As such, it’s time to take a closer look at these emerging markets, and explore the intricacies of EB-5 investors in Latin America. Manuel Ortiz is the Head of EB-5, Sales, and Investor Relations for Civitas Capital Group out of Dallas. His responsibilities include developing and managing global investor relations as well as overseeing the EB-5 Capital Division.
Today, Manuel shares several reasons why Latin American investors are interested in immigrating to the United States, the types of projects these investors prefer, and how security concerns affect the approach Civitas takes in building relationships with Latin American investors. Mona, Mark and Manuel also examine the differences between Chinese investors and those in Latin America when it comes to choosing projects, and the pros and cons of direct investment deals. Listen to understand why renting is preferable to setting up your own Regional Center for developers targeting the Latin American market.
The Origin of Civitas Capital Group
- The name Civitas is derived from Latin, and its meaning implies a shared responsibility, common purpose, and sense of community. This is an appropriate reflection of the purpose of the EB-5 program.
- Civitas was formed 2008, and it became the official EB-5 administrator for the city of Dallas in 2009. Their first deal launched in 2010, and in the seven years Civitas has been in operation, they have formed 40-plus investment funds and raised $600M in EB-5 capital.
- Civitas is unique among Regional Centers because it is also involved in non-EB-5 investments, currently boasting a total of $1.3B in assets under management.
The Civitas Focus on Market Diversity
- Civitas doesn’t just concentrate on Latin America or China. While China represents over 80% of EB-5 investment in overall industry stats, Chinese investment comprises about 72% of Civitas’ capital.
- Civitas makes a conscious effort to deploy resources into emerging markets, dividing projects on a per-fund basis. Some of their projects do not involve any Chinese investors.
The Most-Sought After Projects in the Latin American Market
- The Latin American market tend to prefer smaller projects and Latin American investors tend to seek out equity deals more than other EB-5 investor markets.
The Importance of Regional Center Location
- Latin American investors, specifically those from Mexico and Central America, have a familiarity with Texas markets. They also favor projects in Florida, seeking to invest in the same state where they intend to live.
The Incentive to Immigrate Via EB-5
- There are a number of reasons why Latin American investors are interested in coming to the United States. Many Mexican investors cite security as their motivation; South American investors often employ EB-5 for political reasons.
- A good number of EB-5 investors are interested in getting EB-5 for their children. As opportunities for young people with student visas to obtain corporate sponsorship and remain in the States after graduation become slimmer, the EB-5 program presents a feasible alternative.
- Civitas experienced a spike in Brazilian clients three years ago, but saw interest slow down last year. As property values in Brazil decreased, refinancing became more difficult, and these circumstances likely contributed to the decline in Brazilian investment.
The Civitas Approach to Developing Trust with Latin American Investors
- Individual meetings that establish credibility are preferred by Latin American investors. For security reasons, wealthy Latin Americans are apprehensive about attending highly publicized events, thus the seminar model that thrives in China does not work well in Latin America.
- Timing is another crucial aspect of developing relationships with Latin American investors. In China, a high volume of funds can be raised quickly, whereas in Latin America, the turnaround time is much slower.
- To facilitate relationships with Latin American investors, Civitas has a Spanish-speaking staff. They are in process of adding a Portuguese-speaking staff as well, now that Brazilian investors reaching the post-investment stage will need assistance with the immigration process.
The Deals Favored by Latin American and Chinese Investors
- Civitas has had success with equity investments, and in Manuel’s experience it is necessary to drill down to fundamentals when explaining such sophisticated smaller projects.
- The vast majority of Latin American investors focus on equity investments. Historically, the loan model has been more popular in the Chinese market; however, Manuel has seen increased interest in the equity model with Chinese investors in the last seven months.
- While Civitas hasn’t gotten involved in franchise deals, those projects are also popular in the Latin American market. Immigrants fleeing violence in Venezuela and Colombia, for example, need to generate income once they arrive in the United States, and the franchise model allows them to participate directly in the project upon arrival.
The Pros and Cons of Direct Investment
- Firms must educate Latin American clients to understand that while a $500K investment does cover the minimum required by law, it is not enough to sustain a viable business that fulfills the requirement for ten full-time permanent jobs.
- Investing in a Regional Center like Civitas may be more feasible for investors with $500K, as they gain credit for indirect jobs generated by the project, and the firm’s non-EB-5 arm provides options for investors as their needs change.
Manuel’s Advice for Developers
- As regulations around EB-5 evolve, it will become increasingly difficult to set up your own Regional Center. In fact, a fee may be associated with having a Regional Center moving forward.
- Establishing your own Regional Center might make sense for setting up large fund, but renting is a more attractive option for the smaller funds and single projects preferred by the Latin American market.
Civitas’ Involvement in IIUSA
- As an active member of IIUSA, Civitas is heavily involved in the legislation process. Though it is difficult to predict what will happen, there is the potential for the investment amount to increase.
- The EB-5 program isn’t going anywhere. Manuel predicts a continued movement toward emerging markets, and the lack of infrastructure in Latin American presents both a challenge and an opportunity.