Measure introduced to alter EB-5 program; RealNetworks called a good investment; Hermès store at The Bravern expands; Columbia Pacific’s stake in China hospital.

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Congress may overhaul the controversial EB-5 immigrant-visa program that often benefits prosperous areas rather than the rural and impoverished urban ones for which it was created.

A bill introduced this past week by Senators Patrick Leahy, D-Vt., and Chuck Grassley, R-Iowa, would reform program weaknesses, including the misdirection of money to prosperous areas that was documented by The Seattle Times earlier this year.

The senators said Senate Bill 1501 would “help to restore the program to its original intent, by ensuring that much of the capital generated and jobs created occur in rural areas and areas with high unemployment.” Their measure would also extend the EB-5 program, set to expire in September, for 5 more years.

At least $2 billion in current projects in the Seattle metro area are being bankrolled in part by EB-5 capital, The Seattle Times reported in March. Examples include The Wave apartment building, part of the big Stadium Place project north of CenturyLink Field in Seattle, and Dexter Station, the South Lake Union office building where Facebook plans to relocate its Seattle office.

In exchange for investing in U.S. projects that create at least 10 full-time jobs, immigrant investors and their families get permanent-residency visas, also known as green cards. In recent years, the number of visa application approvals has soared, especially for immigrant investors from China.

Most of the visas go to immigrants investing $500,000 in state-certified “targeted employment areas,” which must have an average unemployment rate that’s at least 1.5 times the national average. Rural areas like Grant County automatically qualify.

But in many cases, EB-5 projects are in high-employment urban areas because some states, including Washington, have allowed project promoters to meet the federal rule by stringing together a chain of high- and low-employment census areas — which critics call gerrymandering.

SB 1501 would end such ploys, according to Judiciary Committee staff, because a targeted area would only qualify if it is a single census tract that has high unemployment.

The bill also would raise the minimum investment by an immigrant to $800,000 for targeted areas and $1.2 million for everywhere else. And EB-5 regional centers, which pool capital from immigrant investors, would be subject to more scrutiny through background checks, site visits and audits to combat fraud.

Kim Zeuli, research director at the Boston-based Initiative for a Competitive Inner City, said she welcomes stronger language defining a targeted area. But she said a better definition would look at both poverty and unemployment compared to the surrounding metro area.

The bill does not require the federal agency overseeing the program to publish data on what kinds of jobs are created by EB-5 projects and who’s filling them.

“The legislation seems to be missing a call for greater transparency, including the collection and public release of project data. This is imperative,” Zeuli said in an email.

IIUSA, the trade association for the EB-5 industry, stated that it was pleased the reauthorization effort in Congress had begun.

“We look forward to providing comments on the bill’s reform measures to ensure that proposals are correctly calibrated and do not unintentionally impede the program’s positive economic impact,” the trade group said.

— Sanjay Bhatt:

RealNetworks a hidden gem?

Value investing is the art of finding the well-run companies that, for whatever reason, are out of favor with other investors, and buying them on the cheap.

One value-focused Chicago investment fund has made a big bet on Seattle’s own struggling tech stalwart RealNetworks.

When they asked themselves, “If we could own just one stock, what would it be?” the answer was RealNetworks, managers of the Ariel Discovery Fund wrote last month.

An early pioneer of video and music streaming on the Internet, RealNetworks has struggled to stay relevant as media-streaming technology proliferated. Efforts to repositionthe company as a builder of Web- and mobile-based photo and video apps haven’t generated meaningful revenue, and the company is bleeding cash.

But in Ariel’s view, RealNetworks doesn’t get enough credit for its minority stake in Rhapsody, the streaming music service spun out of Real in 2010.

“They’ve had some very tough times, but [they’ve] got this hidden asset” in Rhapsody, David Maley, a co-manager of the fund, said in an interview. “I think you could argue that the rest of the company, even outside the stake in Rhapsody, is somewhat undervalued.”

RealNetworks’ video sharing and storage app RealPlayer Cloud (since rereleased as RealTimes) is likely to help the company slow its cash burn in the year ahead, Maley said.

He’s put his money where his mouth is, to the tune of about 260,000 shares, worth $1.7 million, at the end of March. That was the fourth-largest holding for the fund, which, at $39 million, is small by the standards of the U.S. investing universe, and is explicitly targeting investments in relatively small companies.

The bet may be starting to pay off. The New York Post reported this week that a Sony Music executive was seeking a stake in Rhapsody. The speculation helped send RealNetworks’ share price up 27 percent in the past five days, erasing what had been steep losses on the year.

It could also help salvage 2015 for the Discovery Fund, which has lagged the returns of the S&P 500 in every year since the fund’s 2011 inception. Through Thursday — before Friday’s 19 percent surge in RealNetworks — the fund was down 5 percent, according to fund tracker Morningstar. The S&P 500 was up 2.7 percent.

— Matt Day:

Hermès expands Bellevue store

Hermès, a Parisian purveyor of $450 silk scarves and pricey leather goods, opened Friday an expanded 10,000-square-foot boutique in Bellevue’s Shops at The Bravern, the latest sign of how Old World luxury brands are increasingly targeting America’s rich.

The store is three times the size of the previous location Hermès has operated since 2009 in The Bravern complex.

The new Hermès store is the fourth largest of its U.S. stores. And sales in the land of Gore-Tex have grown at double the rate of its other U.S. stores, said Robert Chavez, U.S. president for the 178-year-old apparel house.

“We started small,” he said of the Bellevue store. “We were so surprised at the reaction: It was instant.”

Hermès’ Western Hemisphere unit, dominated by the U.S., grew nearly 15 percent last year when factoring out foreign-currency gyrations.

Booming sales in the Americas outdid growth in the Asia-Pacific region, Hermès’ largest market. In Europe meanwhile, sales grew a relatively low 7 percent.

Hermès has acted accordingly. Last September it opened a new store in Atlanta; in 2013 it redesigned its Beverly Hills store. And it’s working on other expansion projects.

“We’re only scratching the surface” of the U.S. luxury market, Chavez said.

Hermès is going to use the extra space in its Bellevue store to showcase goods it couldn’t previously, such as shoes and home décor. Leather riding gear — a nod to the manufacturer’s origins as a saddle-maker — also has a prominent place.

Chavez said one thing that sets the Bellevue store apart from Hermès stores in busy global hot spots is that it has a “significantly larger” local customer base; in those other cities, lots of shoppers are tourists.

People in the Seattle area have a “beautiful, understated elegance,” he said.

— Ángel González:

Columbia Pacific invests in hospital

Seattle-based international health-care business Columbia Pacific Management is now operating a hospital in China, a few years ahead of schedule.

Last November, Columbia Pacific announced plans to build two hospitals in China. But those hospitals aren’t scheduled to open until 2018.

Then, last week, the company said it is becoming the majority investor in the 200-bed Kaiyuan Orthopedic Hospital in Shanghai, marking its official debut as a hospital operator in China.

Nate McLemore, Columbia Pacific’s managing director for international health care, said the company’s investment is between $50 million and $100 million.

Columbia Pacific plans to expand Kaiyuan to 300 beds, invest in new equipment and hire more doctors.

Currently, the facility emphasizes rehabilitation and offers a bit of orthopedic surgery, McLemore said.

“We’re going to flip that ratio,” with the intention of turning Kaiyuan into a center for orthopedic surgery and joint replacement, he added.

In addition to Kaiyuan and the two previously announced, in-the-works hospitals, Columbia Pacific also operates several clinics and senior-care facilities in China.

China, with its growing middle and upper-middle class, rapidly aging population, and citizens looking for better care, is seen as a major opportunity for foreign health-care companies.

And the Chinese government has been slowly allowing more foreign investment in health care. Last August, for example, it said fully foreign-owned companies would be allowed to open or operate hospitals in some parts of the country.

In addition to its China operations, Columbia Pacific has 28 hospitals in India and Southeast Asia.

— Janet I. Tu: