Bob Kraft ’73 secures foreign investments for development in the U.S.
By John Walsh
Bob Kraft is doing his part to improve the U.S. economy – and he has the track record to prove it. He has helped create thousands of American jobs in 10 years with hundreds of millions of dollars being invested in southeast Wisconsin from foreign investors.
Kraft is a founding partner, chairman, and CEO of FirstPathway Partners LLC, an investment fund manager that qualifies foreigners for U.S. citizenship under the U.S. Department of Homeland Security EB-5 (employment-based fifth preference) Immigrant Investor Program. He also serves as chairman, CEO, and president of RWK Global Holdings LLC, a consulting firm focused on China. Kraft, who was born in Detroit and grew up in Flint, Mich., founded FirstPathway in 2007 as a result of a 20-year involvement with the Milwaukee Chamber of Commerce. Helping create a development plan for the chamber in 2004, Kraft suggested the board reach out to China for capital, much like how the U.S. engaged Japan to invest in America during the 1980s.
Additionally, Kraft has a friend who was the station chief for the Central Intelligence Agency in Beijing who started a security company in China that provided Kraft access to investors. Kraft was a board member of this company headquartered in Hong Kong.
“We needed a hook for Chinese investors because they didn’t know about Milwaukee,” says Kraft, who started his career in sales at a marketing company now called RR Donnelley. “That hook was the EB-5 program.”
The program provides an investment vehicle (a $500,000 minimum) that qualifies high-net-worth individuals for a green card and citizenship if desired. FirstPathway carefully vets projects for suitability, risk, capital preservation, and permanent green card facilitation. The company examines job creation, the industry, location, timeline, and project completion. This analysis, paired with the company’s conservative underwriting methodology, helps best position investors for capital preservation.
The foreign investment dollars can be used only in federally approved regional centers. The Metropolitan Milwaukee Association of Commerce, for example, created a center in southeast Wisconsin in 2007, and since then, the federal government has approved more than 400 investors and at least $200 million of spending in southeast Wisconsin.
FirstPathway is one of the few companies in the country to obtain multiple-project I-829 approval – after which an investor’s conditional residency restriction is removed – placing it in the highest category of EB-5 achievement. The company, which gained federal approval for a regional center blanketing the state of Wisconsin, is ranked as one of the top five of companies that move investors through the U.S. bureaucracy. It uses industry-leading attorneys and formed a team of experts in areas dealing with the Securities and Exchange Commission, immigration criminal background checks, and funding sources.
“I have files on my desk that are eight inches thick that go to Homeland Security,” Kraft says. “It’s exhaustive to make sure we don’t let criminals into the country and the investors’ money is lawful. It’s not an easy program in which to work.”
The current average to get approved for the I-526, the most significant step of the EB-5 program, is 14 to 16 months, according to the federal government.
Because U.S. banks are stringent when it comes to lending as a result of the sluggish economy, it has been difficult for developers and manufacturers to fund projects, so foreign investment fills those voids.
“The banks can’t react as fast as we can,” Kraft says, adding the company finds creative ways to finance projects. “Everybody’s getting into it. A lot of money has been raised by about 30 companies.”
FirstPathway is the ninth start-up for Kraft, who could be called a serial entrepreneur. In addition to Wisconsin, the company is working on projects Southern California, Florida and Nevada. So far, nine projects have been funded by the company. Kraft expects to finish two more before year’s end. The company’s objective is to have raised $1 billion by 2017. Investments are in:
• mixed-use real estate;
• an aircraft engine manufacturer;
• a motorcycle manufacturer; and
• a software development company.
And funds are coming from countries other than China: Canada, India, Russia, South Korea, Egypt, Denmark, Brazil, Iran, Hungary, and Venezuela. Investment programs like the EB-5 are common among countries in the Western Hemisphere, Kraft says, adding that Canada has been the most successful even though it puts it a hold on its program.
“The program is good for the U.S.,” he says. “There’s no cost to taxpayers, and wealthy people invest a half million dollars at their own risk. They create U.S. jobs. We have bipartisan support among congress. The industry has done a good job PR-wise of explaining what the business represents. It’s been amazing.”
Despite development opportunities, paperwork and legal issues related to EB-5-funded projects are daunting.
Throughout his professional career, Bob Kraft’s responsibilities include or have included being director of:
• Association to Invest in USA (IIUSA)
• Openfirst, LLC
• Milwaukee Area Chamber of Commerce
• United Community Center (Hispanic Chamber of Commerce)
• RBP Chemical Company of Milwaukee
• First/Edge Solutions
• University of Wisconsin-Madison’s China Leadership Board
• World Trade Association
• Tri-Tech Holding in Beijing
• Word of Hope Ministries
• Pacific Strategies & Assessment in Hong KongAs well as:
• Co-Chair of the China Business Council for the Metropolitan Milwaukee Association of Commerce
• Co-chairman of the WTA China Council for the Metropolitan Milwaukee area.
• Board member of the Point of Purchase Advertising Institute
“You need to be crazy and patient in this business,” Kraft says, adding that companies need to build trust and have a track record with foreign investors.
As such, Kraft has taken 50 trips to China during the past 10 years.
“It takes that kind of commitment to build trust with the Chinese,” says Kraft, who played football, track, and tennis at John Carroll, as well as two years in a semi-professional football league after graduating from Carroll.
FirstPathway’s success in China has translated into success in India because of the mutual respect the two countries have for each other.
“It’s getting much easier to do these deals,” Kraft says. “For one thing, we’ve got the legal part of it down pat. We know all the agents, and they know us.”
A version of EB-5 program dates to 1990, but it wasn’t in the form of regional centers, and foreign investors needed to commit $1 million to create 10 American jobs to get a temporary green card. Then they could work their way toward a permanent green card or citizenship.
“That ended up being too much money,” Kraft says.
Then in 1993, the federal government created the regional center concept, in which the minimum investment was lowered to $500,000 to create 10 jobs.
“That program took off slowly but was eventually shut down during the late ’90s,” says Kraft, who worked for DCI Marketing for many years before starting Electronic Printing Systems, then named Openfirst, a marketing communications services company.
The Wisconsin regional center, with which Kraft is involved, was the 21st center approved in the U.S. Now there are more than 500.
Throughout the years, Kraft – whose son, Bobby ’00, played football for the Blue Streaks – has developed relationships with the Chinese through his various business ventures. When he started and owned a software development company in 1996 (he sold the company in 2006), he worked a lot with China to purchase product and source labor.
Despite Kraft’s track record of selling companies he starts, he has put a succession plan in place but says he won’t sell FirstPathway.
“My dad is 88 and still works,” says Kraft, who has been married to his wife, Patricia, for 40 years and has two other children in addition to Bobby and three grandchildren. “Our family loves to work.” JCU