A little-known and rarely used federal financing program is starting to gain traction among commercial real estate developers.

The Immigrant Investor Program, known as EB-5, offers foreign citizens a U.S. green card if they’ll invest $1 million in an American project that creates or preserves at least 10 jobs. If the development is in a designated targeted employment area—rural locations or places with very high unemployment—the minimum investment can be $500,000.

Most EB-5 capital—which can be structured as either debt or equity—is funneled through regional centers, matchmakers between foreign capital and local developers in need of funds. Interest in the program has ballooned ever since the advent of the credit crisis forced developers to get creative. In 2007, there were 11 such chartered centers—today, there are 147 across the nation.

“When the banks basically shut down during the recession, many people were looking for an inexpensive form of alternative financing,” says Taher Kameli, principal of the Chicago-based regional center Chicagoland Foreign Investment Group. “The program is very attractive right now.”

Brooklyn, N.Y.–based Forest City Ratner Cos. has accessed about $249 million in debt through the EB-5 program for its planned Atlantic Yards project, which includes multifamily and commercial development, as well as a new basketball stadium for the NBA's New Jersey Nets.

And earlier this year, the City of Dallas Regional Center used EB-5 capital to partially fund construction of Zang Triangle, a $30 million, 260-unit apartment development being built by Dallas-based Lang Partners in North Oak Cliff, Texas. 

Oregon, Wis.–based developer Gorman & Co. also scored EB-5 capital, for a 90-room hotel project in downtown Milwaukee, the redevelopment of a former Pabst Brewing Co. site. Gorman landed $15 million of the estimated $18.8 million needed to construct the project from Chinese investors through the program.

But Gorman, an active apartment builder, has had a more difficult time making multifamily deals pencil out with EB-5 capital. “Apartments don’t work well with EB-5 because they're considered low job generators relative to the capital invested,” says Gary Gorman, the company's president.

The EB-5 model works much better for mixed-use and seniors housing. The Chicagoland Foreign Investment Group, for example, targets assisted living centers, which work well with the program given the high level of permanent jobs needed. Construction jobs don’t count toward that requirement, unless the construction worker is engaged in the project for more than two years, a rare occurrence.

“You have to be creative. If you have a mixed-use project, an apartment project with retail downstairs, that could work,” says Kameli. “But the people working in retail have to be employees of the management group.”

There are other stumbling blocks. Once investors are signed up, the capital sits in an escrow account until the U.S. government approves the foreign investor’s application—a time line that many developers have trouble dealing with.

“It’s going to take the government between five months to one year to release that money,” says Kameli. “But if a developer wants to build an apartment building, the land is available now, not a year from now. You need to have a bridge loan or a line of credit to pay the up-front expenses.”

And as the pipeline of applications grows, the government’s processing time slows. There were 1,955 applications for EB-5 visas all of last year, but through the first half of 2011 alone, there have already been 1,927 applications submitted. Still, the ongoing wave of visa applications speaks to the program’s sudden success.

Kameli expects his organization’s first investment—$8.5 million in EB-5 capital for the Aurora Memory Care Center in Aurora, Ill.—to break ground in October.