The major private partners in the proposed $101 million Iowa Events Center hotel in downtown Des Moines have placed their money in the project under a federal program that provides permanent visas or green cards for foreign nationals who invest in commercial enterprises.

In the case of the hotel, the investment is a $20 million loan with a six-year term at 5 percent interest from a limited liability company that operates out of Rock Island, Ill., under the name CMB Regional Center. CMB is an acronym for Closed Military Bases. Read more about financing for the hotel

The investment program was created by Congress in 1990 as a way to create jobs in areas struck by the closing of military bases. CMB has stood variously for California Military Bases and Closed Military Bases.

The $20 million loan is part of the complicated financing that will flow to the 330-room, 10-story hotel that will be operated by a nonprofit organization at Fifth and Park streets, a location that the American Enterprise Group is using as temporary office and storage space during the $30 million renovation of its headquarters building at 601 Sixth Ave.

The federal financing program has been used for a range of projects, including Las Vegas casinos, hotels and the funding of dairy farms. This is the first time the program has been used for an Iowa project. It is administered by the Iowa Economic Development Authority. On the national level, the program operates under the U.S. Customs and Immigration Service under the name EB-5.

Under the program, foreign nationals, their spouses and children under age 21 are eligible for permanent visas or green cards for a minimum investment of $1 million in a commercial enterprise that creates 10 jobs.

The investment is reduced to $500,000 if it is in what is called a Targeted Employment Area, where the unemployment rate is 150 percent of the national average.

For the Iowa Events Center fund, about 40 individuals have invested $500,000 each, officials said. The federal program also requires foreign investors to play a management role in the company that is created with their money. Because those funds have been rolled into a limited liability company, the investors will be managers of that entity but will not participate in the Iowa Events Center Hotel Corp., the nonprofit organization that will own and operate the convention center hotel. Members of the IEC Hotel Corp. will be appointed by the Polk County Board of Supervisors and the Des Moines City Council.

The unusual financing mechanism was necessary because it was difficult to attract institutional investors to the project at reasonable rates of return. Some of those interested in the project wanted returns on investment of 25 percent.

By way of comparison, investors in other hotel projects often ask for a rate of return of at least 20 percent, a hotel funding expert said. Investors in a typical multifamily housing project, considered a safe haven, especially in Greater Des Moines, might expect returns of 7 to 8 percent on their money.

For the Iowa Events Center hotel, the federal loan would take a subordinate role to an estimated $32 million the project is seeking in bank financing from both local and out-of-town lenders. Those institutions have not been identified.