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I-526 Insurance; The Criteria and The Coverage

Posted by Kurt Reuss on April 18, 2016

I-526 Insurance under scope of EB 5 Visa process

Kurt Reuss: Marc, what criteria do you use to decide whether or not a project is coverable under your I-526 policy?

Marc DiFanti: When we look to underwrite these policies and do our due diligence, we really look at it from two standpoints.

First, of course, is the strength of the project. We look at the project as a whole and its viability and its likelihood of success and how it can work going forward.

Secondly we would look at the team that’s been put together. Do they have a great securities council? Do they have a great immigration counsel? Do they have a great regional center with a great track record in the EB-5 visa industry?

For example, we’d consider Bruce Rosetto from Greenberg Traurig as great; that is, he's somebody who’s been in this industry for a long time and he and his firm have handled a large number of EB5 projects. When we see team members like him, and a whole cohesive team that knows the industry and can handle these types of petitions and filings and understands all the work that goes into it, we realize that they're projects that we want to insure and projects that are likely to receive acceptance from us.

Kurt Reuss: That sounds like it could be a bit of a challenge to figure out who you want to enroll. Obviously, it comes down to the experience of the people involved.

What is an NCE?

Posted by Kurt Reuss on April 01, 2016

NCE is an acronym for  'New Commercial Enterprise' and the term is used in EB-5 to identify the entity, partnership or LLC that EB-5 petitioners will invest in, and the New Commercial Enterprise is a requirement of the US EB 5 program. This entity is often a different entity from the 'Job Creating Entity' (JCE) which the NCE makes an investment into on behalf of the investors, sometimes in the form of a loan from the NCE to the JCE and sometimes in the form of equity, whereby the NCE becomes an equity partner in the JCE.

There are no restrictions on the type of business investors or an NCE can invest in, as long as it is a new business enterprise or the investment is made into a failing business to save jobs, but in both cases the investment must create or save at least ten (10) jobs per investor.

What is a JCE?

Posted by Kurt Reuss on April 01, 2016

EB-5 regional center offerings involve a new commercial enterprise (“NCE”), the entity the immigrant invests into and an independent job creating enterprise (“JCE”), which the NCE invests or loans the EB-5 investment funds into.   

EB-5 Business Plan Process, from Start to Offering

Posted by Kurt Reuss on March 22, 2016

Kurt: How long does it take from the time someone wants to start putting an EB5 investment projects together, to completing it and being ready to take the offering to market?

Lets say from the time they meet with an immigration attorney to the time they should expect to have completed putting together the offering package?

Martin, could you walk us through the process? My sense is that the immigration attorney typically acts as the quarterback on EB-5 offering package . How do you see your firm's role?

Martin: As precisely that; we're the quarterback. We pull together a team which we think will be suitable for the project. That team might include a business plan writer, an economist and a securities lawyer. We also work with the client, their accountant and their business lawyer.

We usually have a kickoff call with everybody to assign tasks so everyone gets to know each other. Everybody will send out a questionnaire to the developer and we try to go through them so that there's not a lot of overlap. Then, we make sure that people are meeting their schedules to produce what they need.

Is a Feasibility Study a Requirement of an EB-5 Business Plan?

Posted by Kurt Reuss on March 09, 2016

Kurt: Here is a brief summary of the items that go into a business plan:

  • Project description
  • Management's background
  • Description of the EB5 sources of funds, (i.e. whether a senior loan or equity).

Marge, how frequently are you provided a feasibility study as an aid to drafting the business plan and how important is it?

Marge: I probably see a feasibility study about 80% of the time if not more, and I think its very important to the business plan.

Not every developer wants to pay the cost for a feasibility study, but I think it adds a great deal of credibility to both the numbers you're trying to support in the business plan, as well as on the marketing side.

Using a company such as PKF Consulting or Colliers International, or another firm with brand presence adds credibility, both to the project and to the projections themselves.

Kurt: As I see it, without a feasibility study, you've got two problems. On the one hand, you could be underestimating your inputs, which means you aren't counting as many potential jobs in your business plan as you could and alternatively, you could be overestimating your inputs, which is probably going to be the bigger problem in the long run.

The Dual Purpose of EB-5 Business Plans

Posted by Kurt Reuss on March 08, 2016

EB-5 Business plan purpose

Kurt Reuss (Host): The EB5 business plan has two purposes. First, you want to make sure your business plan is written to be I-526 compliant and therefore ultimately approved by USCIS and second, your business plan needs to position your EB5 offering for marketing to attract investors.

My belief is that everything you do in your business affects your brand and certainly this includes in a significant way, your business plan, which is given to investors as part of the offering. The business plan is going to make an impression on investors and influence their decision of whether to participate. Obviously your business plan needs to recognize that reality while still being accurate.

Let's begin by discussing the I-526 approval aspects. Marty, would you mind starting us off by talking a bit about ‘Matter of Ho’ issues and the precedents they allude to for EB5 applications?

The Issuer Exemption as it relates to EB-5

Posted by Kurt Reuss on August 11, 2015

An exemption from registration as a broker dealer under Section 15(a) of the Securities Exchange Act of 1934 is available for persons associated with an issuer and involved in the sale of the issuer’s securities. Understanding the Issuer Exemption plays critical role in EB 5 Visa documentation.

How to Handle Early Repayment of EB5 Funds

Posted by Kurt Reuss on April 22, 2015

Repayment of EB-5 Funds

Let's assume that the borrower has an opportunity to repay the EB5 loan to the NCE; that the job creation requirements have been met; but not all the I-829s have yet been adjudicated.

What are the Manager's options? 

Carolyn Lee: The starting point is to determine what ‘investment’ means from USCIS statute, regulations, and precedent decision standpoint. The essential transaction that's regulated by immigration statute, regulations and precedent decisions is the transaction that is between the EB5 investor and the new commercial enterprise (NCE). That is the sole transaction and relationship that the term 'investment' refers to.

The problem is that USCIS compliance in adjudication has tended to apply the standard

Provisions for Sustainment of Investment in Offering Documents

Posted by Kurt Reuss on April 17, 2015

Robert Divine: Ronnie's point is to have the offering documents basically say, "We can pay off every investor as they hit their I-829”, but I've actually tried that with a client who insisted on doing it this way and it didn't go well. USCIS compliance states that violated another part of 'Matter of Izummi' of making an arrangement that is tantamount to a loan.

Now, I've heard other cases where similar language with similar effect was approved and I'm confident that Ronnie has seen language of the type that he mentioned in deals that have been approved.

Ronald Fieldstone: I've never seen that language get an RFE.

Robert Divine: I hear you. We have different experiences from different cases but I'm worried about what can happen. The bad stuff doesn't happen every time.

The EB-5 Manager's Role and Responsibilities

Posted by Kurt Reuss on February 12, 2015

EB-5 Project Manager role under EB-5 Process

Michael Homeier: Balancing the EB-5 project Manager’s role and responsibilities and specifically the extent to which the Manager is obviously looking out for his own interests, but must also be aware of and must honor his legal obligations to look out for the interests of his investors at the same time. 

It’s typical of EB-5 investments that the principals run the show and are the Manager of both the project company and the funding company, whether it be a direct investment with investors coming in as minority owners of the business, or as an indirect investment with investors investing into a funding company that intends to deploy the EB-5 funds to a separate project company.

Investors naturally have a concern that the Manager will be looking out for the Manager’s own interests, sometimes at the expense of the investors’ interests, and by making a passive EB-5 investment the investor is to a considerable degree at the mercy of management.