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Looking for an EB-5 investment: Here are 5 considerations

Posted by Kurt Reuss on September 16, 2019

1. Real estate projects have advantages

Real estate construction projects require a substantial investment with abundant job creation that EB-5 investors can rely on.  EB-5 Regional center projects are allowed to count direct, indirect and induced jobs based on the construction budget so an economic study will determine how many total jobs will be created. One needs only spend the project budget to ensure jobs will be created. Compare this to investing in a business where job creation estimates are tied to operational revenue. It is much more common to miss revenue targets in a new business than coming in under budget on a construction project.

How big a Job Cushion do you need? Well, it depends…

Posted by Rupy Cheema on February 07, 2019

The EB-5 program requires that each EB-5 Investor create ten (10) jobs. Job cushion refers to the percentage of jobs exceeding the requirement. Having a Job cushion is important so that the job creation estimates are above the minimum required by all investors in a project.

So, what is a sufficient job cushion? Is there a magic number that is acceptable and anything lower than that is rejected? Generally speaking, a higher job cushion provides some assurance that job creation estimates will be met — but EB5 investors need to look deeper than just the job cushion numbers.

Job Cushions from 155 EB-5 offerings

Based on our review of 155 EB-5 offerings, job cushion has ranged from 0% to 900%. Seventy five percent (75%) of the projects have a job cushion of 25% or more and thirty percent (30%) of the projects have a job cushion of 100% or more. The median job cushion is 51%.

Common EB-5 visa Investor Questions

Posted by Kurt Reuss on January 09, 2017

Q:  I haven't paid taxes, individual or business, because my country of residence doesn't require it or it isn't customary. Is this a problem?

A: Catharine: We normally tell clients if they can provide income tax returns, it’s great to do so. If they can't, it's not going to make or break their petition. 

We let them know that if USCIS EB5 sends a request for evidence (RFE) for copies of their income tax returns, they will need to either produce them or get a letter from an attorney in their country of residence stating the legal reason behind why they can't provide those tax returns.

I always request tax returns but I’ll still file a petition if I don't have them. 

Take an overview of EB-5 visa requirements

EB 5 projects due diligence checklist

Posted by Kurt Reuss on December 21, 2016

Making an investment of $500,000 - $1,000,000 in one of the EB-5 projects that ultimately fails, jeopardizes both the investor’s funds and the U.S. residency of the investor’s family, therefore every investor would be wise to know as much as possible about the investments they’re considering.

What is EB5 due diligence?

Due diligence is an investigation of an investment prior to signing a contract. Due diligence contributes significantly to informed decision making by enhancing the amount and quality of information available to the investor allowing him or her to better understand the benefits and risks.

What is included in an EB-5 Immigrant Visa due diligence review?

Due diligence begins with a thorough analysis of the investment documents including the capital structure, project viability, exit strategy and job creation potential as it relates to the the USA investor visa program.

The due diligence review should also identify risk mitigation strategies that have been implemented by the Manager or General Partner to protect investors. These include use of a fund administrator to oversee all transfers of investor funds, and construction monitoring to ensure transfers to the Developer are in-line with construction progress.

Inferring that EB-5 due diligence firms are not independent and their findings can be procured is a red-herring, designed to maintain the status quo.

Posted by Rupy Cheema on August 30, 2016

CMB recently published a blog titled EB-5 Due Diligence - Third Party Websites: Considering one of the many independent EB-5 due diligence services? in which they dismiss the notion that investors are served by retaining a due diligence firm before selecting an EB-5 investment.

 

 

EB-5 Source of Funds for EB-5 investment visa

Posted by Kurt Reuss on May 07, 2016

EB-5 source of funds

A primary requirement to apply for an EB 5 visa is an initial investment in a new commercial enterprise. That investment must be $500,000 (USD) in a Targeted Employment Area or else $1 million. Proving the primary source and path of these funds, therefore, is vital to the EB-5 application. As per United States Citizenship and Immigration Services (USCIS) EB5 visa requirements, investors must provide appropriate documentation to show EB5 investment funds have been obtained or earned through lawful means.

I-526 Insurance; Proper Disclosure is Critical

Posted by Kurt Reuss on April 20, 2016

Kurt Reuss: Proper disclosure is an important issue with this I-526 product, considering it is a new product with no claims paid to date. Doug, how do you approach a product like this, when developing disclosures in the PPM?

Doug Hauer: I think you have to be very careful to, in plain language, describe the mechanics of how this policy is actually working.

An investor who is reviewing the PPM should be able to review the section on the insurance and walk away with an understanding of how mechanically a policy would work and what kinds of claims would result in there being coverage and what kinds of claims would result in a denial of coverage.

I think the trap for an issuer or an EB5 regional center issuing a deal is that the term 'insurance' conveys a safety net, or a risk-free proposition. You have to be careful here if you're an attorney drafting a PPM for a client; you need to spell out in clear terms what the limitations are and what the parameters of the product are.

I think it would be important to alert investors, in a PPM, of the risks with this product.

One area that we see in these policies that leads to some confusion is how 'fraud' is defined. Fraud, in a securities law context, when you're talking about an issuer, can mean many different things.

It's going to be important to calibrate those disclosures, make them clear, put those disclosures in plain language, and ensure that all parties in a deal get protection through understanding what the limitations of the product are.

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

Full meaning of NCE ‘New Commercial Enterprise’

A requirement of the US EB 5 program is for the foreign investor to invest and engage in a ‘New Commercial Enterprise’.

EB-5 regional center offerings involve a new commercial enterprise (“NCE”) and an independent job creating enterprise (“JCE”), NCE invests or loans the EB5 investors funds into the JCE.

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

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.