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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%.

EB-5 Source of Funds for EB5 investment visa

Posted by Kurt Reuss on May 07, 2016

EB 5 source of funds scenarios

If you are applying for an EB-5 visa, providing evidence of income and a lawful path of EB5 funding will be the key to your successful transaction. Since there are a myriad of ways to collect the money you need for your investment, having an expert eb-5 investment attorney to guide you successfully through the documentation process is a key element.

Here are a few common EB-5 source of funds scenarios and how to document them.

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.

Consequences of Not Registering as an RIA

Posted by Kurt Reuss on March 17, 2016

Registered Investment Advisor

Kurt: Chris, you mentioned to me that fines for not registering as a registered investment advisor can come in varying tiers, depending on the way you're perceived to have gone about not registering or the circumstances around it.

Fines can range from a lower level when the SEC recognizes that you're doing what you thought you should be doing, but you just didn't do it properly and fines will usually escalate for egregious and repetitive wrongdoings. Any thoughts on how the SEC perceives the issue of fines?

Chris: I think they're going to look at the activities you're actually conducting. In this case, with eb 5 visa requirements being a relatively new area, it's hard to say how they're going to go. I know the state of California structures their fines on a tier system.

Based on first offenses or minor offenses, it's almost a slap on the wrist, if you will. But I've also seen massive disgorgement of profits where some investment advisors have been operating two or three years without registering and they’re continually trying to skirt the rules.

In some cases they do this through the creation of additional companies in an effort to keep their amount under management spread out among multiple entities, but the SEC determines that those entities were integrated. I think it depends on the actual conduct that determines the severity of the fine.

EB5 Projects Due Diligence: Project Financing and Use of Funds

Posted by Kurt Reuss on November 27, 2015

EB5 Project Financing 

Rupy Cheema: A primary question of due diligence is how the project is going to be funded and whether the capital stack is complete. If the project will be funded in part by developer equity, we look into how much equity is being committed to the deal. Most agents we speak to, are looking for a minimum of 30% developer equity.

That begs the question “where is that equity coming from?" and “Is it a cash contribution or is it an asset contribution?”   If the developer is contributing land, how are they arriving at the value of the land. Was there an appraisal done? Is the value assigned reasonable and thus is the developer really contributing 30% of the project cost? If the developer plans to contribute cash, at what stage will it be funded?  Is the developer providing an additional equity commitment in case the project needs more money or if the EB5 projects funding does not come in as anticipated.

Part of the project costs may be funded through a secured loan from a bank.  Having a senior lender in the deal brings both advantages and disadvantages to the NCE’s investment. The biggest disadvantage is that the NCE’s investment will likely have only junior or subordinate rights or perhaps no rights at all to the collateral and the biggest advantage is that the EB5 investors have an experienced party involved in the deal, one who is going to conduct its own due diligence. The senior lender will want to make sure that the construction budgets are reasonable and the environmental assessment is complete. They will also ensure that any conditions imposed have been satisfied prior to the disbursement of their loan.


Posted by Kurt Reuss on November 20, 2015

EB5 Diligence highlights twenty-three (23) deal terms in each due diligence report. Unfortunately, deal terms are what some people define as a due diligence checklist. As an example, earlier today I spoke with Reid Thomas (NES Financial) who’s currently in China and he told me that in speaking with local agents, he asked what they thought about due diligence. He said that from the agent’s point of view there seems to be three (3) major areas that due diligence covers.

SEC Rule 10b-5 and the scienter requirement

Posted by Kurt Reuss on October 31, 2015

John Tishler: SEC Rule 10b-5 is what I’d call the primary rule of liability we’re concerned about in EB5 offerings or EB5 projects. It applies to any offering of securities that has any jurisdictional nexus to the United States. Jurisdictional nexus simply means that some mode of interstate commerce was used: the telephone, an email, postal delivery. I think it is impossible to imagine an EB5 transaction taking place that did not somehow avail itself of the means of interstate commerce in the United States.

In any event, 10b-5 is going to apply and what it says is that it’s unlawful for any person in connection with the offer or sale of securities to omit or misstate a material fact or to state a fact that, in the context in which it is stated, is misleading and that’s considered to be a fraud. When people talk about securities fraud, Rule 10b-5 is what they’re referring to. 

In terms of the commonly used word “fraud” and the common sense understanding of it, lets discuss what it means to commit fraud. The standard for securities fraud is quite a bit lower than the common sense understanding of fraud. 

Fraud also includes an intent to omit a fact or to state a fact that wasn’t complete in its context. Rule 10b-5 has what’s called a “scienter requirement” in relation to the omission of facts from which means there has to have been intent. 

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.

Redemption and Redeployment of EB-5 Capital

Posted by Kurt Reuss on April 20, 2015

Redeployment of EB-5 Capital

Robert Divine: An important question in an EB-5 project is how investors can 'maintain their investment' in the entity they’re investing in and in the job creating enterprise (JCE), in order to have I-829 approval for permanent green card. To some extent the issue puts the immigration interest at odds with the economic interest of the issuer and the JCE who wants to liquidate as early as possible, pay everybody off and have a profit, and even of the investor, who wants an early exit if possible. 

I-526 Petition Requirements and I-526 processing time

Posted by Kurt Reuss on January 01, 2015

For an immigrant investor hoping to obtain his or her green card though the EB5 capital investment program, they must first choose an EB5 projects and then make the required capital investment. That path to a green card and potentially to US citizenship, begins with the filing of Form I-526, the Immigration Petition for Alien Entrepreneur. The I-526 petition must be submitted with accompanying evidence in support of the USCIS EB5 program’s requirements. Upon receipt, the USCIS will evaluate and adjudicate the I-526 petition.

Understand complete EB-5 Visa process

I-526 processing time

Historical I-526 processing trends

Historically, this number has changed quite significantly. For example, in August of 2018, the range was 19.5 months to 25 months. And in 2014 the I-526 processing time was an average of 11.6 months. So, clearly the estimated time has been trending up over the years. With that said, in 2017 and 2018 the Immigrant Investor Program Office (IPO) saw several quarters of improved processing times. IPO Chief Sarah Kendall told industry stakeholders in October 2018 that IPO was fully staffed and looking to make significant improvement in the backlog in 2019. However, this optimism was not to last as improvement stopped at the end of 2018 with a 37% reduction from the previous quarter. No official explanation has been issued regarding this sudden and unexpected change.

Reasons for a processing slowdown

In general, processing times take longer when IPO gets more petitions than it can process. However, at the time of this writing, there are a couple other possible explanations regarding the longer I-526 processing times. Increased litigation is one as perhaps USCIS is now looking to comply with recent court orders than have gone against their traditional policy implementation. Another possible reason for the slowdown could be an imminent policy change. For example, in 2011/2012 a processing slowdown came just before policy changes. The industry is certainly expecting changes to the program soon. Some industry experts have stated that the possibility exists that actual processing times have not changed at all. The thinking here is that perhaps USCIS is publishing longer times to reduce the number of inquiries they receive; perhaps USCIS wants to avoid EB 5 visa applicants filing a writ of mandamus, a court order that compels the adjudication of a case that is taking longer than the mandatory time limits.

Effects of High-Skilled Immigrants Act of 2019 on EB-5 Visa wait times

On July 10, 2019; The U.S. House of Representatives has approved bill H.R. 1044, the Fairness for High-Skilled Immigrants Act of 2019. The Act would eliminate the 7% country cap for EB-5 Green Cards.

Past investors from the rest of the world would have 3-5 year delays.

Future investors from anywhere in the world would wait 7-8 years.

What to do if your case is taking too long

Keep in mind the numbers USCIS publishes are averages. But if you have filed your I-526 and your case is outside the average processing time, you should speak with your Eb 5 Visa immigration lawyer. You or your lawyer could send an email inquire to the IPO office. USCIS says the time range indicates how long they will take to process your case from the date they received it. They also say that they “generally” process petitions in the order they are received. To check the latest USCIS processing estimates, go to their Case Processing Times page.

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I-526 processing times depend on many factors including I-526 petition requirements issued by USCIS. Look below at the fundamental requirements.