Rupy, as someone who performs due diligence on a regular basis, how do you approach due diligence of economic impact studies?

Rupy Cheema: We start off ensuring that the data in the economic impact study is consistent with the data in the rest of the project’s documents, i.e. the EB5 business plan, market feasibility study and the PPM. I don’t think I’ve ever looked at a project where we did not find inconsistencies between these four documents simply because the economic analysis happened at a certain point and then there’s different versions of documents floating around and the changes don’t get picked up. Those are some of the most common issues we find at the beginning of our review, just reconciling the discrepancies in the documents.

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

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.

(John Tishler): Assuming we're talking about the loan model, you have to start with what the deal is between the new commercial enterprise (NCE) and the job creating entity (JCE). There are so many iterations related to the structure, the needs of the developer and what the agents are looking for, that this quickly gets to be a very complex problem; Probably the most complex problem that we have right now in terms of structuring an offering and we have to rely on our immigration partner firms or colleagues to advice us.

If I could sum up the advice I’ve received in three words it would be: “We don't know” and so then we have to structure a real offering around “We don't know”.

Getting investors their visas is always paramount. Everyone who expects to be a long-term player in the EB5 industry knows that if they do anything that would defeat people's visas, that's the end; there would be no real recovery from that.