Immigrant Investor (EB-5) Program - An Additional Source of Project Funding OEDA Fall Conference 2013
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Immigrant Investor (EB-5) Program
An Additional Source of Project Funding
OEDA Fall Conference 2013
Agenda
• EB-5 Program Overview
• Why Investors and Developers are Interested in EB-5
• Access to EB-5 Financing
• Conclusion Q/A
2
EB-5 Overview
Congress created the Immigrant
Investor Program, also known as “EB-
5”, to encourage job creation and
foreign direct investment in the United
States.
U.S. Customs and Immigration Service
(USCIS) sets aside 10,000 EB-5 visas
each year for immigrant investors who
invest through EB-5.
An EB-5 Regional Center is a private
enterprise regulated to do business by
the USCIS in a defined geographic
area and in specific industries.
3
EB-5 Overview
For each EB-5 immigrant investor, at least 10 full-
time jobs must be created through a $500,000 USD
investment in a project located in a rural area or an
area of high unemployment, known as a “Targeted
Employment Area” (TEA).
– Areas outside of a qualified TEA require a
minimum investment of $1 million USD.
Immigrant investors are primarily motivated by
access to “Green Card” not solely by financial return.
– Consequently, EB-5 investments have become
an attractive alternative source for competitive
cost capital.
During the last fiscal year ending Sept. 30, more than
$1.8 billion was raised through EB-5
– 7,641 foreign nationals received EB-5 visas
– 80% from China
4
EB-5
EB-5 Overview
Overview
Two Types of EB-5 Investments
Direct EB-5 Investment
Investor buys business or starts new business
Investor must play active role in business
Must create 10 FT direct W-2 employees
Few applications
Investment through EB-5 Regional Center
Can be in the form of equity or loan
Direct, indirect or induced jobs may be considered
Regional Center tracks jobs and submits reports to USCIS
90~95% of all applications
5
Basic EB-5 Deal
Structure
EB-5 Investors Regional Center
Common Member Managing Member
Investment Capital
Management
Principal Interest
plus Interest
NEWCO
Security Interest/Mortgage Interest on Financing
Investment and Principal Repayment
of capital
Borrower
(Business entity receiving capital and creating Jobs)
6
7
EB-5
EB-5 Overview
Overview
United States EB-5 Program is NOT Unique
Countries with Similar Immigration Investment Programs
– Canada
– Australia
– New Zealand
– United Kingdom
– Austria
– Singapore
– Bulgaria
– Cyprus
8
EB-5 Overview
EB-5 Visa Allocations
10,000 immigrant visas per year maximum
This includes family so 4,000 investors
3,000 visas reserved for targeted employment areas
3,000 visas reserved for regional center affiliation
More than 90% are regional center affiliated and in TEA
Most Recent usage: 7,641 Visas
9
EB-5
EB-5 Overview
Overview
Top Countries for Issued EB-5 Visas
Country FY 2011
1. China-mainland 2,408
2. Korea, South 254
3. Taiwan 122
4. Iran 117
5. Great Britain 57
6. Mexico 53
7. Venezuela 46
8. India 37
9. Russia 30
10.Vietnam 26
11.Canada 26
12.Netherlands 26
13.Japan 20
14.Turkey 20
15.South Africa 19
16.Brazil 16
17.Italy 16
10Why developers are
interested in EB-5?
Capital unavailable from traditional sources
Can help lower the borrowing costs
EB-5 financed projects may be combined with financing sources
– State
– Port
– NMTC
– Historical Tax Credits
Location
– Targeted Employment Area (TEA):
• High unemployment area (150% of national average)
• Rural area (not in MSA or town of more than
20,000)
11Why are Investors
Interested
The Motivation
Primarily motivated by Green Card
No quota wait
No job offer or employer sponsorship required
Spouse and children included
Location flexibility
Business/Investment type flexibility
No residency requirement
12Investor requirements
Document lawful source of funds
Document path of funds
Otherwise eligible to apply to immigrate to the US
13EB-5 Investor’s
Concerns
Job creation
Financial risk
Immigration risk
Project pre-approved
Project solvency
Insufficient investors
14EB-5 Process
for Foreign Investor
Investor makes initial deposit to escrow account: Regional
Center and investor submit I-526 to USCIS
Funds released to
Investor’s USCIS project; Investor
Denial Approval
money is Review granted conditional
returned (8 Months)
visa
Investor submits I-829 with 21
USCIS Months
Investor
returns to
home USCIS Investor is granted
country and Denial Approval
Review permanent
possibly
loses (6 Months) Green Card
investment
15EB-5 Regional Center
Program
Regional Centers:
Are licensed and regulated by USCIS
Have limited scope based on geography, industries and economic
methodology
Can be public, private or quasi; engaged in the promotion of economic
growth
Work closely with the developer/borrower; have an established broker
network to find investors and manage the reporting requirements.
Investors in a project affiliated with a USCIS-approved Regional
Center may count direct jobs as well as indirect and induced jobs
16Typical Regional
Center EB-5 Investor
Does not want to start/manage business
Inexperienced individuals or retirees
Wants to be geographically mobile
Wants/needs to do something quickly
Prefers “hands off” approach
Immigration is driving force, not investment
Does not want to deal with complex legal issues
17Typical Direct
EB-5 Investor
Actually wants to start, manage and control business
Knows project will create 10 new direct full time jobs for U.S.
workers
Investment is driving force
Wants total control of investment
Wants to maximize profit
Understands they are responsible for legal and reporting issues
18Direct & RC
EB-5 Investor
Direct Investment Regional Center
Investor has reduced risk due to equity ownership RC can apply to USCIS for project designation pre-
and control of the project approval to reduce risk
Investor must play more active role in business or RC decides on new projects based on business
project strength and ability to market the project to overseas
investors
Investments must be in the form of equity. Loans Although debt (loan) is typical, investment through a
are not permitted in most cases RC may be in the form of either a loan or equity.
Direct investments usually command higher Investor can live anywhere. Can work anywhere, or
earnings. not work
Only direct jobs created by the project or business Direct, indirect and induced jobs created by the
will be counted project or business may be considered
There is no limit on the number of EB-5 direct Investor can start business or make investment/loan
investors on any project as long as 10 fulltime jobs
per investor are created
Investor must track job creation and submit detailed RC tracks the direct, indirect and induced job
reports directly to USCIS creation.
Typically offers faster visa approval for investor RC manages ongoing administration and compliance
responsibilities
Investor can sell a profitable business when they are RC monitors compliance with business plan and
ready to exit foundation facts in economic report
19Bad Press
Some Noteworthy Bad EB-5 Deals:
Northern Beef Packers –South Dakota
El Monte Regional Center in El Monte, California
Noble Outreach –New Orleans
Chicago Convention Center
20EB-5 Regional
Centers in Ohio
Cleveland International Fund, Ltd
1240 Huron Road E. Suite 420, Cleveland, OH 44115
CMB Summit LLC RC
7819 42 Street West, Rock Island, IL 61201
Midwest EB-5 Regional Center LLC
1021 Delta Ave., Cincinnati, OH 45208
Northeast Ohio Regional Center
542 E. Liberty St., Wooster, OH 44691
Ohio Development Regional Center
6592 Woodbriar Lane, Greenville, OH 45331
21Next Steps
Can EB-5 Fit Your Project
If you have a project
– Developers
– Company
– Community
If you know a potential investor
– High net worth individuals
22Questions
23Contact
Keith Conroy
keith.conroy@hickspartners.com
Emily Turner
emily.turner@hickspartners.com
21 East State Street, Suite 2200
Columbus, OH 43215
(614) 221-2800
Confidential and Propriety
2013 Hicks Partners LLC. All Rights Reserved.
No portion of this presentation may be reproduced or distributed without express written permission of Hicks Partners LLC.
3/2013
24Why Support the
EB-5 Program?
Since FY2005, it has attracted over $4.7Billion in foreign direct investment,
accounting for the creation of over 95,000 American jobs - all at no cost to the
taxpayer.
With over 3,200 immigrant investor petitions filed in the first six months of FY2013,
the Program is well on its way to another recording breaking year of economic
contribution to the U.S.
There are currently almost 6,000 pending immigrant investor applications pending
with the federal government - awaiting on decisions upon which almost $3 Billion
waits, ready for infusion into the U.S. economy for the purposes of U.S. job
creation.
The Program is versatile, allowing diverse industry sectors to put EB-5 capital to
work in projects that transform regional economies - including: assisted-living,
commercial real estate, construction, education, energy, entertainment,
infrastructure, healthcare, hospitality, logistics, manufacturing, transportation, and
more.
Over 95% of EB-5 investment capital is invested in "targeted employment areas"
that are experiencing high unemployment or are considered rural - thereby making
traditional sources of financing more expensive and difficult to come by.
The Program has become a reliable and vital source of capital for local economies
- rural and urban.
The U.S. is in fierce competition for immigrant investor capital around the world.You can also read
