Choosing the Right EB-5 Project

Feb 16, 2022

 

Crucial points to consider when choosing your EB-5 Immigration Investment application are:

  • which type of project to invest in,
  • with which type of company,
  • with which type of payout structure.

Today we go over the essential questions you should be asking any EB5 developer, RC (Regional Center), NCE (New Commercial Enterprise), and immigration attorney.

 

There are many options to choose from when selecting where you want to invest your EB-5 capital for immigration by investment.

From BAI Capital co-founder and CEO Arturo Venti:

I think that an investor doing due diligence needs to come up with several questions like:

Who and what is the experience of the SEC attorney representing the NCE and that has made the EB5 description package?

What is the capital stack of the project? In particular, what is the position of the EB5 investor capital? Is the EB5 alone in 2nd position, 3rd? Or is it Preferred Equity?

If things for some reason turn sour, what is the waterfall distribution of the capital?(How does the capital get dispersed and in what order?)

How does the developer intend to pay back the capital at exit? Through refinance, cash flow generated, sale?

Plus, something many investors are unaware of:

Did you know that the money needs to get to the developer to create jobs and that the developer does not have any control of it until it’s actually delivered by the NCE? Also, at exit the capital flows back from the developer to the NCE then to the Investor.

In brief, here are some answers to Arturo’s insightful questions:

  1. Direct Investment vs Regional Center Investment
  2. Work with RC vs work with a developer
  3. Boutique vs corporate developer/ project manager
  4. Loan vs preferred equity as investment structure

1. In our opinion, RC is much better to invest with than DI, as you can invest as a preferred equity partner, that creates a much more stable investment environment, plus without all the hours and effort involved with managing your own project.

2 & 3. Larger EB-5 firms work with RC’s in charge of managing and directing their clients to their current project that needs investors. There often isn’t much choice in the particular development, nor regular contact with the developer.

When investing directly with a developer/ EB-5 manager, the applicant gains a deeper relationship and contact with the project as it unfolds, and can be safeguarded against loss by protecting their capital against the developer’s sponsor investment.

4. Preferred equity compared to loan is a more secure method of managing your significant investment as it sits higher in the capital stack and waterfall of distribution, coming in 2nd after senior loans.

 

More from Arturo:

All projects must certainly ensure you get the i526 approved but the main difference among them is how to safeguard your capital.

It’s not just about profits, even though that is never a bad thing, but it’s more about having your invested capital safe throughout the EB-5 application process.

Usually, a loan is in the 3rd or 4th position in the capital stack, whereas Preferred Equity comes right after senior/ bank loan, and before our own money invested as developer and or project sponsor.

Also, I want to remind you just how important it is to make sure the EB-5 offering was prepared by an SEC-specialized EB5 attorney.

 

The experts at BAI Capital can provide you with more than just the answers to all the essential EB-5 questions.

Discover how our unique approach, our competitive projects – and most importantly, our proven results – are different, by booking your confidential meeting today.

 

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