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EB-5 Investment Boot Camp recap- Have a sound EB-5 plan in place

NES Financial had the honor of attending and partially sponsoring the 4th Annual National EB-5 Investment Boot Camp at the offices of Greenberg Traurig in NYC on April 10th. The day started off with an EB-5 Market Update from Brian Su.  Brian confirmed that the latest SEC action in Chicago had caused increased concern among Chinese immigrants hoping to utilize the EB-5 program to immigrate to the U.S. He emphasized the importance of having a sound business plan and experienced EB-5 partners before hoping to attract any funds from overseas, as projects are likely to be more closely scrutinized moving forward.

Laura Reiff of Greenberg then gave an overview of the EB-5 program and updated the participants on the current state of pending legislative proposals.  She confirmed the program had broad bipartisan support in Congress and that the Obama administration was also a supporter of its job creation goals.  There is a strong push to make the program permanent and also to eliminate country quotas.  China, for example, is fast approaching maxing out its number of available visas for citizens hoping to come to this country.

Kate Kalmykov and Jennifer Hermansky then explored some of the more advanced issues surrounding the I-924 and I-526 application processes.  They also explored the various options new entrants into EB-5 have when it comes to structuring their EB-5 project; they can form a new Regional Center, have the project adopted by an existing Center, buy a dormant Regional Center, or simply do a direct investment project sans Regional Center.  The importance of assembling an experienced EB-5 team was a recurring theme throughout the day.  Having the right EB-5 business plan writer, securities/corporate attorney, lawyer, economist, escrow agent/bank, and marketing firm/commissioned agent is critical to launching a successful – and USCIS compliant – EB-5 capital raise. They also discussed current USCIS processing times for the various stages of the EB-5 process (i.e. filing an I-924 for Regional Center designation- approx. 9 months, and I-526 approval- approx. 8 months).  Finally, a detailed exploration of the top ten trends in USCIS I-924 & I-526 Requests for Evidence (RFEs) ensued: Tenant Occupancy, need for feasibility studies, non-compliant business plans, hypothetical, actual project or exemplar issues, purchasing a Regional Center, redemption agreements, operational plans, geographic areas and industry codes, and source of funds issues were all discussed in detail.

Jeff Carr, noted EB-5 economist, spoke about the importance of being conservative when estimating job creation and also when drawing up the territory to be covered by a Regional Center- it being important to make reasonable assumptions about how much impact a project will have on a given region.  Phil Cohen spoke about preparing the EB-5 business plan and emphasized the unique requirements the USCIS will be looking for when reviewing the plan versus what may be contained in a more standard business plan.

Steve Anapoell and Genna Carver took us on an in-depth discussion concerning applicable securities laws, investment company acts, and various exemptions cautioning that the times when the SEC overlooked the EB-5 program are over as evidenced by the recent SEC action and the EB-5 stakeholder’s call last week.  It is imperative that prospective EB-5 entrants understand that this is a securities offering, and one must be careful to avoid violating any SEC securities laws.  Hiring a knowledgeable securities attorney to assist you in structuring your transaction is essential.

Finally, Reid Thomas and I spoke about the value of having an escrow in the EB-5 process to safeguard investors’ funds, provide transparency to the transaction, and ensure funds are available to be returned to investors should there be a problem with the project or the individual’s I-526 application.  We also discussed how our proprietary EB-5 Escrow Solutions allow Regional Centers and project owners to track investors’ funds through the entire EB-5 process by utilizing a subscription escrow, construction escrow, and capital account.  A real life example of the benefit of having an escrow is the aforementioned Chicago project whereby every investors’ $500,000 investment was protected solely because an escrow requiring the funds be held until I-526 approval was in place.

The event was a huge success with novice entrants and EB-5 experts alike coming away with the latest information on the program and by providing a unique networking event for all involved.

Thank you to Brian Su of the Artisan Business Group, Inc. and Greenberg Traurig for hosting this important and worthwhile event!

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