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CST: 22/11/2019 06:11:58   

Important Considerations Before Rushing Into An EB-5 Investment Just Because The Regulations Are Changing And It Will Cost Nearly Twice As Much A Perspective By Patrick F Hogan CEO Of CMB Regional Centers.

38 Days ago

DALLAS, Oct. 14, 2019 (GLOBE NEWSWIRE) -- A tsunami of EB-5 investors are rushing to educate themselves about the EB-5 program in order to prepare and file their EB-5 petitions prior to the November 21st deadline, imposed by the new rules. The EB-5 program’s minimum investment amount is set to nearly double on November 21st, however investors can still lock in the current $500,000 TEA-investment rate and obtain a permanent visa (U.S. green card) for their spouse and children under the age of 21. It is expected there will continue to be a run on EB-5 investments from foreign nationals who want to “get in” before the price hike, however there are many more considerations that every EB-5 investor should explore besides an investment being cheaper. Indeed, a hasty decision can lead to a much more expensive experience in the long run.

The EB-5 Program is complex and requires a potential investor to conduct thorough due diligence on all facets of what may be offered in the EB-5 marketplace. It is understandable to want to try to get in before the November 21st deadline as it could save you and your family a minimum of $400,000, however if the due diligence is not done properly failure can cost a lot more than $400,000.

There Are Many Important Considerations A Potential EB-5 Investor Should Consider However, The Very First Question Should Be:

Is it vitally important to you that the investment threshold is increasing from $500,000 to $900,000? It goes without saying that the primary motivation for any EB-5 investor is the permanent residency visa, yet the visa will still be obtainable after the November 21st deadline, it will just require an additional $400,000. Therefore if it is critical to you to file your I-526 petition and only invest $500,000, there is much work to do in a short period of time. Is it still possible to get your I-526 petition on file before the deadline with under 40 days left? The answer is yes with some certain qualifiers.

Considerations When Looking For A Regional Center:

Do not simply believe the hype, marketing or stated experience a regional center presents. Make them prove everything they state! Not just in words but through actions. As an example, CMB Regional Centers has commissioned a nationally recognized accounting firm, BKD LLP, to audit all of its EB-5 partnerships’ financials according to GAAP from inception and every year thereafter, as well as CMB’s EB-5 immigration statistics. The audit reviews total number of investors, total number of I-526 approvals, total I-829 approvals, total amount of EB-5 investors’ capital that CMB paid back, as well as other parameters. Having independent audits of the regional center partnerships is a best practice and gives its EB-5 investors the transparency they deserve, as well as gives a potential EB-5 investor confidence to know that the achievements of the regional center are real and documented by a third-party. CMB was the very first regional center to begin this best practice of voluntarily commissioning third-party audits of all its immigration partnerships, setting a standard for transparency for all regional centers to follow.

Another great question to ask is; how many foreign national investors has the regional center taken through the entire EB-5 process from the initial I-526 petition, through the I-829 approval process and finally a return of their capital account in the investment from the new commercial enterprise? The true measure of success in EB-5 for both the regional centers and its EB-5 investors, is completing the entire process of obtaining approval of all petitions, to securing a permanent visa, and the ultimate return of capital. There are very few regional centers who have actually achieved this ultimate success in returning capital to their EB-5 investors.

In the past, many regional centers have gerrymandered economic and geographic statistics in order to make a project seem to qualify as a Target Employment Area (TEA) under the $500,000 EB-5 program. What is interesting about the new regulations starting on November 21st, the (TEA) designation process has been completely revamped and regional center projects that gerrymandered the areas in order to seem to qualify today, will not qualify after November 21st. Why is that important for an investor looking to subscribe today? A potential EB-5 investor should ask the question; what happens if the regional center cannot complete the capital raise utilizing EB-5 funds? In other words, if the project doesn’t raise all the capital required by November 21st, what happens to the project? Is the project completely dependent upon EB-5 funding and if it is, how does the regional center plan to complete the funding after November 21st? It is quite possible a potential EB-5 investor may invest in what would be considered a doomed project or project destined for failure. A project that is fully dependent on all of the EB-5 capital actually being raised and the regional center is not able to actually raise the budgeted EB-5 capital and is no longer qualified as a TEA in the new definition of a (TEA) or simply cannot raise the funding at the higher dollar amount the project may stall or fail. If these questions and scenarios are not planned for by the regional center and project, it could result in failure for the project and ultimately the EB-5 investors including any of the EB-5 investors who invested previous to the November 21st date. This illustrates how complex some of the questions to ask regional centers are.

Additionally, if a regional center is trying to add an EB-5 offering to the market between now and November 21st, there are additional questions that should be asked about the offering and project. Can the regional center produce the full set of offering documents right away for an investor to complete their due diligence and can they answer all of your questions? If the answer is no that should be an incredible alarm bell to not consider that EB-5 project. What you’ll find is some regional centers don’t have projects available for subscription right now and they are scrambling to get their documents together to release another project. That begs the question, is that a regional center you want to invest with? A rushed investor that skips their due diligence process, doesn’t properly document their source and path of funds, invests in an incomplete investment or premature project is not simply saving time, they are increasing their likelihood of denial as well as the loss of their capital investment. EB-5 stakeholder organization, Invest in the USA or IIUSA recently published the Q3 2019 Fiscal Year data for I-526 petition approvals and the results were devastating. The approval rate for I-526 petitions was shown to fall to a 14-year low of only 58% (https://iiusa.org/blog/iiusa-data-report-form-526-quarterly-data-review-analysis/).

Our advice is not to get in such a hurry as to skip any of the important steps in your preparation for an EB-5 investment. Placing your family’s future in the hands of an inexperienced regional center or attorney and taking chances on shortcuts or workarounds may prove to be devastating mistakes.

It is also important to remember this final rule makes it very clear the investment amount will rise to $900,000 for TEA’s. The changes to the TEA requirements are all effective from November 21st onward. There are absolutely no exceptions regardless of whether a project is in the middle of a capital raise or even if the regional center has obtained an I-924 approval. Conversely if a potential EB-5 investor is able to have their petition on file before November 21st the new regulations will have no impact on the successfully filed petition.

Finding an EB-5 Immigration Attorney- Hiring an experienced EB-5 immigration attorney to guide you through the EB-5 process can be one of the greatest insurance policies you could buy. A knowledgeable immigration attorney will evaluate your eligibility for the EB-5 program, conduct immigration based due diligence on the EB-5 project you’ve selected, check for program compliance, notify you of the documents you need to submit with your I-526 petition and they will file your I-526 petition for you. Remember the regional center and the immigration filing attorney must work together to get your I-526 on file in the short period of time.

Liquidating Your Assets- You may have the assets to qualify as an EB-5 investor, but liquidating them may be challenging or finding the source of funds for the assets may be a problem. Given the short period of time, ask your immigration counsel preparing your source of funds if it may be better to turn to a loan or gift to use as an investment source. Part of the I-526 petition is proving all investment funds came from lawful sources. This means that an investor may have to trace back the funds several years and accounts with funds from several sources may complicate the EB-5 process. This is an area where working with well-qualified EB-5 experienced immigration attorney can make a significant difference.

Collecting Source of Funds Documentation- Ask your immigration counsel well in advance what source of funds documentation will need to be translated into English, if English is not the official language of your country of citizenship. Some common examples of evidence may include payment stubs, employment contracts, bank account statements, tax returns, stock certificates, lease documents for rental income, documents for sale of assets, receipt of gifts, and/or inheritance estate settlement documentation.

Timing- Every EB-5 investor’s case is different. However every EB-5 investor in a project files the exact same EB-5 project information. This is why it is important to choose a regional center that already has all of the project documents required for you to file your I-526 petition. It is important to have an immigration attorney experienced in EB-5 to guide you through the gathering process of all your personal documents and to file the required forms.

Don’t Just Look At The Regional Center Or The Underlying Project You Are Investing In.  Your Review Needs to Include Both Elements.

The EB-5 program requires the foreign national to make an “AT RISK” investment. If the regional center is not telling you a requirement of the EB-5 program is for your entire investment to be at risk of total loss there’s a problem. This is a basic requirement under the EB-5 program and to try to avoid the “AT RISK” requirement under the EB-5 program is tantamount to fraud. If a regional center tells you they guarantee the return of capital don’t just walk away; run! If they will lie about that they will lie about anything. The level of risk can be illustrated by saying on one end of the spectrum it’s a “foolish investment” and on the other to a more risk-mitigated level nearer to US treasuries.  We would assume most investors would prefer to get involved with a project that is substantially risk-mitigated, yet still meeting the at risk requirements of the EB-5 program. Common sense needs to be applied when looking at the job creating entity, which many times common sense applies. Is it reasonable to conclude that the job creating entity will create the required amount of jobs that the new commercial enterprise needs to prove (10 new American workers) for every foreign national investor in the partnership? This is an incredibly important question to ask the regional centers! If the regional center cannot demonstrate 10 new American jobs at the I-829 petition stage no matter what has been done previously the foreign national will be denied their permanent visa.

During the due diligence process of the investment, what is the likelihood of business success.

In looking at the regional center and the investment into the new commercial enterprise (job creating entity), what is the likelihood of business success. The first question to ask is: how many successful EB-5 partnerships the regional center has undertaken. This gives you a view into how the regional center operates but it does not give you any information about the current offering.

As an example we at CMB actively pursue projects with developers that have demonstrated they are deserving of trust, have solid track record in their respective fields and understand the dynamics involved with an EB-5 investment. We look for strong underwriting fundamentals and utilize only debt structures for the EB-5 investment that alleviate many of the inherent conflicts of interests that many EB-5 equity investments may have. We are not saying equity investments are inherently bad, just more complex than debt arrangements. Another warning sign for equity arrangements would be to look to see if the regional center is an affiliated company of the job creating entity? If so, every investor could be at a major disadvantage in that there could be inherent conflicts of interest. Ensure in the documents that somehow a third party is involved to evaluate and audit BOTH the regional center and the job creating entity to ensure transparency. Without that power the foreign national investor is powerless!

These questions and thoughts illustrated above should give any potential EB-5 investor much to think about and act upon. The bottom line is find a regional center that encompasses all of the above. This is a life changing decision and an opportunity to be a permanent resident of the greatest country in the world.

CMB Regional Centers Is Comprised Of 16 Separate Authorized Regional Centers, Have Over 22 Years Of Experience And Are Guided By Their CEO, Patrick F Hogan, With Over 25 Years’ Experience In The EB-5 Program. CMB Has 100% EB-5 Project Approval Rating For All Projects Adjudicated By The USCIS, Have Raised Over $3 Billion+ In EB-5 Capital, Have Documented 175,000 New American Jobs Created, Subscribed Over 5,500 Investor Families, With Those Audited Statistics, CMB Lays Claim As The #1  Regional Center!

If you are intrigued by the opportunities an EB-5 Visa offers and are considering applying for the EB-5 visa check out the CMB website for some basic information on the EB-5 process and contact CMB at: : www.cmbeb5visa.com or info@cmbeb5visa.com  or 1-309-797-1550

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