For over thirty years since its inception, the EB-5 Immigrant Investor Program, a fast track government immigration program, has allowed families to obtain the United States Green Card and reach their goal of the American dream. The EB-5 program provides one of the fastest routes to U.S. residency among other U.S. immigration options and is relatively flexible given the lack of professional experience, language skills, or education requirements.
The success of a family’s EB-5 journey greatly hinges on the selection of the right project. Based on over a decade of experience as an EB-5 consultant, Shai Zamanian, U.S. lawyer and director of The American Legal Center, urges families to carefully analyze EB-5 projects prior to investment. “This investment decision carries grave implications for EB-5 participants and must therefore be made diligently with consideration of a series of key factors,” says Shai.
EB-5 program basics
The EB-5 program, the U.S. golden visa equivalent, was first introduced by the U.S. government in 1990 to boost the U.S. economy through job creation and the injection of foreign investment. The program allows foreign investors to obtain U.S. Green Cards for themselves and their dependents including spouse and children under 21 years of age with an investment of $800,000 in a government pre-approved project. The investment is eligible for return to the investor after passage of approximately five years. As Green Card holders, EB-5 petitioners and their family members can freely live, work, and travel in the United States.
U.S. immigration laws mandate that a “true” investment must be made for applicants to qualify for immigration benefits under this program. A true investment is one which is “at risk” meaning that the $800,000 must not be guaranteed. That said, there are steps that families can take to mitigate their risks and to increase their chances of a successful EB-5 investment. Shai, a top EB-5 expert based in Dubai and U.S. licensed lawyer, states, “Selecting the right project is beneficial for families not only because their chances of receiving their investment funds is higher but also because they are more likely to successfully avail the immigration benefits of the EB-5 program.”
Capital stack
At the heart of project selection lies the “capital stack” – the blend of equity, debt, and other forms of financing that constitute a development project. The capital stack of a project is a great indicator of the project’s financial stability and risk profile and must therefore be closely scrutinized by EB-5 investors. A well-structured capital stack with an adequate cushion of equity indicates that the project is more resilient against market fluctuations. On the other hand, an imbalanced or heavily leveraged stack might pose higher risks, potentially impacting the chances of both visa approval and capital recovery.
A healthy capital stack is one in which all three forms of financing – sponsor equity, construction loan, and EB-5 capital – are involved. The involvement of financial and government institutions is a positive sign. This is because institutional lenders such as banks require a certain level of assurance during the underwriting process prior to approving a loan. For instance, the borrower must demonstrate a well-developed construction plan including the involvement of a qualified builder. In addition to loans from third-party institutional lenders, the financial involvement of the project’s sponsor is a positive sign as it shows the sponsor’s confidence in the project.
Location
Careful consideration of the geographical location of the project is also significant. To benefit from the lower investment threshold of $800,000 as compared to $1,050,000, investors must invest in Targeted Employment Areas (TEAs). To qualify for TEA designation, an EB-5 project must meet certain requirements imposed by the United States Citizenship and Immigration Services (USCIS). An investor must ensure that the proper TEA certifications are in place to be eligible for the reduced investment requirement.
The location of a project plays a vital role in its success, which affects the chances of return of investor funds. An investor must evaluate whether the project is located in a desirable market and whether there is demand for the specific type of project in the proposed location. For instance, a hotel project would be most suitable for an area in which tourists and business travelers visit frequently. It would be important to analyze the business plan of the project along with other financials to determine whether the project is feasible and would remain profitable in the future.
Regional Center track record
Behind each project is a regional center responsible for its oversight and management. A regional center is an organization designated by USCIS with the goal of promoting economic growth in the United States. By investing in a regional center project, investors can benefit from a passive investment and take advantage of indirect job creation.
The reputation and track record of regional centers are paramount. Investors should investigate the regional center’s track record, including its involvement in past projects and its overall success rate. Having assisted over a hundred families in filing their EB-5 applications, Shai has observed, “While investors should not solely rely on track record, behavior in the past can be a determining factor on future performance.” A regional center with a strong track record is more likely to handle challenges adeptly and successfully navigate complex regulatory processes, thus safeguarding investors’ interests.
Transparency
Investors are advised to opt for projects that prioritize transparency. Detailed project plans, financial projections, and an understanding of how investors’ capital will be utilized are key elements in establishing credibility. To ensure transparency, an EB-5 investor may inquire whether the project site is equipped with cameras, allowing them to monitor the construction progress firsthand. As some projects do not offer onsite cameras, investors can request to visit the project site.
If the regional center is unwilling to accommodate an investor in visiting the project site, this may be an indicator of the project’s unsuitability. Additionally, it is essential for the investor to determine if the regional center offers regular construction reports. These reports enable the investor to track if the project is adhering to the agreed-upon timelines. If financial information is not openly shared or updates are not provided promptly, it could raise concerns for potential investors.
Navigating the path to success
A successful EB-5 application demands thorough examination and careful project selection. By considering factors such as the project’s capital stack, location, track record of the sponsoring regional center, and transparency, investors can significantly mitigate risks and position themselves for a favorable outcome.
A hasty investment decision can lead not only to loss of funds but also to immigration risk for the investor. Navigating the requirements of the EB-5 program can be a challenging task but with the help of seasoned and experienced advisors, the process can be manageable and investors can increase their chances of success. The team of U.S. licensed lawyers and experts of The American Legal Center have successfully assisted many families in the Middle East in applying for their U.S. Green Cards through the EB-5 program. They stand ready to support you in initiating your journey toward U.S. migration.
