necessary permitting, and ultimately manage the financial
health of the project.
STAGE 3: PERMANENT RESIDENCY AND
RETURN OF PRINCIPAL
SUSTAINMENT RISK
In order to receive permanent residency, USCIS must
c o nf i r m th e i nve s tm e n t was s u s t ai n e d d u r i n g th e
conditional residency period. The best way to provide
safety around the investment sustainment is by seeking
projects that have checks and balances, such as those
with an independent fund manager. If the project is under
common control of one entity, or person, it is easier for
fraud or misuse of funds to take place. Regional centers
and fund managers play critical roles, and together should
help improve performance, transparency and accountability
of the project. Complete background checks on key
principals and have upfront discussions on the relative
experience that each of these groups bring to the project.
JOB CREATION RISK
At this final stage, the job creation must be verified. Initial
economic studies are based on predictions, which can
fluctuate. When comparing the job creation between
projects, consider the types of jobs counted in addition to
the buffer. Construction jobs are the safest jobs to rely on,
because they are easier to predict than operational jobs.
If a project utilizes operational jobs, an investor should
check to see if construction jobs can fulfill the job creation
obligations for all investors. If not, investors should inquire
to understand how jobs are allocated and where in line
they are likely to be in order to make an educated decision.
Investors should also keep in mind it is not necessarily the
lack of job creation itself that creates issues at the I-829
stage, but often the lack of verification from the developer
to prove the jobs. Regional centers and fund managers
should have procedures in place to track, collect, and report
job information to the investor and USCIS.
LIQUIDITY RISK
A looming concern for most investors is the return of their
investment. Working with their financial advisor, investors
should run financial models to see if a refinancing event or
sale of the project will generate enough cash to pay back
existing debt and investors. Assumptions in the project’s
exit plan, such as the anticipated sale price or cap rate,
should be cross referenced with the market study or other
available data to ensure it is reasonable.
REDEPLOYMENT RISK
Special consideration should be given on how capital
may be redeployed. Seek to understand exactly who has
redeployment authority and how future projects will be
evaluated, by reviewing the redeployment language in
the offering memorandum. Projects and investors can
collaboratively manage this risk with the use of a fund
manager with independent authority over redeployment,
input from a registered investment advisor, and an
oppor tunity for investors to provide input during the
process.
TAKEAWAYS
All investments have risk, and EB-5 is no different. Ask yourself
these questions: what risk can be minimized, what risk can
be managed, and what risk are you willing to take? With the
help of professionals, investors should consider the risks at
each stage of EB-5 prior to investing. An experienced sponsor
should have readily deployable mitigation tools custom-tailored
to any project and should be able to discuss those measures
in detail. These tools allow investors and sponsors to work
collaboratively to increase the overall likelihood of success.
Mickayla Zinsli Rosard has worked
in the EB-5 industry for seven years and has
overseen the procurement of $140 million
EB-5 funds. Rosard previously served as
the director of EB-5 services at Baker Tilly
and at a regional center. She also served
on IIUSA’s Public Policy Committee for
two years and co-founded the EB-5 Rural
Alliance. She holds series 63 and 82
securities licenses.
Request for Proposal
from EB-5 Marketing Agents
Seeking entrepreneurial proposals
from experienced EB-5 Marketing
Agents that have a local country
presence to HNW individuals who
are potentially interested in
participating in the EB-5 program.
Our job creating project will
be a large film studio in
southern California.
Project updates and RFP parameters:
www.SanDiegoFilmStudios.com/eb5-rfp
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