EB5 Investors Magazine | Page 91

strategies, and market analysis). The project summary and operations sections should follow Matter of Ho to the extent possible. In reality, some of the required elements (such as a list of suppliers) will not be available or determined at the time of the filing and, as such, are not typically included. Moreover, if a project results in job creation from construction only (i.e., a real estate development where construction spans 24+ months, but the building is sold once complete), the plan often excludes the operations section altogether. Organizational Structure With direct EB-5 investment, the new commercial enterprise (NCE) is the operating business; it is the only entity of consequence as it relates to the business plan. The plan should clearly address that entity’s structure, ownership and organization, and provide a clear description of the NCE’s business activities. In contrast, it is common for regional center projects to include multiple entities. One common investment model is when EB-5 investors invest directly into a lending entity (the NCE), which in turn finances a project (the job creating enterprise or JCE). In this model, the “business activity” of the new commercial enterprise is to provide financing for the project, and it is the job creating enterprise’s activity that most directly impacts the economy. A regional center plan should clearly describe the structure of the project as a whole and include an organizational chart defining the NCE, its relationship to the JCE, the role of the regional center, and any other entities involved. The ownership structure and management of each entity should also be listed, and the flow of funds between the various entities should be illustrated. Source and Use of Funds A business plan for a new company must clearly outline the sources and uses of invested funds. For direct investment, the table should list the EB-5 investment (and any other secured funds) and itemize the uses of those funds. This includes onetime up-front costs, equipment, build-out costs and immediate inventory expenses. The balance of the investment is considered working capital, which covers the operating expenses until the business turns a profit. In a regional center plan, the capital stack should be detailed, followed by a summary of the project costs, including hard construction costs, soft construction costs, FF&E and financing fees. It is also good to include a detailed construction budget with line-item hard construction costs. Timelines Regional center plans should include the general timeline of the project’s development as well as a detailed construction timeline, typically in the form of a Gantt chart provided by the developer or contractor. An additional operations timeline should be included if applicable. Direct plans should include a detailed operational timeline that states when the investment was made and when the primary activities funded by the investment will be deployed. These will vary from project to project, but typically include major asset purchases, execution of key contracts, launch of operational activities and hiring. Management Team and EB-5 Investor Participation A direct plan should include biographical summaries of the company’s management team, including a biography of the investor and an explanation of his or her role in the company (if managerial or operational). Regional center investors participate directly through their partnership or membership i