MZ: There is more time needed to educate agents and investors on “non-traditional” projects, which can be a challenge.
Marketing non-traditional projects also relies on the involvement of certain agencies that are interested in diversifying their
portfolios, which can also take time to find. For our regional
center, the biggest advantage is helping projects receive EB-5
financing who might not otherwise. That equals job creation
in our region.
EB5 Investors Magazine: What other types of projects
do you see popping up in the EB-5 industry, now that
the real estate market seems to be back on track?
Aker Philadelphia Shipyard at the Navy Yard
TR: The Navy Yard is a good fit for the EB-5 program because it
represents a coordinated approach to the development of a public asset. EB-5 financing enables this development and rather
than simply representing low-cost construction financing, loans
made to borrowers such as Aker and Rhoads enable the domestic preservation of an industry that is increasingly dominated by
overseas producers.
SEPTA is a good fit for the EB-5 program for different reasons.
In that case, the local transit authority servicing the Philadelphia
area was in need of a long-overdue upgrade but faced a restricted
budget and competition for federal and state grants. The EB-5
financing allowed SEPTA to upgrade its fare collection system—
thereby increasing revenue and enhancing efficiency—which
otherwise would have been difficult to finance.
EB5 Investors Magazine: Are potential investors
skeptical about non-traditional projects at first?
MZ: As a non-profit organization, we aren’t necessary looking
for flashy projects, but rather, solid, well-packaged EB-5 projects. Unfortunately, agents often have a narrowly defined idea
of what makes a ‘good’ project, which more often really just
describes a project that is easier to sell.
We have found that investors, on the other hand, are much
more open to “non-traditional” projects so long as they fit into
the risk tolerance of an EB-5 investment (job creation, exit plan,
etc.). However, it is still important that the business model is
easy for investors to understand.
EB5 Investors Magazine: What are some of the
challenges associated with more non-traditional
projects? What are some advantages?
TR: Some of the challenges for a “non-traditional” project may
include underwriting issues if the borrower is a new industry,
a project’s unproven technology, or a project that lacks a track
record. However, “non-traditional” projects may also represent
a unique opportunity to utilize EB-5 in the way in which it
was originally intended—to encourage and promote U.S. jobs.
“Non-traditional” projects may also be more high profile than,
say, a hotel development.
MZ: We have screened projects like airplane design and manufacturing, hydroponic lettuce growing, medical device technology, a cement company, fertilizer plants, renewable energy
plants, a natural gas trucking fleet, a transportation loading
facility, and even a dance production.
TR: We believe that as the EB-5 program has grown in popularity, borrowers are becoming more knowledgeable about the
program. We believe we’ll see increased inbound inquiries from
borrowers who have not historically utilized EB-5.
EB5 Investors Magazine: What are your
suggestions to Chinese migration agents regarding
matching up investors and projects?
TR: As with all projects, it is important to be able to communicate all aspects of the project, including credit worthiness,
source of repayment, exit strategy, and appropriateness for the
investors’ risk appetite.
MZ: Chinese migration agents should understand the robust
discussions that are taking place regarding changes to the EB-5
program. These changes could include an increase in the program’s minimum investment amount. This could come in the
form of a reduction in the flexibility of gerrymandering TEA
zones, making it harder for projects (e.g. in Manhattan, San
Francisco, etc.) to qualify as a $500,000 investment. Expanding
on that, the majority of the coun ѥ