Last year Greenfield Advisors began working with clients involved in the EB-5 Immigrant Investor Program, providing a variety of services. As part of this new venture, I attended the 2016 Las Vegas EB-5 Conference. The event was structured as a series of panel discussions on topics ranging from likely congressional next steps on EB-5 to global marketing and diligence trends.
Here are some of my key takeaways:
- Given that it is an election year, Congress is unlikely to tamper with the construct of EB-5 that was extended until September 2016. Most experts believe that the EB-5 legislation will be extended in its current form again and then revisited in greater detail after the election.
- The Financial Industry Regulatory Authority (FINRA) officially named EB-5 a “priority area” for oversight. As Greenfield Advisors observed in another blog post on the topic, the SEC has taken more actions in 2015 on EB-5 than in all prior years combined. FINRA is the self-regulatory organization (SRO) of the financial services industry.
- Foreign agents will not be allowed to solicit or raise capital in the United States without the involvement of a licensed broker dealer.
- There is a growing need for diligence on behalf of the investors to protect their interests due to language barriers as well as process and project complexity.
- More than 90% of EB-5 investment projects are real estate projects, and 90% of those are financed with debt.
- While China still dominates the EB-5 process in regard to the number of people utilizing the program, Vietnam is number two. Iran and India have been more active as well. A common element among all of these markets is the difficulty of moving cash out of the home market into the EB-5 investment in the United States.
A common theme underscored the processes for EB-5 investors, developers, projects, and regional centers: conservatism. Speakers at the conference repeatedly emphasized that EB-5 professionals need to be cautious during every step of the process. Here are a few notable instances that stood out for me:
- Be wary of the track record and bios of management teams offering projects. A case was cited of a Chicago project developer who claimed to have 15 years of experience. That number subtracted from his current age would have made him 12 years old when he started!
- Keep job creation estimates on the conservative side and make sure to have a full understanding of allowable investments under EB-5.
- Place an emphasis on transparency and comprehension throughout the process, particularly in the drafting of business plans, economic analysis, and diligence preparation (all areas of focus for Greenfield Advisors).
- Make sure there is some “playroom” or cushion in the job creation numbers and developer timelines to ensure hitting employment and development targets.
- Work to ensure consistency across materials provided to immigration authorities, from the economic analysis to the business plan to legal documents.
Overall, this was a great conference, and I’m glad I attended. I look forward to returning next year. And don’t forget that Greenfield Advisors has expertise in the key areas described in this blog post, including business plans, economic analysis, investor and issuer diligence, and capital raising. Please contact us so we can help fulfill your EB-5 needs.
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