I spent several years marketing American investment immigration “EB5″ projects across China, Indonesia, Malaysia and Singapore. The American EB5 program grants a foreign national a green card for himself and his children if they place USD $500,000 at risk in an investment that creates 10 jobs for Americans.
Choosing a Marketable Project
An investment project, like a hotel, needs to have about 20-30% developer equity, and have places for at least 15 EB5 investors. If there aren’t at least 15 places left in the project then even the smallest investment agencies will not take on the project. EB5 funding can refinance a bridge loan, so prepare to pay a higher interest rate on a portion of the debt in the EB5 project. Also, the construction of the project needs to take at least 24 months. Practically, this means that the smallest marketable real estate project is around USD $50,000,000. And, the paperwork necessary to file an EB5 project varies in cost, but developers should prepare around $250,000 +/-.
Prepare to Wait for EB5 Funding
Typically, EB5 immigrants have long time horizons for migrating, and there isn’t a lot of pressure that could trigger a sale, except for government policy changes. Every year, on Sept. 30th, the United States sets the budget and enacts continuations of policies for many programs, including EB5. Many people don’t understand that the EB5 program itself is not being reviewed by the U.S. Federal Government, rather the program is extended when the budget is passed. So, every year, investors pile in EB5 investments right before the Sept. 30th deadline.
When it Rains it Pours
EB5 companies need to be prepared for a massive influx of investment in a short period of time, but also need to maintain relationships with local investment agencies throughout the year, despite an overall lack of investment. For example, one project I worked on had been on the market for at least 2 years and had sold only about 40 spots out of a maximum of 99 places. Then, right before a U.S. Budget renewal, the project filled out the other 60 places for investors, and we needed to allocate investors to other projects as a back-up plan.
Government Shutdowns Are Really Confusing for Investors
In recent years, to complicate things, there have been multiple government shutdowns and budget deadline extensions. During the last few shut downs, EB5 investors actually thought that the EB5 program was shut down. Investment agencies spread news flyers across social media stating that the program was cancelled. Also, it typically takes at least 60 days to prepare EB5 paperwork for an investor. So, when the budget deadline is pushed from September 30th to December 15, it allows investors that were late for the last deadline the opportunity to invest. But, when the budget deadline is moved 2-3 weeks later, there isn’t enough time for investors to apply for the EB5 program and investments stall.
The Older the Project, the Better
Typically, investments that take a while to market are seen as bad by investors, this is not the case with EB5. EB5 investment can replace bridge funding up to 2 years after the project has finished construction. As time progresses, there is more verified job creation for projects, which means that investors can be sure that they already created jobs before they invest money. Also, the US Government has time to certify the compliance of the project with EB5 law, so investors know that the project part of the application will be approved. Also, in the case of projects with Chinese investors, new non-Chinese investors can take job creation and their investment is returned before Chinese investors, so these projects are more marketable to non-Chinese investors.
There are many more details to EB5 projects, but these are some of the details that make for misunderstandings between investors, EB5 companies and developers. If you are interested in marketing an EB5 project don’t hesitate to let me know and send me an email at [email protected]