the eb-5 immigrant investor program - luis f. hess, pllcthe eb-5 immigrant investor program 282 ed...

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TheEB-5ImmigrantInvestorProgram


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Agenda

Facts & Figures Implementation •  What is EB-5? •  EB-5 Process Timeline •  Investment Categories •  Why EB-5 Projects Fail •  What is a Regional Center? •  EB-5 Regional Centers in Texas •  EB-5 Investment Statistics •  Regional Center Platform •  Investor Characteristics •  Encore Global •  Investor Objectives •  Typical EB-5 Capital Stack •  Investment Amount •  Typical EB-5 Funding Timeline •  Targeted Employment Area (TEA) •  Typical EB-5 Projects


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Favorite Quotes that should be applied to EB-5 Deals

“anentrepreneurshouldneverlethimselfforgetthetrustthataninvestorhasgiventohim,andthatthistrustofferedbyaninvestorshouldcreateamoralimpera@vetobeagoodstewardoftheresourcesmadeavailablefortheventure.”JEFFREYCORNWALL,BOOTSTRAPPING11(Pren:ceHall2010)

GuyKawasaki,theformerchiefevangelistofApple,proclaims“DiscloseEverything”and“...ifthere’scrudthathasn’tbeen–orcannotbe–cleanedupimmediately,thendiscloseittoinvestors.Anddoitearlyintheprocess.Thelateryourrevealit,theharderitwillgettodosoandthemoreitwillharmcredibility.”GUYKAWASAKI,THEARTOFTHESTART124(PenguinBook2004)


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What is an EB-5?

A Triple-Win Program …

In 1990, Congress created the employment-based fifth preference (EB-5) immigrant visa category for qualified foreign investors who want to invest in a new commercial enterprise that will … (1)  Benefit the U.S. economy, and

(2)  Create (or save) at least 10 full-time jobs for qualifying U.S. workers within two years of I-526 approval (or reasonable time thereafter) in exchange for permanent residency status in the United States.

JobCrea@on,CapitalInfusion,andImmigra@onthroughInvestment.


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EB-5 Administration

Employment-Based Immigration Program The U.S. Citizenship and Immigration Services (USCIS) administers the Immigrant Investor Program, also known as “EB-5,” created by Congress to stimulate the U.S. economy through job creation and capital investment by foreign investors.

Under a “pilot immigration program” first enacted in 1992 and regularly reauthorized since, 10,000 visas are set aside each year for investors (and eligible family members) in Regional Centers designated by the USCIS.


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Investment Categories

EB-5 Investments Are Divided into Two Categories

Direct Investment A direct investment into a business – count only “Direct Jobs” that are created by the business.

Regional Center Investment An investment through an approved Regional Center – can count …

ü  Direct Jobs ü  Indirect Jobs ü  Induced Jobs

A Regional Center is a more advantageous and effective tool for an EB-5 investor to prove-up jobs. Today, approximately 95% of all EB-5 investments are through USCIS approved Regional Centers.


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What is a Regional Center?

•  An EB-5 Regional Center is an entity designated by the USCIS that is eligible to solicit, receive, disburse and manage immigrant investors’ capital.

•  A Regional Center obtains its designation by submitting a detailed application (form I-924) to the USCIS.

•  It takes about 12 - 18 months to obtain Regional Center approved.

A Regional Center is a defined geographical area where a sponsor seeks to create jobs and promote economic growth through the investment of EB-5 funds.

Congress has reserved 3,000 of the 10,080 EB-5 visas for EB-5 investors who invest in Regional Centers.


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EB-5 Investment Statistics

EB-5 is a successful job creation and economic development program that has supported 100,000+ new American jobs, $6.5+ Billion in foreign investment, and $750+ Million in federal, state, and local tax revenue – all at no cost to the U.S. taxpayer! Year I-526sApproved AmountInvested

2005 179 $89,500,0002006 336 $168,000,0002007 473 $236,500,0002008 640 $320,000,0002009 1,262 $631,000,0002010 1,369 $684,500,0002011 1,563 $781,500,0002012 3,677 $1,838,500,0002013 3,699 $1,849,500,0009Years 13,198 $6,599,000,000


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2011 EB-5 Investment Statistics


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2012 EB-5 Investment Statistics

•  For2013,Chinaincreased,SouthKoreaDecreasedto2%,VenezuelaandMexicoeachhadapprox.1%.


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Investor characteristics


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Investor Characteristics *

•  China has 1,020,000 millionaires with personal wealth of at least 10 million RMB (more than $1.6 million USD) in investable assets (up more than 20% year-over-year).

•  China also has 63,500 ‘super rich’ people with a personal wealth of at least 100 Million RMB in investable assets (up more than 9.0% last year).

•  4 out of 5 Chinese millionaires are considering sending their children to study overseas, with the U.S. and the U.K. their preferred destinations.

•  27% of Chinese billionaires have been involved in immigration investments.

•  Investment Motivation: Children’s education, financial security, political instability, economic instability, corruption, pollution, safety, diversification.

•  Source1:“China'sPrivateWealthReport2013”issuedbyChinaMerchantsBank•  Source2:“TheHurunWealthReport2012”issuedbyGroupMKnowledge(GMK)


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Investor Financial Objectives

Encore Global Regional Center

New Employment Creation At Least 10 Full-Time Jobs Per Investor (Plus a Buffer)

Clear Business Plan With Exit Strategy

Modest Returns on Investment Low Risk to Capital

Well Capitalized Strong Sponsor

EB-5 Investors EB-5

Projects

Other $$$

Capital


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Investor Personal Objectives

Immigra@on

U.S.GreenCard

THE MOST IMPORTANT GOAL!


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Investment Amount (Per Investor)

With One Exception … (of course)

One Million Dollars ($1,000,000)


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Targeted Employment Area (Project Location)

A “targeted employment area” is an area that, at the time of investment, is an area experiencing unemployment of at least 150 percent of the national average rate -- or it can be a rural area.

A rural area is any area outside a metropolitan statistical area and outside the boundary of any town having a population of 20,000 or more according to the census bureau.

FOCUS


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Investment Amount (Per Investor)

Exception:

If the project is within a Targeted Employment Area, the investment amount per investor is …

$500,000 THE

PREFERRED CHOICE

Five Hundred Thousand Dollars

($500,000)


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EB-5 Process Timeline (3 to 5 Years)

12 Months (I-526 Approval) *www.uscis.gov as of 7/28/2014

2 Years Investment “At Risk” within Project

8 Months (I-829 Approval – Conditions Removed) *www.uscis.gov as of 7/28/2014

1 – 2 Years Project’s Exit Strategy

3 – 6 Months (Consular Processing or Adjustment of Status – Conditional Green Card)

The investment hold period is usually 5 years with immigration process lasting 3.5 to 4 years (depending upon the validity, quality of project and that actual investor’s situation).


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Job Creation Requirements

•  For each investor, a project must create or preserve 10 full-time jobs at a minimum of 35 hours per week for qualifying employees.

•  Qualifying employees include: a US Citizen,

permanent resident or other immigrant authorized to work in the United States (does not include investor, investor’s spouse, or investor’s children).

•  These 10 new jobs must be consistent with the jobs identified in the investor’s I-526 petition.


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Direct & Indirect Jobs

•  Direct Jobs are actual, identifiable jobs for qualified employees located within the commercial enterprise. (Jobs = Positions not People)

•  Indirect Jobs are those jobs shown to have been created collaterally or as a result of capital invested in a commercial enterprise affiliated with a Regional Center by an EB-5 investor. (Construction jobs are indirect jobs.)

•  The number of indirect jobs created through an EB-5 investor’s capital investment is based upon a business plan and a detailed economic analysis, which is evaluated and approved by the USCIS during the approval and designation of a regional center for participation the Immigrant Investor Program.

•  Each Regional Center must demonstrate, in verifiable detail,how jobs will be created, either directly or indirectly.

•  Job Buffer (market asks for at least 20%)

EconomicAnalysis


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Why EB-5 Projects Fail

•  Fraud or Corruption – developer never intended to fulfill his promises

•  Due Diligence Failure – little or no due diligence performed on the project, the developer’s background and track record in the industry, no real assessment of market conditions (need for the project), etc.

•  Undercapitalized or Mismanaged – (a) the developer has very little equity in the project, (b) developer has no cash reserves, (b) not enough contingency in the budget, (c) poor project accounting, (d) cost overruns, (e) project mismanagement, etc.

•  Job Creation Methodology (RIMS II Economic Modeling) is based on construction spending. If a developer does not spend as budgeted, then there may not be enough jobs created per the model

•  Regional Center Issues – not all Regional Centers are created equal.


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EB-5 in Texas

532 Regional Centers as of June 2, 2014 46 Regional Centers in Texas Regional Centers in Texas (incomplete list):

•  Encore Global •  US Freedom Capital-Texas

Frisco Texas Int’l Development Center North Texas EB-5 Regional Center City of Dallas (Civitas) Texas Urban Triangle Regional Center Civitas Texas Regional Center Houston EB-5 Regional Center

*Different Models among groups.


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About Encore Global Regional Centers

Ø  14 Approved Regional Centers Ø  2 Pending Regional Centers

ThelargestRegionalCenterplaPormintheU.S.A.


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About Encore Global What makes Us Unique?

Ø  Encore owns and operates the 2nd largest Regional Center Platform in the U.S. Ø  Encore developed the first EB-5 project in the State of Texas (call center), and this

project was the first Texas Regional center project to receive an I-829 approval.

Ø  Encore has the resources (in-house) to underwrite, develop, operate, and manage a wide variety of real estate projects (over 800 years of experience)

Ø  Encore has the geographic flexibility to develop and/or fund real estate projects in 61 markets across the country

Ø  Encore has its own team of professionals in China

Ø  Since its inception in 1999, Encore has never lost a penny for any of its investors in any of its projects (even during the recession)

Process Discipline Performance


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Hypothetical EB-5 Capital Stack

0

20

40

60

80

100

TypicalProjectCapitalStack

Developer&OtherEquity

EB-5Funds

SeniorDebt

15%

25%

60% $30.0 Million

$12.5 Million

$7.5 Million

$50.0 Million Project


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EB-5 Projects

What distinguishes one EB-5 project from another?


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Types of EB-5 Projects in the Market

•  Hospitality •  Multi-Family •  Retail •  Office •  Mixed-Use •  Health Care •  Senior Housing •  Student Housing •  Call Centers •  Public-Private Partnerships •  24-Hour Restaurants / Businesses •  Service Businesses •  Oil/Gas


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Ques@onsandAnswers

LuisF.Hess,J.D.,M.A.Office:[email protected]

the eb-5 immigrant investor program - luis f. hess, pllcthe eb-5 immigrant investor program 282 ed...

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