EB-5 Real Estate Loans

This page provides an overview to help real estate developers understand the general process of accessing EB-5 capital through A List Partners. The information discussed below are the minimum requirements for consideration of a project, the entities involved, the application documents, and an outline of the entire process. Use this as a starting point to begin a discussion with the A List Partners management team about potentially partnering in a real estate development project using EB-5 capital.

 

A List Partner’s Minimum Requirements for Consideration of Project

 

As a general guideline of projects that A List Partners typically considers, below is a table of minimum requirements in which the development project should meet.

 

Duration of Development Project

Minimum of 3 years needed for foreign investors to complete their application to obtain permanent green card; 4 years is optimal for most EB-5 Investors. However, EB-5 Investors from some countries will need projects that have a duration of 6 to 8 years for them to be able to complete the application process due to the country of origin of he EB-5 Investor causing delays and objections to their application. Projects may extend beyond 3 years and may have additional development phases.

3 – 5 Years
Total Cost of Development Project

A List Partners may consider larger development projects. The developer will typically need to use 3rd-Party financing for the acquisition and entitlement stages of the project. EB-5 capital is raised after application process is completed.

$10MM to $100MM
Job Creation

The maximum amount of EB-5 capital that may be raised for a project is determined by the anticipated number of indirect, direct and induced created. For instance, if 200 total jobs are projected to be created, a total of $20MM in foreign capital may be raised ($10MM for Targeted Employment Area)

10 Jobs

Per Investor

Application Fee Paid by Developer

Application fee covers the costs associated with attorney fees, regional-center fees, economic analysis, business plan writing, appraisal, immigration attorney, initial marketing materials used to market to EB-5 Investors and administrative costs associated with processing the application. Fee amount is approximate and could change.

$150,000

 

Who is involved?

 

There are three primary entities involved in the EB-5 application.

  1. The Regional Center
    The organization that sponsors the investment project within its defined geographical area.
  1. The ‘Job Creating Entity’ (JCE)
    The entity in which jobs will be created. Typically this is the real estate developer’s company.
  1. The ‘New Commercial Enterprise’ (NCE)
    The entity in which the foreign investor invests his or her money. A List Partners is the NCE.

 

What is needed?

 

Below are the documents that must be produced by the NCE (A List Partners) for the application process.

 

  1. Fully USCIS-compliant business plan (Preferably an experienced 3rd-Party Business Plan Writer)
  2. Regional Center approval letter
  3. Regional Center organization & formation documents
  4. Targeted Employment Area (TEA) letter (if applicable)
  5. Economic Analysis (Created by 3rd-Party USCIS recognized Economist)
  1. Private Placement Memorandum (PPM)
    A List Partners will form a new entity for each individual project. This entity is filed as a Security with the SEC and is managed by A List Partners Management, LLC.
  1. Organization & formation documents for newly created A List Partners entity
  2. Loan Agreement between NCE (the new A List Partners entity) and JCE (Developer)

 

Below are the documents that must be produced by the JCE (Real Estate Developer) for the application process. A List Partners works with the developer to help produce these documents.

 

  1. Deed to the property
  2. Land Purchase Agreement
  3. Organization & formation documents for developer’s company
  4. Executive Summary of the development project
  5. 5-year Operational Pro Forma
  6. Permits & zoning approvals (If developer is still in the permitting stage, must produce a timeline of when permitting will be completed)
  7. Construction bid, schedule, and support letter
  8. After-Developed/As-Built appraisal (market study)
  9. Competitor analysis (at least 3 competitors)
  10. Biography of the developer
  11. Staffing descriptions (if applicable)
  12. Marketing strategy (if A List Partners will not be marketing the project)

While this list is not fully comprehensive, it covers the large majority of what is needed in order for the economist and business plan writer to create a fully compliant economic analysis and business plan. The developer should expect for more documents to be requested and revisions needing to be made along the way.

 

The Process

 

To officially begin the process of evaluating if the real estate development project will be a viable candidate for EB-5 capital, the developer needs to supply A List Partners with a 5-year Operational Pro Forma, which includes the construction budget and income statement. The Pro Forma is then sent to the economist for an initial job creation analysis.

As stated in the table near the top of this page, the development project must create a minimum of 10 jobs (indirect & direct) per foreign investor, which is calculated by the economist. So the initial job creation analysis goes a long way towards determining if the development project will be a good candidate for EB-5 capital. However, 3rd-Party financing can and is often times used to bridge the gap if the maximum allowable EB-5 capital is not enough for the developer to complete the project.

 

Calculation of Maximum Allowable EB-5 Capital

Standard Investment = (Job Creation Count / 10) x $1,000,000
OR
Targeted Employment Area Investment = (Job Creation Count / 10) x $500,000

After the initial job creation analysis is completed and the development project is proven to be a viable candidate, A List Partners and the developer begin working with the EB-5 team (securities attorney, immigration attorney, economist, business plan writer, etc.) to prepare all the documents referenced above. During that process, A List Partners will begin the preliminary marketing of the project to its network of brokers to raise awareness and generate feedback.

Once the documents are finalized, including the economic analysis and business plan, they are then presented to foreign investors and brokers working with foreign investors for review. If a investor likes the development project as an investment and is ready to proceed, he or she will then subscribe/invest in the NCE (A List Partners entity) and wire the funds into an escrow account.

The foreign investor then begins working with his or her Immigration Attorney to prepare the I-526 petition, which proves the investor’s eligibility for the EB-5 Visa program. Once the I-526 petition is approved by USCIS, which typically takes around 6 months, the money is moved from the escrow account into the NCE’s account and subsequently loaned out to the JCE (Developer). Typical loan terms range between 3 to 5 years, but loan extensions may be possible.

Upon the completion of the development project, the JCE (Developer) pays off the loan and the NCE (A List Partners) processes the final distribution to the foreign investors. Once the final distribution is paid out, the process is complete and the new entity (security) is dissolved.

ALPM Flowchart