Since the EB-5 Regional Center Program's inception in 1990, billions of dollars of capital have been successfully deployed into job creating enterprises. Raising capital through the EB-5 Regional Center Program is a complicated process that requires early planning and professional execution for any given financing implementation.
The structuring and subsequent funding of an investment project with EB-5 capital depends on the careful preparation and execution of all requisite documentation and a sound marketing strategy. Such documents include comprehensive and compliant securities filings, business plans, economic studies, and other such legal documentation.
Auric Ventures International has assembled a team of EB-5 experts, service providers, attorneys, and other such advisors, contributing to an efficient document preparation and submission phase, which expedites the process of registering a project to be eligible to raise EB-5 capital.
There are numerous advantages to incorporating EB-5 capital into a project's capital stack when compared to traditional financing options, including a lower cost of capital, attractive financing terms, and increased leverage, as described below.
EB-5 investments are typically "covenant lite" in that EB-5 financing agreements allow developers a greater amount of autonomy due to reduced covenants and management rights when compared to other forms of capital. Moreover, EB-5 capital is typically "non-recourse" and free of personal guarantees.
EB-5 capital is typically infused into a project's capital stack in lieu of traditional mezzanine capital, general equity, or preferred equity. Succinctly, EB-5 capital is loaned at a significantly lower interest rate in comparison to other such mid-tier options in the capital stack.
EB-5 investments typically follow a "loan model" or are structured as an equity interest with debt characteristics. Utilizing EB-5 capital can result in greater leverage for the equity investors in a given project who will rarely share appreciation in value with the EB-5 investors. Greater leverage results in a greater internal rate of return to the developer and equity partners.
A number of preliminary criteria must be met in order for a given project to raise EB-5 capital. Such requirements include project category, job creation, and location, as described below.
The EB-5 Regional Center Program can raise capital for a wide continuum of development or redevelopment projects relating to real estate development, industrial development, infrastructure projects, energy sector projects, healthcare centers, educational institutions, information technology centers, hospitality, biotech, logistics, and much more.
Due to the reduced cost of EB-5 capital, larger projects are able to take greater advantage of the savings on cost of capital due to economies of scale.
The central purpose of the EB-5 Regional Center Program is job creation. Each EB-5 investor must demonstrate that their investment will create ten (10) jobs per investor for qualifying U.S. workers, either directly or indirectly through economic modeling and projections.
It is important to keep in mind that development and redevelopment projects have significant impacts both the macro economy and micro economy when estimating job projections. Moreover, when a Regional Center is used to partially finance a project, economic multiplies may also be used in projections for job creation.
EB-5 projects are typically located in "Targeted Employment Areas" (TEAs), which are defined as places that, at the time of investment, are experiencing unemployment of at least one hundred fifty percent (150%) of the national unemployment rate, or rural areas which are defined as any area outside of a metropolitan statistical area or outside of any city or town having a population of twenty thousand (20,000) or more according to decennial census data.
Generally, EB-5 capital has more attractive terms and a cheaper overall cost of capital when compared to similar financing instruments.
EB-5 capital is extremely versatile, but is generally deployed as a replacement for mezzanine capital. Alternatively, EB-5 financing can fill a variety of capital funding needs for eligible development projects by replacing or augmenting institutional financing or supplementing equity contributions.
While no project is the same, an ideal fundraising commitment is between $5 and $50 million dollars due to increased savings as a result of scale.
The fundraising duration depends upon the size of the capital raise. The optimal time frame should last between nine and twelve months.
Developers and project sponsors are not responsible for any of the EB-5 investors' immigration petitions. The EB-5 Regional Center, our investors, and their legal counsel handle all matters pertaining to the immigration process.