Document 6488924

HOTELSnyc
The Forum for New York Hotel Real Estate
Alternate Financing for Hotel Projects:
The Basics of the EB-5 Program
May 3, 2013
Clem G. Turner, Esq.
Homeier & Law, P.C.
150 Broadway, Suite 1920
New York, NY 10038
(646) 393-4701
clemturner@homeierlaw.com
Kevin Wright
Wright Johnson, LLC
205 Worth Avenue, Suite 201
Palm Beach, FL 33480
(561) 602-1992
kevin@wrightjohnsonllc.com
Standard Disclaimer
This presentation is designed to provide practical and useful
information on the subject matter covered. However, it is
provided with the understanding that no legal, tax, accounting,
or other professional services are being rendered or provided. If
legal advice or other expert assistance is required, the services of
a competent professional should be sought.
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Executive Summary
 EB-5 Overview, Basics and Timeline
 Team/Funds needed for an EB-5 Capital Raise
 Government Rules and Regulations
 How Much Can You Raise
 Overall Utilization of the EB-5 Program
 Recap
 Q &A
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Let’s Start with the Basics
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EB-5 Program Overview
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Investment
• $1,000,000 minimum investment.
• $500,000 minimum if project located in a Targeted Employment Area (TEA) (more
details later)
JOBS
• Project must create 10 permanent, full-time jobs per $500,000 invested
• Investments can be aggregated to benefit large Projects generating numerous jobs
(e.g. $50,000,000 invested – 1000 jobs created)
U.S.
Residency
• EB-5 Visa/Conditional Green Card issued approximately 4-6 months after
Investment (After Investor meets ALL standard immigration requirements.)
• Permanent Green Card issued approximately 2-3 years after Investment, assuming
requisite number of jobs created.
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Basics of EB-5 Capital Offerings
 Investor motivated not by Potential Return, seeks:
 Recovery of Principal
 Green Card (Job Creation)
 SAFETY of Investment is key Investor Criteria
 Track Record of Principals
 Viability of Business Plan
 Typical EB-5 “Preferred Return” to Investor
 1% - 2% (“Safer” projects offering 0.5%)
 Typical EB-5 Investment Period
 5 years (Can extend to 7 or 10 with additional “Preferred Return” (3%-
6%))
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EB-5 Program Administration
U.S. Citizenship and Immigration Services
Approves and
Oversees
Private
“Regional
Centers”
Regional Center
Non-exclusive
geographical
territories
Approves and
Oversees
Immigrant
Investor
Applications
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Oversee local
EB-5 Projects
Job Creating Entity
Receives
Investment
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Creates Jobs
What is a Regional Center?
Private entity, approved by USCIS to administer
capital raising activities under the EB5 Program
Approval provided is for a NON-EXCLUSIVE
geographical area for one or more specific industries
Markets to foreign investors; Oversight responsibility
for Project; Ongoing USCIS reporting requirements
Not necessary, but required if counting “indirect and
induced” job creation*
* The Job Creation effects of indirect and induced jobs can be quite compelling,
and can multiply the direct job count by as much as 5x.
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Ready to Begin the Challenge?
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EB-5 Process/Timeline:
Formation of Regional Center
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Document Production
and R. C. Application
Completion
(1-2 months)
Regional Center
Application Processed
(9-12 months)
Upon Approval, Market
Project Overseas
(1-4 months)
Investor Subscriptions
(or a portion)
Deposited into Escrow
(Ongoing)
Investor Conditional
Green Card
Applications Processed
(4-6 months)
Upon Approval,
Investor Subscriptions
Released from Escrow
(Ongoing)
As Funds Clear Escrow,
Partnership “Invests” in
Project Company
(Ongoing)
Project Company
creates JOBS
(2-3 Years)
Investor’s Conditional
Green Card made
Permanent
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Immigration
Attorney
Corporate
Attorney
• Regional Center
Issues
• Investor Issues
• Securities Docs
• Deal Docs
• Corporate Issues
Migration
Agent/Broker
• Procure
Investors
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EB-5
Professional
Team
Migration
Consultant
Business Plan
Writer
• U.S. Specialist in
Marketing to
Offshore Agents
• USCIS
• Investors
Economist
• Job Analysis
• Economic Rpt
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Documentation
Costs/Legal Fees
•$100,000 - $150,000
(not including offshore
marketing)
Investor
Procurement Costs
•$40,000 - $60,000
(Paid by Investor)
•200-300 Basis Points to
Migration Agent
Primary Government Regulators
 United States Citizenship and Imigration Services (USCIS)
 Primary Regulator – EB-5 is an IMMIGRATION Program
 Gatekeeper for Issuers and Investors
 Loss of Regional Center Status/Deportation
 Securities and Exchange Commission (SEC)
 Sale of Interests in an EB-5 Offering is a sale of
SECURITIES
 Only concerned with Issuers
 Issuers face investor lawsuits and SEC
Enforcement Actions (fines and incarceration)
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Regulatory
Double-Team
US Citizenship & Immigration Services
 Oversight of Projects
 New Commercial Enterprise or “Troubled Business”
 “At-Risk” Investment (no Guarantee of Return)
 Job Creation
 Tenant Occupancy Issues
 Targeted Employment Area
 $1 million minimum v. $500,000 minimum
 Ongoing Project/Job Creation Status Reports
 Oversight of Investors
 Homeland Security Screening
 OFAC List
 Source of Funds
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Targeted Employment Area
 Unemployment at least 150% of the national average
 RURAL – Population of 20,000 or less
Obtaining your TEA designation
 MSA – Metropolitan Statistical Area
 Census Tracts
 Working with your State
 Census Tract Averaging
 Application vs. Specific Project
 Timing
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Securities and Exchange Commission
Securities Offerings Pursuant to Valid Exemption
 Regulation D “Safe Harbor” for Private Offerings
 No “general solicitation” (until JOBS Act implemented by SEC)
 Sales to Accredited Investors only - $300,000 annual income (with spouse) or
$1,000,000 net worth (not including the value of investor’s primary residence.)
 Regulation S “Safe Harbor” for Offshore Transactions
 No “directed selling efforts” targeted into the U.S.
 No sales to any “U.S. Person” or to any resident of the U.S.
Securities Offerings accompanied with Adequate Disclosure
 Unlawful for any person, directly or indirectly employ any device, scheme, or
artifice to defraud,
 Unlawful to make any untrue statement of a material fact or to omit to state a
material fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading,
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Do you need an EB-5 Proficient
Corporate/Securities Attorney?
EB-5 financing is an Offshore Securities Offering pursuant to an
IMMIGRATION Program
 Counsel must be familiar with Section 901 et. seq. of the Federal
Securities Laws (Regulation S) and complex Broker/Dealer issues
 Transaction documents must incorporate EB-5 Program
requirements and regulations
 (e.g. policy function; no repayment guarantee; distribution restrictions; etc.)
 Offering Memorandum must incorporate disclosure regarding
risks UNCOMMON to non-EB5 private offerings:
 (e.g. Immigration Law and EB5 Program specifics; USCIS administration and Green
Card/Consular Visa process; I-526 and I-829 Process; Job creation and
corresponding economic analysis; Potential sunset of EB5 Program; Cap on EB-5
Visas; Taxation issues; Regional Center administration and potential conflicts; etc.)
 High Stakes in light of SEC increased oversight and enforcement
action
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EB-5 is a Complex Program
It is Essential to engage EB-5 Service Providers with a
STRONG track record
The EB-5 Program
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How Much Can You Raise?
Can EB-5 answer your PRAYERS for Capital!
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Job Creation – The Key to Financing
 Methods, RIMS II, IMPLAN, REDYN
 Geography: Commuting Patterns vs. MSA vs. CSA
 Construction Jobs
 National Impacts vs Regional Impacts
 Business Services, Utilities, Construction
 Verification of Inputs
 Feasibility Studies
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New York City Hotels -Job Creation
 Construction Final Demand Multiplier Est. 10
 Operational Final Demand Multiplier est. 12
 Example: A hotel that will have $50MM in hard construction
cost would create 500 jobs. ($50MM x 10 =500)
 Example: The hotel that will gross $24MM in revenue and
create 288 jobs ($24MM x 12)
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How Much Has Been Raised?
Is all this academic?
Is EB-5 delivering revenue
and creating jobs
within the United States?
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Utilization of the EB-5 Program
Fiscal Year
Investor Petitions
Approved
Estimated
Corresponding Capital
2012*
3,677
$1,838,500,000
2011
1,563
$781,500,000
2010
1,369
$684,500,000
2009
1,262
$631,000,000
2008
640
$320,500,000
2007
473
$236,500,000
2006
336
$168,000,000
2005
179
$89,500,000
* Preliminary Sept. 2012 data
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Is EB-5 Capital Right for You?
Advantages
Inexpensive
Cost of Capital
• Investor 1%-2% annually
• Finder 2% - 3%
Fixed Cost for
Entry
• $100k - $150k (Marketing
Excluded)
Emerging
Market
• Estimate $5B raised in 2013
• China most established
• Latin America, India
Win-Win
“Silent” Money
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Disadvantages
Time
Consuming
• Capital raise could take 12-24
months (approx)
Start-Up Costs
• $100 - $150k outlay
before entry to market
Not Yet
Established
Market
• Pricing fluctuates
• Psychological Influences
• Capital Infusion and JOBS
• Wealthy Immigration
High Stakes
• Job creation failure leads to
deportation
• No Guarantee of Success
• No reporting, no vote
• Subordinate
Regulatory
Oversight
• USCIS – Reporting Req’s
• SEC - Disclosure
Homeier & Law, P.C. | Wright Johnson, LLC
Homeier & Law, P.C.
 Collective 50 years Corporate and Securities Experience
 Over 100 EB-5 Deals since 2009
 Counsel to over $1 Billion EB-5 Capital Raises
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




Hotels and Casinos
Restaurants
Medical Facilities/Assisted Living Facilities
Manufacturing
Charter Schools
Etc.
 Deep Relationships in EB5 Service Industry; representation on
EB5 Trade Association’s Best Practices Committee
 Big Firm Experience – Small Firm Rates
 Partners prior firms include: Skadden, Arps; Paul, Hastings; Sherman &
Sterling; etc.
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Homeier & Law, P.C. | Wright Johnson, LLC
Wright Johnson, LLC
 Business Plan Writers, Economists, Strategists
 Over 300 EB-5 Deals since 2006
 Clients in almost every state and industry
 Hotels Restaurants
 Assisted Living Facilities
 Manufacturing
 Hospitals
 Technology
 Regional Center owners and operators as well as service
providers; long time IIUSA members,
 Firm understanding of the investor
 6 months of 2012 spent in Asia working with Agents daily
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Clem Turner, Esq.
Clem Turner is a shareholder and the Managing Attorney of the New York Office of Homeier & Law,
PC. Clem practices in the area of general corporate, corporate finance and business transactional law.
With over15 years experience in the corporate and business transactional fields, both as in-house
corporate counsel and with private law firms (such as Skadden, Arps, Slate, Meagher & Flom LLP)
Clem brings a deep level of legal knowledge and expertise to the EB-5 industry.
Clem has counseled numerous corporations and Regional Centers raising capital through the EB-5
Program on matters of structuring, strategy, securities law and corporate law. He has handled
numerous EB-5 transactions in the hotel and accommodations, casino, restaurant, senior and medical
facilities, manufacturing, technology and other industries. Clem has written several articles and
routinely lectures at EB5 events throughout the U.S. and he is the highest ranked corporate/securities
attorney on www.eb5investors and the only corporate/securities attorney in the top five on
www.eb5info.com. (The other lawyers practice immigration law.)
Clem received his B.A. from Princeton University and his J.D. from Georgetown University Law
Center. He is a member of the New York State Bar and California State Bar.
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Kevin Wright
Mr. Wright is considered an expert in the EB-5 industry with vast
experience, including all facets of EB-5 Regional Center and foreign
investor immigration applications, marketing, and econometrics. He
is the only individual to have written and had a Regional Center
application approved by himself, including generic (template)
offering documents, economic studies, business plans, and legal
compliance. He is an active member of the Invest In USA
Association (IIUSA) and has successfully received USCIS approval for
dozens EB-5 Regional Centers throughout the United States. His
experience includes working with foreign agents across Asia. Mr.
Wright has also developed a proprietary software database
application to keep in compliance with USCIS. In many ways, Mr.
Wright is considered to the highest level of understanding of all
platforms and areas within the EB-5 arena.
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For Further Information
Clem Turner, Esq.
Homeier & Law, P.C.
150 Broadway, Suite 1920
New York, NY 10038
(646) 393-4701
clemturner@homeierlaw.com
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Homeier & Law, P.C. | Wright Johnson, LLC
Kevin Wright
Wright Johnson, LLC
205 Worth Avenue, Suite 201
Palm Beach FL, 33480
(561) 602-1992
kevin@wrightjohnsonllc.com