EB-5 Financing - IMN's 15th Annual US Real Estate Opportunity & Private Fund Investing ForumThursday June 12, 2014New York City

Agenda

• Introductions • Background On EB-5• Discussion • Questions

Introductions

• Moderator: Ali Jahangiri, Founder & CEO, EB5Investors.com

• Panelists: David Hirson, Fragomen, Del Rey, Bernsen & Loewy, LLP George Ekins, Principal, American Dream Fund, Inc.

Background on EB-5 Program

• The United States Congress created the fifth employment-based preference (“EB-5”) immigrant visa category in 1990

• The EB-5 Program is administered by the U.S. Citizenship and Immigration Services (“USCIS”), a component of the United States Department of Homeland Security

• EB-5 visas permit a qualified foreign national to obtain a permanent US Visa (a “green card”) if the foreign national (i) makes an investment, (ii) in a US business that (iii) creates or saves 10 US Jobs

Background on EB-5 ProgramInvestment Requirements

EB-5 Investments must: - Create at least 10 US Jobs - Be equal to at least $1M If the investment is made in an area where the unemployment level is at least 150% above the national average (a “target employment area” or “TEA”), the investment may be $500k - Be actively managed by the foreign national. Ownership of a limited partnership interest satisfies this requirement. - Be made in a new or substantially reorgianized commercial enterprise - Be at risk (no guaranteed repayment or job creation) - Be made from lawfully obtained funds

Typical Deal

• Typically arranged by “regional center” - Allows a larger number of jobs to be counted through economic modeling• “Migration Brokers” market interest to EB-5 investors • Debt or preferred equity - Typically fixed rate – 4% - 8%• Generally 5 years, interest only, balloon payment • Funds must be “at risk” until Green Card (I-829 Approval)

Typical DealSizing

• Project Budget Determines # of jobs through economic model - Budget applied to model (e.g., $x construction budget = 1,000 jobs) - Typically, a “job cushion” is applied (e.g., 10% reduction = 900 jobs) - Max Investors (900/10 = 90) - Max size (90 x $500k = $45M; 90 x $1M = $90M)• Economic model prepared based on projections and prepared

by third party economist

Typical DealFunding

• EB-5 Investor subscribes and pays fees ($50K) and EB-5 investor submits “I-526 Application” to USCIS

• Investor’s subscription funds ($500k/$1M) deposited in escrow• Funds released from escrow to lender and available for advance

under two primary models: 1. “Hold until Approval” – An investor’s funds released from

escrow when USCIS grants “I-526 Approval”2. “Early Release” – All or a portion of an investor’s funds released

from escrow when I-526 Application submitted; if any “holdback”, released when investor (or certain number of other investors) obtain I-526 Approval

Typical DealCash Flow – The Principal Challenge

• Frequently structured like a construction loan – Borrower makes draw requests, construction monitor reviews, advances made

• BUT,• Advances: unlike traditional construction loan, proceeds

may not be available on demand, depending on fundraising success and release mechanism

• Repayment: Funds must be “at risk” until I-829 Approval – no prepayment, no “release pricing”

Typical DealOther Unique Features

• Job generation – Covenant to “create” jobs – spend more!• Reimbursements – Frequently permit EB-5 funds to be used

to reimburse prior costs• Interest – Some EB-5 loans charge interest once funds

available for advance, not once drawn• Advance Early – Advance to Borrower as soon as released

from escrow, regardless of whether current required for construction

• Fallow Money Solutions ($ Too early and prepayment lockouts) – Distribute, defease

• Securities risks

EB-5 Financing

EB-5 Financing Timeline

Funds Returned to

Investors

Release of funds Investor EB-5 funds must begins 3 months Approvals be spent and job after start of creation requirements met recruitment

Funds can begin to be released as early as 6 months from the start of the partnership with the Regional Center

Year 4 Year 5 Year 2 Preliminary

Work3 Months

InvestorRecruitment3-6 Months

USCISProcessing12 Months

Year 1 Year 3

EB-5 Immigration Timeline

I-526 approval and receipt I-829 approval and receipt of conditional green card of permanent green card

Files I-526 and funds File I-829: Funds are released to EB-5 Funds must be spent and job Retuned to project upon filing creation requirements met Investors

Year 4 Year 5 Year 2 Preliminary

Work3 Months

InvestorRecruitment3-6 Months

USCISProcessing12 Months

Year 1 Year 3

EB-5 Investor Profile

High-net worth individuals seeking immigration to the U.S.

Motivation for Immigration: Quality education for their Children (primary) Diversification of asset-base (secondary)

Prefer reliability/security versus high returns

Prefer established project partners

Majority of investors from China

EB-5 Financing and China Top 5 Countries

China

S.Korea

Taiwan Ira

n

Venezuela

0.00%

40.00%

80.00%

Chart Title

China

S.Korea

Taiwan Ira

n

Great Brit

ain0.00%

40.00%80.00%

Chart Title

China

S.Korea

Great Brit

ain

Taiwan

Canad

a 0.00%

20.00%40.00%

Chart Title

China

S.Korea

Great Brit

ain

Taiwan

India0.00%

20.00%40.00%

Chart Title

Number of EB-5 Investors 2005-2012

2005 2006 2007 2008 2009 2010 2011 20120

1000

2000

3000

4000

5000

6000

7000

2012 total 6,041

Today:EB-5 Investment Immigration

Majority of EB-5 Projects are Real Estate Based Projects

Industry Standards

Investor Interest

Larger Established Firms Participation

Government Investment

Roles

Regional Center Role

“Regional Centers” are licensed by USCIS to facilitate EB-5 investment. The San Francisco Bay Area Regional Center provides the following Services Services To US-Based project partners• Compliance with EB-5 requirements/USCIS reporting• Design and implement an EB-5 specific marketing strategy and collateral with

project partner integration/participation• Direction on production of investor documents • Responsible for sourcing foreign investors • Investor Relations, Reporting and Management Services to Foreign Investors • EB-5 Immigration process (I-526 and I-829)• Project status monitoring/quarterly reporting• Found Tax Compliance • Quarterly Investor Financial Statements • Referrals to the other professional services• US “Landing Services”

Project Partner Role

Pre-Funding• Work with Regional Center to structure EB-5 investment based on

jobs economic analysis • Full participation in design and implementation of marketing

strategy/collateralFundraising• Participation in “roadshow” investor events as a speaker • Support Regional Center and Regional Center partners in answering

investor questionsFund Management/Compliance • Compliance with USCIS EB-5 requirements to fulfil job creation count • Provide Regional Center with updates on project progress and

implementation

Thank You