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Are commercial construction private loans secured by real estate valid for EB-5?

I have been arranging construction loans in California for 35 years. Because of changes in real estate market I have high demand for constructions loans. Those are private loans secured by real estate and arranged by licensed California broker (also called "Hard Money Loans"). Loan amounts range between $1,000,000- $20,000,000. The loans are typically for 18-60 months. The loans creates new jobs. I estimate that for each $1 million invested, about 20 new job positions are being created, it can be documented. The return on investment is 5%-11% depending on the project and it fairly very secured. Could these investment opportunities qualify as a viable project for an immigrant investor and if so, is it likely that investors would be interested in such a business plan?

Answers

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    Reza Rahbaran

    Immigration Attorney
    Answered on

    A project must comply with USCIS rules and regulations. Passive investments do not qualify for EB-5 immigrant investor classification. A business plan that illustrates an active business, or is involved with a regional center and satisfies the job requirement, may be eligible for EB-5 investment purposes.

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    Lei Jiang

    Immigration Attorney
    Answered on

    Yes, such projects can be structured for EB-5. You need to consult an EB-5 attorney to put all pieces together.

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    Rohit Kapuria

    Immigration Attorney
    Answered on

    Your proposal, though somewhat unorthodox, could possibly qualify for EB-5 purposes. Of course, it would have to be structured properly so that it is both EB-5 compliant as well as attractive to potential investors. One consideration is that investors would be investing in either one or multiple entities and the funds will in turn be lent out to 3rd party projects. Some regional centers have been structured to follow this model and the difficulty stems from tracking job creation. For example, if you have two investors that invest in one fund and the fund in turn lends each investor''s capital to separate construction projects, your regional center would have the task of tracking job creation at different locations. The other consideration is that the loan term would have to be for at least 60 months (and possibly include the option for an extension) because the investor must remove conditions on the temporary green card prior to receiving his/her investment refund. There are potentially ways to work around this point but they can get complicated and securities counsel would have to give you proper guidance. With regards to attractiveness in the marketplace, it is possible that some investors could jump on the idea. Of course, the more complex the project, the less attractive it will be. If however, you get a very good EB-5 business plan, a strong EB-5 economic report, a reliable marketing agent and are represented by competent securities and immigration counsel, you should be in good shape. I highly recommend consulting with immigration counsel prior to moving forward with your plan.

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    Passive investments do not qualify for EB-5 immigrant investor classification. If the deal can be restructured so that this is an active business with direct (or indirect if a regional center is involved) new employment creation, then you may have something to work with. Not every industry is suited for EB-5.

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    Ed Beshara

    Immigration Attorney
    Answered on

    EB-5 projects can be financed by a loan model in a EB-5 Regional Center context. The EB-5 project can be EB-5 compliant, marketable to investors and can have clear exit strategies for the investor. Our law firm has been involved in representing EB-5 Developers and operators in the preparation of EB-5 projects incorporating the loan model to finance projects.

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    Marjan Kasra

    Immigration Attorney
    Answered on

    It sounds as though you may have a viable vehicle for investment visa purposes. That being said, further evaluation is warranted. You should consider consulting with an experiences EB-5 Attorney.

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    An approvable EB-5 project must comply with the USCIS rules, regulations, and procedures. A marketable EB-5 project must be acceptable to whichever foreign market you are attempting to cater to (China, South America, etc.). For example, USD $1 million investments are going to be a tough sell when there are many USD $500,000 options available for projects located in TEAs. Preparing a potential project for the EB-5 market and for approval by USCIS is a unique, multi-layered process that is best served by the guidance of a qualified EB-5 attorney, like those at our law firm, who can coordinate with other professionals. We can help arrange the legal and financial infrastructures to make your project both approvable and marketable.

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    Stephen Berman

    Immigration Attorney
    Answered on

    No. You cannot meet the investment requirements by borrowed money, you need to own it.

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