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How do regional centers calculate interest rates for individual investors?

Can a regional center offer different interest rates to investors on the same project? How do they calculate something like this?

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    Ed Beshara

    Immigration Attorney
    Answered on

    In a loan model EB-5 Regional Center project, the JCE will enter into a Loan Agreement with the NCE. The NCE corporation receives the individual investor funds and, then, the NCE loans the funds to the JCE. The JCE will state in the agreement that the interest on the repayment of the loan and the average amount in the EB-5 industry is less than 1%. The reason why the interest amount is low is that, if it is higher, the JCE could seek traditional funding for their projects rather than the lower priced EB-5 funding.

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    Since EB-5 investments are equity investments, it is not entirely accurate to call returns to the EB-5 investors “interest rates.” Under the “loan model,” EB-5 enterprises use the invested capital to loan to other companies, usually referred to as “job-creating entities,” or JCEs. The terms of the loan from the NCE (new commercial enterprise) to the JCE are determined by a loan agreement. It might be that the NCE allocates a percentage of the interest to the EB-5 investors, by the agreement it has with the investors. The “interest” received by any investor is really a profit distribution or a “return on investment” from the NCE to the EB-5 investors, notwithstanding the fact that the funds were paid as loan interest payments from the JCE to the NCE.

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    A Olusanjo Omoniyi

    Immigration Attorney
    Answered on

    To a greater degree, the issue of interest rates is usually dealt with in the early stage of the agreement between the regional center and the investor. There is no single standard for all. In most cases, the agreement will state that the regional center''s interest rate is pegged to what is obtainable as a going rate in a savings account which is usually a very small percentage. Most EB-5 investments earn very small interest rate and may be as low as just 1%.

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    It would appear unlikely that the same project would offer different rates. Arguably, if there are different tranches, this is possible.

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    Charles Foster

    Immigration Attorney
    Answered on

    Yes, Regional Centers can offer different rates of interest to investors on the same project. They simply have Class A and Class B offerings. The key would be full disclosure. Investors in China are more willing to accept the lower interest rate than investors in other parts of the country.

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    Phuong Le

    Immigration Attorney
    Answered on

    I believe you are referring to the NCE. While the Regional Center may sponsor an EB-5 project, it is the NCE that generally conducts the EB-5 offering to raise funds for the project. The same project can have multiple offerings and each NCE is free to offer its own terms. Check the offering documents to confirm and to also compare the investment terms with other offerings in the same project (if any).

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    Jinhee Wilde

    Immigration Attorney
    Answered on

    Different projects and the loan agreement that was part of the subscription agreement, partnership agreement packet you signed will describe what the investor, as part of the limited partner will be getting as interest for the investment. Each year, the limited partner will receive the K-1 for the interest payment that you received from the partnership who loaned the money to the project and receive interest payments.

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