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How does EB-5 financing work with conventional capital?

My company is focused on raising JV/equity capital for commercial real estate developers via conventional avenues. A number of my clients are now asking about EB-5 capital and whether it could be part of the capital stack. My question is whether EB-5 financing causes any problems with the conventional lenders (senior mortgages, construction loans, mezz debt) or equity partners? If so, what types of problems typically arise? A conventional mezz debt source and a senior lender have to sign a tri-party agreement - does this apply to the EB 5 financing also?

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    EB-5 typically works well in a mezz debt scenario, as well as other financing structures. There are no specific immigration requirements as to the number or types of agreements in any given EB-5 case, but all U.S. laws and regulations must be followed. In most cases, the "deal package" consists of all relevant and required agreements between the investor and the project, including any agreements to show that the EB-5 capital is at risk and how it is being used in the project. If, for example, a tri-party agreement is required by banking or other regulations, and it contains relevant information about the EB-5 capital not contained in any of the other agreements/documents, then it should be included in the supporting evidence of the investor's I-526 petition. If the information is duplicative or not probative as to any EB-5 requirement, then it need not be submitted.

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    J Bruce Weinman

    Immigration Attorney
    Answered on

    EB-5 is usually not the exclusive source of funds for a project - especially a real estate project. You should not run into any problems, but everything is subject to negotiations between you and the lenders.

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    Ed Beshara

    Immigration Attorney
    Answered on

    An experienced EB-5 immigration attorney will be able to assist you. In general, non-EB-5 funding and EB-5 funding can jointly finance an EB-5 project, and every case is different.

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    EB-5 funding is often a part of a multi-part capital stack that can also include bond funding, developer equity, other non-EB-5 investors, bank loans and more. As is often the case, the actual development project will receive a loan or lump equity investment from the EB-5 new commercial enterprise, and will require a loan agreement or something similar.

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    Barbara Suri

    Immigration Attorney
    Answered on

    The investment of EB-5 capital is treated as any other investment capital. The difference being that the EB-5 investor is also reaching for permanent residency in the United States and thus has to submit additional documentation to USCIS, quoting the qualifying investment as the major qualifier.

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    John J Downey

    Immigration Attorney
    Answered on

    EB-5 capital is usually used as one part of the capital mix. Your question is really case specific. It should not cause any problems per se, but you may have contracts with other investors or lenders that might cause a conflict.

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    Robert Lee

    Immigration Attorney
    Answered on

    EB-5 is an alternative financing source. Traditional sources like banks and VC's charge a lot for their financing. Because EB-5 has an immigration component, it goes through a different process with a lower expectation of return from the investor applicants. The immigration and business attorneys generally work together to make sure the deal is structured to fit the needs of the parties and compliance on the immigration issues. EB-5 financing is best used when combined with other financing sources. The value added is that projects with EB-5 financing are able to leverage those potential funds for better financing rates and products.

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    Daniel B Lundy

    Immigration Attorney
    Answered on

    EB-5 fits very well into a conventional capital stack. It is frequently used as a substitute for higher priced mezz or equity. Some lenders do not know much about EB-5, and are therefore nervous about it. It helps if you have the right team and can educate them. A very small number just do not want EB-5 in a deal. Some will require it to come in as preferred equity. Many will allow it as mezz debt, and some will even allow it to take a subordinate lien position. There is typically an intercreditor agreement, or, in the case of preferred equity, the EB-5 entity's rights in the case of a default are limited by the operating agreement. The bottom line is more and more lenders are familiar with EB-5, and there should be very few out there that won't work with it in the stack.

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