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Is it safer for an immigrant investor to invest in an ongoing EB-5 project or a newly established one?

What minimizes our EB5 investment risk - investing in an ongoing project or in a newly proposed project? Please explain.

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    As EB-5 requires an investor to invest in a new business enterprise, everything could be a new project. If you are asking which of the following projects is safer, you basically have two options: (1) a project offered by a regional center that attempts to gather few hundred or thousand investors, thus a project that has been offered for a long time and had earlier investor petitions submitted; or (2) a new project offered that will gather few dozen investors but has had no investor petitions filed. Which one is safer? This is not a simple answer. It is an accepted premise that: the larger the project, the higher chance of something going wrong. However, the problems that do arise in your project may not derail the whole thing—it depends on a variety of factors. Also, while I-526 petitions may be approved, the more important application is the Removal of Conditions application, the I-829. Because the approval of I-829 depends on creating the jobs forecasted at the I-526 stage, a larger project with more investors could present a risk of falling short on the projected number of jobs. However, this would depend on the methodology of the job creation that the project uses. Thus, each project must be reviewed separately on its own merits and there is no concrete rule of which regional center or project is better than another. There are some better questions to ask: you should look at whether the regional center choosing the project is the developer and any if any possible conflicts of interest exist; you should check if the regional center has a proven track record of doing EB-5 projects successfully; etc.

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    What type of investment you make really depends on the level of involvement you want to have in the U.S. business. If you prefer as little involvement as possible, you might want to invest in a regional center project. You would need to vet the regional center, the project developer and management to see what type of a track record they have in project completion and EB-5 success. If you would like to be more actively involved in the business, you might consider directly investing in a franchise. In that case, you would have to vet the franchisor, the amount of support it provides to its franchisees and the record of success of its franchises. The choice is up to you. Whichever type of investment you choose, you need to vet it carefully prior to investing to provide some level of security for your investment.

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    Statistically speaking, the safest thing for an immigrant investor to do would be to invest in a project under an existing EB-5 regional center as opposed to making a new, direct EB-5 investment. This would minimize your risk, as most regional center projects are in a TEA, thus you would only need to invest $500,000. Furthermore, the projects make use of economic studies, which results in a high probability that USCIS will find job creation criteria has been met. More importantly, you can invest in projects with the guidance of an experienced immigration attorney, hopefully Board Certified, but particularly with experience representing EB-5 projects as well as individual EB-5 investors. The regional center should have a solid record in terms of their experience as a developer and, more importantly, evidence that their exemplar has been approved and other EB-5 petitions have been approved for the same project. This would give you a greater level of security because, if you are investing in a project with already approved petitions, it is highly likely that your EB-5 investor petition on Form I-526 will also be approved.

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    There is no critical distinction except an ongoing project that may already have approvals which can provide some assurance as to immigration success. The critical aspect is to look at both the investment from a financial risk perspective and ensure it meets immigration compliance criteria. An immigration lawyer helps with the latter. You need to have a financial analyst/due diligence expert evaluate the project from a risk perspective.

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    There are many factors that may determine if an EB-5 project is sound. You should carry out detailed due diligence on any prospective project, focusing on several factors, including the promoters and parties involved, the credit risk and the ability to raise the required finance and to repay once the exit strategy presents itself. Although the age of a project may be a crucial factor, it is by no means the only factor and there is no substitute for detailed consideration of the issues, whether by an investor, his/her attorney or with the assistance of experienced investment advisers. From an immigration perspective, one consideration may be whether the project is fully subscribed or will be fully subscribed, particularly in view of the looming sunset date (September 30, 2017) for the Regional Center Pilot Program.

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    Each EB-5 project has its own risks and opportunities, just like any other investment. A thorough due diligence review on the financial details and background of each project is needed to fully appreciate all of the nuances and risks involved.

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    If you vet the projects thoroughly, there is no safer option based on whether a project is an ongoing one or new. Both should be able to provide you with documentation to protect your investment, job creation info, exit strategy, track record of developer, I-526 success record (if any), etc.

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    There are so many factors to consider. Regarding established regional centers, you can get an immigration track record, better quality of management, due diligence, etc.

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    This is a very good question but, in truth, the answer will depend on the project, whether ongoing or new to the market. I recommend you consult with your Investment Immigration Attorney and a Registered Broker Dealer.

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    One critical aspect of the EB-5 program capital being invested at-risk. Although an immigrant investor may be eligible for a green card because of the investment, the program requires the investment of at-risk capital. To evaluate the risk of an investment, foreign investors should seek the advice of investment advisors and business attorneys.

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