by EB5 Investors Magazine Staff
As Chinese interest in the EB-5 program continues to rise, even surpassing USCIS visa allocations, business for migration agencies has reached new heights. Faced with increasingly complex regulations and due diligence procedures, migration agents play an increasingly important role. In this issue, we are honored to have the chance to interview David Chen, Partner Lawyer of Visas Consulting Group, and Tony Tang, the Managing Director/Chief Counsel of Shanghai Jiajing Consulting Services CO., Ltd. (also known as Worldlink Immigration). We are pleased to present both the factors that they take into account when selecting projects and their experiences in the industry.
EB5 Investors Magazine: Please tell us about yourself. What is your professional background? How did you get involved in the immigration business?
David Chen: After graduating from Shanghai’s Fudan University Law School in 1992 with a specialization in international economic law, I started practicing law as a business litigation attorney in Guangzhou, South China. I did not begin learning about immigration matters until 1997—as a consequence of Hong Kong’s transfer of sovereignty, the demand for immigration extended to mainland China, especially from Guangdon province. Because of my legal practice, I was connected with many attorneys outside China, including some immigration attorneys from Canada who were eager to expand their client base in China. They suggested I should make an attempt at providing immigration consulting services. So, I set about establishing the first office of Visas Consulting Group in Guangzhou.
In 1999, we shifted our primary focus from Guandong province to Shanghai. Aside from the fact that we are more familiar with Shanghai clients’ “style,” Shanghai and East China had more immigration opportunities at the time. After moving our headquarters to Shanghai, we have successively opened four other offices in Jiangsu – Zhejiang area. We now have nine offices total, including Beijing, while the Shanghai office has over 100 employees assigned to four departments: marketing, consulting, documentation and administration.
EB5 Investors Magazine: What is the scope of Visas Consultants? How many clients do you place per year?
David Chen: Every year we have a few hundred EB-5 investors. The second biggest immigrant program for us is the Canadian program. Since the reopened Federal Immigrant Investor Program has a higher risk, the Quebec program is currently the most popular option. However, the processing time is now longer than that of the EB-5 program. We handle some cases for Portugal and Hungary too. We try to cover all the investment immigrant programs, including the programs like Malta, St. Kitts and Nevis, the United Kingdom and Australia, etc.
EB5 Investors Magazine: EB-5 investors often have very specific motivations. Why would an investor choose to immigrate to Portugal, for example?
David Chen: Some people are actually interested in developing small businesses in Southern Europe. But, for most people, they just want to get a visa—that is all. The residency requirement for European countries is not so strict, so the investors do not need to relocate right away. They keep the visa just in case one day they have to leave China. Also, most Chinese investors feel more comfortable investing in real estate.
EB5 Investors Magazine: How many EB-5 projects do you usually promote per year?
David Chen: Normally we are committed to three to four projects per year. We do not like to take too many projects, because we always put in a lot of effort to conduct due diligence reports, especially for the projects introduced by new regional center partners. We will spend more time studying their background and track record. If the project is brought in by a regional center we have been working with, we can skip the background-check process and directly start determining if the project is secure by looking into key factors like job creation, capital structure and business plan. In that case, we still have to evaluate each project very carefully. The average time we spend on one project is four months. Of course, if some projects have tight timelines, we will try to speed up the process accordingly.
The bottom line is that we need to do a thorough due diligence for each project, which is very time-consuming. We cannot afford to do that for too many projects.
EB5 Investors Magazine: Since you only do three to four projects per year, would you be interested in small-size projects? How many options would you present to a client?
David Chen: The minimum number of investors we can accept is 40. Normally we want to have at least two different options for the clients; that being said, for most cases we will not take two identical projects at the same time.
EB5 Investors Magazine: Based on your case volume, I am sure you have plenty of deal flow. Does that mean you will push away new people who want to set up meetings with you? What is the best way for a project to approach you?
David Chen: To be honest, we do not want too many people phoning us, because we can only pick out three to four deals every year. We would still meet with people introduced/referred by someone we are familiar with, though. For example, an immigration attorney or U.S. banker we have worked with.
EB5 Investors Magazine: Does timing make a difference, in terms of when a project approaches you?
David Chen: Yes. If the project is good, but we are all booked and have to fulfill our commitment, we will ask whether the project can wait. If not, there is not so much we can do. So yes, timing is very important.
EB5 Investors Magazine: During the process of evaluating a project, are you able to adequately comment on the offering documents and negotiate to get the security you like?
David Chen: Yes. Some regional centers may approach us for advice before finalizing the offering documents, and we may provide our insights. For example, if we think the loan agreement favors the developer’s interest too much, we will make comments and suggest revisions. Regional centers may disagree with our opinions at the beginning, but many of them have come back and realized that we were right.
EB5 Investors Magazine: Do you have an in-house lawyer or financial expert to help you with due diligence?
David Chen: We have team members who have a financial and legal background, but we also work with attorneys and financial experts in the United States. For conducting project due diligence, we need to go through several stages. First of all, we do the due diligence ourselves. We review the documents and see if there are things we do not like or that need to be proven, and then we negotiate and discuss with the regional center/developer. After that, we will hire professionals in the States to verify the documents. If the developer or regional center is someone we have not worked with before, we need to do a background check and sometimes hire an attorney to take a closer look. Also, we will visit the project site of every deal we do.
EB5 Investors Magazine: What are your preferences in terms of deciding which project is a good investment? Can you explain to us what your perfect deal would be?
David Chen: During the process of selecting projects, we always look at the whole picture and weigh different factors. We prefer a well-known developer with extensive experience and distinguished track record, a good location (preferably along the East or West Coast) and solid capital structure. We also prefer first lien position EB-5 loans, but that does not mean we always say no to mezzanine loan projects. There are tons of factors that need to be considered. For example, a good project should have at least 20 percent developer equity and sufficient job buffer. We like indirect construction jobs better, but under certain circumstances we can accept revenue-based indirect jobs. We like construction that has already started before EB-5 capitalization, and we also like exemplar petition approval because that can speed up the processing time. We do not have a very fixed standard. Again, it is important for us to see the big picture.
EB5 Investors Magazine: Do you ask projects for exclusivity most of the time? Is your commission/ spread disclosed to the investors?
David Chen: Most of the time we do exclusivity. The commission and spread details are listed in the documents, and we encourage the investors to get their own attorneys to review them. I think it is a good trend to do disclosure, and I also think it is our obligation to follow the regulations.
EB5 Investors Magazine: Besides assisting your clients with their immigration applications, do you also help them relocate to the United States?
David Chen: Yes, we called it landing services. If they need help, we will work with our network and local realtors in the States to help them land and register for their children at schools. We try to answer all of their questions. We have a team here specializing in landing services. If someone can compile a list of Chinese-speaking realtors and education consultants across the country, I would love to have that list.
Translated from the original Chinese article.