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How do changes in an EB-5 project budget need to be reflected?

If the total construction budget increases in a regional center project, does the offering memo have to be amended accordingly? In my case, the developer got a bigger construction loan to replace the previous one. Do the investors need to report the change? If all I-526 petitions are still pending, does this change need to be reflected by an amendment to the I-526 template petition?

Answers

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    Julia Roussinova

    Immigration Attorney
    Answered on

    This will likely not be a material change but consult your EB-5 immigration attorney for further guidance.

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    The offering memorandum should accurately reflect the facts, but if the total construction budget increases and this does not adversely impact the job creation, then there is an argument that a formal amendment may not be necessary and this may not be material change.

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    To be safe, you could, but material changes usually have to do with changes in ownership or location.

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    Marko Issever

    EB-5 Broker Dealer
    Answered on

    Most likely not. It is almost a given that construction projects have budget overruns. In your particular case, the developer decided to increase the senior loan. The offering memorandum should be amended to reflect the change, though, so that future investors are informed correctly. As for the existing investors, they should be notified as well through the regular project updates so that their respective immigration attorneys could make an assessment whether an amendment is necessary.

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    Belma Chinchoy

    Immigration Attorney
    Answered on

    An increase in the budget, on its own, generally does not require an amendment but you should discuss with your filing attorney.

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    Phuong Le

    Immigration Attorney
    Answered on

    At the end of the day, a project's budget and financing are generally considered material information to your investors and, depending on the scope of changes, you may have duties to provide notice/inform from both a securities and an EB-5 standpoint. You will need experienced deal counsel on both sides to effectively advise you. For example, if the increase in budget/financing is sizable and affects the project's scope (arguably even a 10% increase may qualify), the NCE/issuer may have to consider its duties/roles from different angles. From a securities standpoint, a securities counsel may advise that the NCE/issuer at least provide a notice to its current investors informing them of the changes (and perhaps amend the PPM if the changes would be considered materially important for future investors). From an EB-5 standpoint, an EB-5 project counsel may advise that the type of notice (and its possible material impact on the investor's EB-5 petitions) will depend on where they are in the EB-5 process, whether the changes may affect any underlying I-924 exemplars, and whether it's advisable for EB-5 counsel to create an I-526 interfiling for investors who have already filed and possibly update the I-526 template for future investors. Ultimately, these are issues that our EB-5 practice group commonly advises projects from all across the U.S. and illustrates why it is best to work with experienced EB-5 counsel who can effectively guide you through changes in your project (versus simply choosing the cheapest option and hoping nothing goes wrong). Rarely is there a straightforward answer, so these issues must carefully be worked through with advisors who understand the issues at hand as well as your business. Good luck.

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    Lynne Feldman

    Immigration Attorney
    Answered on

    Probably not, but would need to review to determine if there is a "material change" requiring an amendment.

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    Charles Foster

    Immigration Attorney
    Answered on

    If a total construction budget has increased, it would not necessarily mean that the offering memo would have to be amended, except that it's the obvious thing to do with respect to future investors. More importantly, such a change would not be deemed to be a material change, which would require any amendment to be filed with USCIS.

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