How do I do due diligence on EB-5 regional center projects?

An experienced EB-5 immigration attorney will be able to review the EB-5 project documentation and give an opinion as to whether it is compliant with the immigration laws and securities laws, while a licensed investment advisor can review the financial and investment viability of the EB-5 project. Based upon the above due diligence, you can decide which project is likely to approve your EB-5 permanent residency and whether the project will continue to do business for a viable exit and money to the EB-5 investor.

You should investigate the history of the regional centers first. How about its previous EB-5 projects?

Retaining immigration attorneys is a great first step, as they can review EB-5 projects for immigration issues. An experienced EB-5 immigration attorney can also refer you to investment advisors who understand EB-5 projects and potential investment issues.

Due diligence is of great importance. You must not do it alone. There is a lot at stake. In due diligence, Baurkot & Baurkot requests and reviews everything and anything from the offering documents, the private placement memorandum, the business plan, corporate and capital structure, use of funds, construction timelines and budgets, the market study, the financial inputs of the project, the job creation methodology, and the TEA designation. Baurkot & Baurkot also conducts comprehensive background checks of the management of the new commercial enterprise, the job creating enterprise and the regional center. It is important to visit the site to check on the condition of the property and its location. Direct contact with the management of the developer, issuer, and more. Any due diligence must be comprehensive.

The answer is quite simple: unless you are a remarkably sophisticated investor, you are not going to be able to do due diligence by yourself. You need expert help. There are several well-qualified EB-5 due diligence experts that are found here. I would make appointments with them, make a choice on who you want to assist you after checking out that expert, and then let them help you get that due diligence done.

Probably the best and easiest way is to engage an attorney listed with the American Immigration Lawyers Association (AILA) from the particular geographic area you intend to invest in. The attorney could then guide you regarding obtaining a business evaluation firm to perform due diligence on any project you felt you might want to invest in.

It is generally advisable that due diligence should be done by investors and primarily through their EB-5 attorney. Typically, the attorney will produce a due diligence report in cooperation with a due diligence service provider by considering various factors as part of the investigation, such as a site visit, review of the project developers' records, viability of the project, and capitalization of the project, just to name a few. For a detailed action plan, consult an EB-5 attorney to address this issue before you proceed further.

There are multiple things you need to look for in a project: 1. Parties involved in the project. If it is an infrastructure project, the experience of the developer. 2. Track record of the regional center - approvals of I-526s, I-829s and return of investors' money. 3. Structure of the investment. 4. Structure of the loan in case of a loan model. 5. Valuation of property and co-lateralization of the loan. 6. Job creation. 7. Seniority of lien of the EB-5 investors. This list is not exhaustive. There are multiple other things you need look at in the project.

I recommend that you engage an immigration attorney as well as an investment advisor to perform the due diligence on a regional center. The immigration attorney will request immigration related statistics (i.e., number of petitions approved, number of green cards approved, etc.). The investment advisor will review the financials, economist's report, etc. to evaluate the regional center from an investment standpoint. You will spend money with the two professionals, but before investing more than $500,000 it is crucial to understand the financial and immigration risks involved.

Like any investment, whether for EB-5 purposes or otherwise, the investor should thoroughly investigate the project/enterprise that he/she will be putting his money in, which may include but is not limited to: 1. Verifying that the regional center has been approved for/designated as a regional center by USCIS; 2. Regional center's track record of successful filing and approval of I-526 and I-829 petitions; 3. How long has the regional center been operational and how many projects has it sponsored? 4. Always check to see the past performances and the reputation of the project developer associated with the project; 5. Check to make sure whether the project will be developed in a Targeted Employment Area (TEA); 6. How will the EB-5 funds be released to the project? 7. If the I-526 is denied, when and how will the funds be returned to the investor? 8. Make sure there is a clear exit strategy for return of invested capital, etc.; 9. Make sure there is room for the requisite job creation.

You can do your due diligence in either of two ways; you can work with a handful of advisors that give investment advice on EB-5 regional centers as well as working with experienced immigration counsel that, while they cannot give investment advice, is familiar with reputable EB-5 regional centers. You can also go online and obtain a great deal of information about EB-5 regional centers, including the length of time that the regional center has been in business or the project developer has been doing business and to some degree you can learn about the prior approval rates for the EB-5 regional center in terms of prior projects. If possible, you would also have the right to contact a prospective regional center and actually visit the project and talk to the key individuals either at the regional center and/or project regarding the EB-5 project.

Due diligence is a complex endeavor. You would probably be wise to engage a professional to handle it because you would be making a sizeable investment. Some regional centers will publish the fact that an outside entity has provided due diligence on a project. You might also hire an immigration attorney who will represent your interests and protect them. Specifically, when IBLF does due diligence on a project it includes the following topics of research: criminal reports on all principals; credibility of principals' resumes; reasonableness of plan; timing of project completion; ultimate market potential; availability of suppliers; analysis of contractors' obligations; control of funds; licenses required; validity of assets involved; percent of EB-5 funds related to total project cost; amount of equity invested by project owners; projected positions to be created; completion and success of other projects; plan for maintaining investment at risk until investor has condition removed; secured interest in the project assets allocated to EB-5 investors; type of securities offered; whether securities are registered; is a broker handling sales. Otherwise, who is promoting sales, etc.

The first step is to find a due diligence expert. You can also start by finding a good immigration lawyer who can recommend a good due diligence person. Then do due diligence on your due diligence person by checking their track record.