EB-5 Investors’ Guide to Reform and Integrity Act.
Who gets paid, how much and what for? Critical information even before the Reform and Integrity Act.
The Reform and Integrity Act (RIA) requires specific information to be disclosed to EB-5 investors that did not have a requirement for disclosure in the past. Most people reading this will have heard of the phrase “follow the money” as who is getting paid, how much they are getting paid and what they are getting paid for are all critical information for an EB-5 investor. AIM receives its compensation from the developer. We are not compensated in any way by the regional center or the New Commercial Enterprise. We serve as consultants to developers that are interested in utilizing the alternative source of capital that EB-5 investment provides. AIM has established relationships with various regional centers and AIM has been able to negotiate favorable interest rates such that AIM’s services come at little, to no, overall cost to a developer in comparison to a developer approaching a regional center without the engagement of AIM.
The Reform and Integrity Act (RIA) requires specific information to be disclosed to EB-5 investors that did not have a requirement for disclosure in the past.
Remember, the two most important goals of the traditional EB-5 investor are getting their green card(s) and getting their money back so providing a borrower with low cost capital plays well into these two goals. A high cost of capital can put a huge financial burden on a project (the Job Creating Entity/JCE) and, by doing so, the project may not be able to perform as well as it would with lower cost capital. Additionally, a high quality project should be able to attract capital at more favorable rates so if the EB-5 funding is costing the developer a higher rate of interest shouldn’t this raise questions and concerns about the quality of the underlying project? EB-5 investors are not seeking a high rate of return on their investment so where is the rest of this money going (follow the money)? The United States Congress is well aware of greed and corruption that made its way into aspects of the EB-5 Program and this is where new legislation (the RIA) placed much of its focus.
Understanding Payments & Risks in EB-5
As an EB-5 investor you want to ensure that the interests of all parties are aligned. You also need to recognize that individuals/companies need to be properly compensated for the work they do or the risk they take on. The EB-5 investor also needs to understand that a business needs to be profitable in order to stay in business and the immigration and financial journeys an EB-5 investor takes involve years so it is critical that those key players remain in business throughout that journey. A prospective EB-5 investor needs to be prepared to ask questions (sometimes really hard questions), to make sure those questions are answered properly and to ask for evidence that supports the answers they are being given. There are times other questions should be triggered even when the question is not asked by the prospective EB-5 investor. Gauge how helpful others are when you have questions and how you will be able to monitor the activities of the NCE and the JCE in the future.
We hope you found EB-5 Investors’ Guide to Reform and Integrity of use. Please comment below and/or feel free to contact us directly with any questions you may have. Our staff will be able to help you or to put you into direct contact with the parties that can.
Kraig Schwigen is a recognized industry expert in the EB-5 business with over a decade of experience. As the former Chief Operating Officer of one of the largest regional center groups in the industry, Kraig grew the company from 40 investors to over 5,400, representing over $2.7 billion in EB-5 investment capital raised.
Today, as a key member of the American Investment Migration (AIM) team, Kraig is dedicated to sharing his extensive experience and expertise to assist developers seeking EB-5 investment capital.