In a recent U.S. Immigration Podcast, host Mark Deal interviewed Michael Gibson on how he helps immigration attorneys and their clients sort out and pick the best EB-5 investment by answering this question: What advice do you have for lawyers in helping clients choose among the many EB-5 Regional Centers out there?
Gibson has been the managing director of USAdvisors, the parent company of EB5News.com and EB5Info.com, for almost nine years. His firm provides due diligence, research and risk analysis on EB-5 visa projects for investors and helps developers raise funds through the EB-5 visa program. He has a degree in economics and his previous work experience was with Citicorp where he worked in the Capital Markets and Investment Banking divisions as a securities, foreign exchange, derivatives, money market, credit and debt analyst and portfolio risk manager. Gibson is an authority on EB-5 due diligence, job analysis and payback.
For those comparing EB-5 projects from Regional Centers, Gibson had this advice, “If your focus is on the Regional Center, you’re already starting off on the wrong foot.”
“When we started doing due diligence in the EB-5 industry in 2007, the Regional Centers, owner, operators and developers were all closely linked. What you see now is a Regional Center mostly being a marketing agency than asset developer; they are like a bank. They are going to raise the funds, deploy them and hope for the best.
“I would suggest the focus be on the actual project – how is it being developed, who is behind it, what capital is available if EB-5 falls short. USCIS is going to focus on if the project’s ability to create the sufficient jobs needed, they have no consideration for what’s happened with the Regional Center in the past.
“We really want to focus the attention not on the Regional Center, we want to move away from a discussion of which center does this or that, but what is the project going to do in terms of job creation and hopefully at term and repayment of the capital invested.
“We get asked these two questions all the time: Will this project create sufficient jobs to fulfill the EB-5 conditions and secondly, will our clients get their money back at term. The Regional Centers can’t answer this. They are putting the deal together and raising funds.
“What the attorneys that represent the investors must be focused on is will that specific asset do what it’s supposed to do in terms of job creation and economic impact as well as exit and return in capital. Not all regional centers are created equally nor are all projects. You need to look at the asset and project that are being sponsored. Don’t just look at the Regional Center brand, but the asset to make sure it meets your investor’s goals.”
A listing of EB-5 Regional Centers can be found at our sister site EB5Info.com.
Other Helpful Tips
- You have to be careful about the timeline for development; example being a large-scale project (casino, hotel, or something) you want to be cautious if it’s delayed and they are below the levels outlined in the business plan, you may have an issue filing the I-829 based on indirect solely.
- EB-5 is a great program for raising capital, but it’s not necessarily great for large-scale projects because of the artificial constraints imposed by USCIS. For instance, the two-year window in which to create the jobs is very restrictive if you have a large-scale project. This kind of finance is better geared towards smaller-scale projects that can meet the two-year timeline.
- Risk is the part not immediately understood or appreciated by the immigration attorney community. Immigration attorneys look at EB-5 as an immigration program with an investment attached to it, we look at it as an investment with a visa attached. The majority of risk for your client, because regardless of the investment they choose, four out of five will be approved. That’s proven by data. Where the risk is going to be is failure to repay principal at term. If your client invests and gets their green card but loses all of their money, will they be happy? I’m going to guess no, especially if they weren’t informed of the risk upfront. This is where the risk to the immigration attorney lies. If I’m an attorney, that’s where I’d focus, the client failing to get their money back.
- We’ve done analysis, the probabilities show that only 35 percent of the time will the investors get their I-829 approval and their principal back. The highest probability at 45 percent is I-829 approval with full principal not being returned.
- Every Regional Center promotion always markets 100 percent approval (there’s no USCIS data on this), you’re taking them at their word so take it with a grain of salt. A number of the centers saying this have actually had a significant number of RFEs.
- Once you start giving advice on investments, you are leaving EB-5 immigration law and into the practice of giving investment advice. I would say most immigration attorneys are not covered for this. You want to transfer this liability to a third party, but don’t just blindly hand your client off, do research beforehand and make sure they are qualified.
To listen to the 50 minute podcast in it’s entirety, please go here.
Gibson is trying to bring transparency to the EB-5 marketplace. He has just launched a database of EB-5 projects and Regional Centers at EB5Projects.com. This allows attorneys and investors to interact with the many Regional Centers and projects that are out there. They can do searches on projects, locations, categories, track record and history of the Regional Center. It’s very difficult to find information on Regional Centers, how many projects they’ve had, how much capital they’ve raised.