SAMPLE CHART OF WHAT TO DISCLOSE IN A NOTICE TO INVESTORS
Financial Measure Initial Offering Current (Asuming TI/LC Facility)
Total Project Costs (Including Costs Spent-to-Date, but Excluding Financing Costs) $200 million $225 million
Total Project Costs (Including Costs Spent-to-Date and Financing Expenses) $225 million $250 million
Projected Total Developer Equity $60 million 26.65% $75 million 30%
Total Offsets Through NOI/Other Sources $ in millions $48.4 million
Tranche 1 EB-5 Raise $20 million $10 million
Tranche 2 EB-5 Raise $10 million $25 million
Total EB-5 Raise $30 million $35 million
TI/LC Facility None $ in millions
Total Project Debt $165 million $175 million
Debt to Project Cost Ratio 73.33% 70%
Tranche 1 Jobs Needed (Assuming Max EB-5 Raise) # of Jobs # of Jobs
Tranche 1 Jobs Creation Projection # of Jobs # of Jobs
Tranche 1 Job Count Buffer % %
Tranche 2 Jobs Needed (Assuming Max EB-5 Raise) # of Jobs # of Jobs
Tranche 2 Jobs Creation Projection # of Jobs # of Jobs
Tranche 2 Job Count Buffer % %
Financial Measure Comparison Initial Offering Current Status
the original location under similar terms and conditions. These
changes could reasonably be supported as non-material.
Debt vs. equity: Is there a change in the model from debt to
equity? From an immigration point of view, this may not be
deemed material since it does not affect the job creation or
the at-risk issues, but clearly from a corporate point of view,
there is a significant difference between a debt instrument
and an equity investment given the priority of repayment. The
modification could include a change in
the priority of the EB-5 Loan compared
to other debt on the project.
increase? These are very important factors to take into account.
Above is a sample chart indicating the type of analysis that
would be appropriate to disclose in a notice to investors.
Substitution of Assets: In some cases not only are locations
changed, but assets are substituted. For instance, a developer
of a mixed-use phased project may elect to change the order
of phasing due to economic circumstances. The key factor
here is whether the original offering documents provide for the
flexibility of the developer to modify
the order of development or substitute
locations or the real estate mix of the
project, whereby the economic report
and business plan take into account
the applicable components and
the potential substitution thereof in
complying with immigration rules and
regulations.
"A change in the
capital stack is the
most significant
factor in analyzing
the significance of the
change"
Change in Capital Stack: A change in
the capital stack is the most significant
factor in analyzing the significance
of the change. Applicants should
do an evaluation of the capital stack
comparing the existing offering
documents to the new capital stack,
together with an indication as to
whether the percentage ratios have been maintained. In other
words, has the debt to cost increased? Has the overall value
increase based upon an increase in cost taking into account
the additional capital funding? Does the project substantially
have the same percentage of equity coverage compared to
the original offering and if there is a cost increase, does same
otherwise entail an increase in value that would justify the cost
110 EB5 INVESTORS M AGAZINE
In connection with all of the above
factors, it is always necessary to
determine whether investor consent is required. This may
not be clear cut if the applicable documents provide authority
to the manager/general partner, since it could be argued that
no consent is required. However, to the extent we are dealing
with the securities issue involving a significant change to the
original transaction, then obtaining investor consent could be
appropriate.