EB5 Investors Magazine English Edition Volume 6, Issue 2 | Page 110

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.