EB5 Investors Magazine "Top 25 Awards Edition" Volume 8 Issue 1 - Page 103

Ronald R. Fieldstone, Partner (305) 428-4521 ronald.fieldstone@saul.com Julian Montero, Partner (305) 428-4546 julian.montero@saul.com The Power of Collaboration. Saul Ewing Arnstein & Lehr LLP is a combination of Saul Ewing LLP and Arnstein & Lehr LLP, a firm with 400-plus attorneys and 16 offices stretching down the East Coast from Boston to Miami and extending into the Midwest by way of Chicago and Minneapolis. The Firm represents a number of Regional Centers, real estate developers and EB-5 foreign investors. Members of the Firm’s EB-5 Practice handle the preparation of private placement memoranda and ancillary documents (which account for over $8 billion of EB-5 funds spread over 300+ projects) and conduct project immigration and EB-5 compliance reviews, as well as file hundreds of I-526, I-829 and I-924 petitions. Roger Bernstein, Partner (305) 428-4506 roger.bernstein@saul.com Jay M. Rosen, Partner (305) 428-4526 Jay.Rosen@saul.com Rohit Kapuira, Partner (312) 876-6653 rohit.kapuria@saul.com Amy Link, Counsel (305) 428-4507 amy.link@saul.com 161 North Clark Street Suite 4200 Chicago, IL 60601 (312) 876-7100 saul.com a doubt, the first investment step is crucial. Often, it is the determining factor whether the selected project will create the requisite jobs. Nevertheless, in addition to obtaining permanent residency, investors have two additional objectives when making their EB-5 investment: Preservation of their capital • Return on their capital The required attention on redeployment strategy has become especially impor tant with the amendments announced last year, July 24, 2020, and post-November 21, 2019 because now both the minimum investment amounts (from $500,000 and $1 million to $900,000 and $1.8 million, respectively) and processing times have risen sharply.20 21 As a result, investors are now hoping to receive not only their capital back but an additional i nve s t m e n t r e t u r n , i n l i n e w i t h other similar risk investments, as well. The success of these t wo other objectives largely depends on a well -thought redeployment strategy. Regulations demand that regional centers reinvest/redeploy capital into new similar risk projects. This activity can reduce regulatory risk. However, while doing that, it leaves the EB -5 investor powerless. As mentioned above, going into the Among other things, they check: • the loan-to-value ratios of the EB-5 loan and the senior loan • the geography of the project to make sure that it fits the new definition of TEA • the developer’s experience in new development projects and access to requisite capital so that the developer’s interests align with that of the EB5 investors. • the availability of a sound lender who conducted rigorous due diligence and concluded that the project was viable • the developer’s track record of the number of I-526 approvals, I-829 approvals, and conditional green cards obtained, as well as the record of capital, returned. Cynthia V. Gomez, Associate (305) 428-4514 cynthia.gomez@saul.com Southeast Financial Center 200 S. Biscayne Blvd. Suite 3600 Miami, FL 33131 (305) 428-4500 • original EB-5 investment, the investor conducts a very rigorous due diligence study. After completion, sale, or refinance of the project, unless the investors file their removal of conditions application, the NCE can neither place idle funds in escrow nor return the same to the investors. They need to redeploy. At this point, if the NCE redeploys those funds to another substantially riskier project, the initial credit analysis of the initial project becomes a futile exercise. B r o ke r - d e a l e r s c o u l d e n c o u r a g e r e g i o n a l c e n te r s to employ a redeployment strategy that favors diversification and increase the likelihood of capital preser vation. In many instances, the NCE’s redeploy the funds during the sustainment period without the obligation to share the additional income they earn with the investor. Broker-dealer involvement at the project selection stage would help investors become aware of these conditions of their investment. Broker- dealers could confirm that the PPM contains details of the reinvestment policy, such as the profit-sharing aspect of any future redeployment activity. Before affecting redeployment, broker- dealers would also ensure that the regional centers know their notice or consent requirements. They could also advise regional centers to employ best practices by: "When a regional center seeks consent from the investors, those investors could get an unbiased opinion from the broker-dealers on the redeployment strategy" • get ting the investors i nvo l ve d i n t h e d e c i s i o n - making process by giving them reinvestment options to choose from even if the documents do not obligate them to seek consent from them, • providing independent verification of the soundness of these options, EB5INVESTORS.COM 103