Capital stack in EB-5 investments : How to understand the differences
Learn the pros and cons of senior debt , mezzanine debt , preferred equity and common equity .
By Jennifer Mercier Moseley and Ashmin Chowdhury
“ safe ” investment . That is , investors focus their diligence on whether the JCE will create the required ten jobs and stay in business so that there is a likelihood ( or even near certainty ) that the investor will obtain his or her permanent green card .
To a non-U . S . citizen seeking an EB-5 visa through an investment in a regional center , the actual process of making an investment may appear merely mechanical . However , determining whether to make an investment is not merely a determination of whether the investment allows investors to qualify for immigration benefits and maintains compliance with the Immigration and Nationality Act , U . S . securities laws or any other applicable laws . While obtaining permanent residency may remain the most important goal to the investors , investors should also review whether the investment opportunity provides a likelihood of repayment of their capital investment . In addition , investors should review the opportunities to receive a profit on their investment .
GETTING THE EB-5 INVESTMENT REPAID AND MAKING A PROFIT
As recently as 10 to 15 years ago , investors and others in the industry saw an EB-5 investment solely as an immigration transaction rather than a transaction that involves the intersection of many complex laws and regulations , such as U . S . securities laws . Now , EB-5 investors are generally aware that regional centers are required to make certain disclosures to the potential investors , including risk factors related to the project and the job-creating entity ( JCE ), but to the extent due diligence is done on a specific investment opportunity , the main focus is on evaluating whether the project is a
Investors need to first decide their ultimate goal – once they obtain approval of their I-829 , is their goal satisfied , or do they want to receive their capital back ? Does the investor want to make a profit on his or her investment , in addition to receiving back the capital investment ? If investors are concerned about more than obtaining their permanent residency in evaluating potential investment opportunities , they will first need to understand the different forms of investment an EB-5 investor may be offered by a JCE . Ideally , investors should hire a financial or investment advisor who can help evaluate the investment opportunity based on the individual investor ’ s needs and goals because not all investments are the same just because the required ten jobs will be created .
The different forms of investment can be broken up into four general categories : senior debt , mezzanine debt ,
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