A CLOSER LOOK AT THE LAW
Special attention must be provided to an EB-5 transaction that does not involve fraud and that otherwise encounters monetary issues that could jeopardize both the financial and immigration viability of the EB-5 investment.
This does not happen very often, but the industry needs to be aware of the implications related to a socalled“ troubled project.” or a“ troubled business”. These issues should be anticipated both in the offering documents, including the limited partnership / operating agreement, as well as the loan documents and the loan administration process. There are two significant categories to be addressed, including immigration and financial issues.
IMMIGRATION ISSUES
From an immigration standpoint, the first priority is to create jobs and then maintain the at-risk component of the investment. If a project is in midstream of development that has not been completed or if the operating business does not create the budgeted revenues to create additional jobs, then this could pose a serious problem since without completion of construction or the execution of the business plan there may be a serious risk that the projected number of jobs will not create the number of jobs required to obtain I829 approval.
Other potential problems include situations where the actual funding of the project has not begun due to legal issues such as the termination of a lease for a project site, the inability to obtain senior financing, internal developer partner disputes that delay the start of construction, or other issues that prevent the funding of the loan or the contribution of equity.
FINANCIAL ISSUES
The second part of the equation is the financial integrity of the investment and the ability of investors to receive a return of their capital. This would include the factors stated above as well as the following considerations: Background information on the developer is discovered that brings into play the ability of the developer to separately fund and / or complete the project.
Project-related changes that may not be material from an immigration standpoint but will otherwise negatively impact the financial viability of the project, such as the
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