Step 1: Requesting the Offering Package
We start by requesting the offering package, setting the stage for our assessment. Our industry-specific knowledge allows us to scrutinize the offering package, verifying its compliance with EB-5 Program requirements, including the critical aspect of job creation.
Our request for the offering package includes:
Private Placement Memorandum (PPM)
This document is a detailed guide to the investment opportunity, presenting essential information about the project. It outlines the terms, risks, and key aspects that potential investors need to understand.
NCE's Operating Agreement
The Operating Agreement for the New Commercial Enterprise (NCE) outlines the governance structure and operational details. It delineates the roles and responsibilities of those involved in managing the NCE.
Business Plan and Economic Analysis
These documents provide insights into the project's strategy, operational plans, and its expected economic impact. They are critical for evaluating the project's feasibility and its potential to create jobs.
Loan and Security Agreement
This agreement defines the terms of the loan and the security arrangements between the NCE and the Job Creating Entity (JCE). It specifies how the funds will be utilized and protected.
Subscription Agreement
The Subscription Agreement is a contract that investors enter into, outlining the terms and conditions for participating in the offering. It covers details related to the investment, including the amount, payment terms, and rights of the investor.
Escrow Agreement
The Escrow Agreement governs the handling of funds during the offering process. It ensures that investor funds are safely held until specific conditions are met or the investment is finalized.
Fund Administration Agreement
This agreement outlines how the funds will be managed and administered. It covers details related to fund allocation, disbursements, and financial oversight.
Regional Center Authorization and Sponsorship Letters
These documents confirm the Regional Center's authorization and sponsorship of the project. They are essential for understanding the project's eligibility for the EB-5 program and its alignment with regulatory requirements.
Step 2: Reviewing the EB-5 Project
Our extensive experience informs our comprehensive review of the EB-5 project. This review encompasses project feasibility, program compliance, and the critical evaluation of job creation. We examine critical elements such as the project’s plan, TEA designation, permits, approvals, key agreements, funding sources, and financial projections.
Our assessment encompasses:
Project Description
A thorough examination of the project's details, including the Job-Creating Entity (JCE), its size, operational characteristics, product and service offerings, market alignment, future prospects, and execution plans.
TEA Designation
Evaluation of the project's location to ensure compliance with Targeted Employment Area (TEA) requirements. This assessment considers whether it qualifies as a rural area or falls within a high-unemployment targeted-employment area, impacting the required investment amount and visa priority.
Permits, Approvals, and Key Agreements
A meticulous review of all permits related to the project, ensuring compliance with regulations and timely acquisition of necessary authorizations. Key project agreements are also examined to provide insights into contractual relationships, obligations, and financial implications.
Funding Sources and Financials
Assessment of various sources of funds, ensuring their proper use in alignment with project objectives. A detailed expenditure breakdown is reviewed for transparency and financial prudence. We also examine financial projections and underlying assumptions to gauge the project's financial performance and its ability to meet EB-5 repayment obligations.
Step 3: Analyzing the EB-5 Fund
In this phase, we dive into the heart of the EB-5 offering—the EB-5 fund or New Commercial Enterprise (NCE). Our analysis covers fund objectives, investment type, fund income, exit strategy, operational costs, and management, ensuring a clear understanding of the fund's mechanics.
Our analysis encompasses:
Fund Objectives
A comprehensive understanding of the NCE, including its establishment date, targeted offering amount, ownership structure, and confirmation of proper organization and good standing.
Investment Type & Duration
Examination of the nature of the investment instrument from the NCE to the JCE, whether it takes the form of a loan or preferred equity. We also evaluate loan terms, renewal options, guarantees, and security, providing clarity on the mechanics of capital deployment.
Fund Income
Scrutiny of the NCE's income streams, which includes interest earned from loans or preferred distributions from equity, aligning these with the respective agreements. This offers insights into the financial returns and income generation associated with the NCE's participation in the project.
Fund Exit Strategy
Rigorous evaluation of the exit strategy for the NCE, with a primary focus on assessing timelines, projected financial performance, and the identification of funding sources earmarked for the repayment of capital back to the NCE.
Operational Costs & Management
A comprehensive review of the allocation of administrative fees, designed to cover various expenses related to the offering and marketing. Additionally, we examine the compensation structure for the NCE's manager, scrutinizing management fees and other forms of compensation for alignment with industry standards. This assessment also extends to understanding the manager's identity, role, experience, and ownership structure, all of which contribute to effective NCE management.
Step 4: Regional Center Sponsorship Review
We focus on the regional center sponsoring the NCE, evaluating its establishment, USCIS authorization, project application, and compliance with the EB-5 Reform and Integrity Act of 2022. This ensures the suitability of the regional center as an NCE sponsor.
Our evaluation includes:
Authorization & Scope
We analyze the regional center's establishment date and USCIS authorization details. This involves assessing its compliance with the EB-5 Reform and Integrity Act of 2022 and understanding the geographic scope it covers. These factors help us evaluate its suitability as an NCE sponsor.
Project Application
We carefully review the I-956F project application submitted by the Regional Center to USCIS. This document is a prerequisite for EB-5 investors filing their I-526E petitions.
Compliance with RIA of 2022
We examine the compliance and policy manuals of the Regional Center, ensuring they align with the EB-5 Reform and Integrity Act of 2022. These manuals outline measures for monitoring NCEs, associated JCEs, and other program participants. Our assessment ensures the Regional Center's commitment to regulatory compliance and its ability to meet program requirements.
Step 5: Management and Oversight Evaluation
We assess the management and oversight of the EB-5 project, including the NCE, JCE, and third-party service providers. Our review considers the management team, potential conflicts of interest, service providers, fund administration, and background checks.
Our review covers:
The Management Team
We conduct an evaluation of key personnel, considering their qualifications, experience, and track record.
Conflicts of Interest
We identify and disclose any affiliations or relationships that could give rise to conflicts of interest.
Service Providers
We document and review all involved service providers to ensure the presence of a credible team responsible for compiling the offering package.
Fund Administration & Escrow Agents
We make note of any fund administrators or escrow agents involved. If no fund administrators are utilized, we verify that annual audits are conducted on the NCE.
Background Checks
We perform extensive background checks on key members of the management teams for both the NCE and JCE, utilizing search tools such as CrowdCheck and Global Verification Network to confirm the absence of disqualifying events.
Step 6: Investor Review & Commitments
In this phase, we provide summaries of key elements within the offering documents that matter to investors. We cover remedies in case of I-526 denial, investor distributions, exit strategy, investor communications, management participation, suitability criteria, and subscription procedures.
We cover:
Remedies in Case of I-526 Denial
Investor Distributions
We examine the amount, frequency, and timing of investor distributions, taking into account the implications related to the "at-risk" status and guaranteed returns.
Investor Exit Strategy
We evaluate the NCE's strategies for repaying investors, closely examining the mechanisms and specified timelines outlined in the agreements.
Investor Communications
We review operating agreements to ensure compliance with investor reporting and transparency requirements. This includes the provision of financial statements and tax reporting information.
Investor Management Participation
We assess the level of involvement of immigrant investors in NCE management, including their responsibilities and participation in policy formulation.
Suitability
We examine the criteria for investor suitability, the procedures for verification, and the extent to which investors adhere to investment and tax-related risks.
Subscription Procedures
We review the subscription agreement, gaining an understanding of the processes and required documentation for NCE membership.
Step 7: Evaluating Investment Strengths and Risks
We comprehensively assess the EB-5 project's strengths and potential risks to offer you insights needed for well-informed investment decisions. This includes considerations such as expedited processing, visa set-asides, phased investment flexibility, strategic locations, diversified offerings, construction progress, and risk factors.
This includes considerations such as:
Investment Strengths
Our review reveals the project's various strengths, including potential for expedited processing times. We consider past successful expedited investors, phased investment flexibility, the project's track record of EB-5 capital raising and government support, strategic locations, diversified offerings, significant construction progress, and proof of concept.
Investment Risks
Our analysis goes beyond the disclosed information to uncover hidden or unanticipated risks that may affect the project's success. We scrutinize market conditions, regulatory factors, competition, and project-specific risks. Project financials, operational plans, and underlying assumptions are carefully assessed. External factors such as policy changes, immigration laws, and economic conditions are considered.
Step 8: On-Site Assessment and Management Interviews
This phase involves on-site assessments and interviews with project management to gain deeper insights into critical aspects of the EB-5 project, ensuring that you have a thorough understanding.
This allows us to ensure a thorough understanding of:
Site Evaluation
We conduct an assessment of the project site, evaluating its current condition and its proximity to important demand generators. This provides valuable insights into the physical aspects of the project and its alignment with market conditions.
NCE Expertise
We closely examine the New Commercial Enterprise (NCE) to ensure they possess the necessary expertise and staffing to effectively manage the funds from investors. This assessment is essential to verify the NCE's capacity to oversee the financial aspects of the project.
Project Management Insights
Through interviews with the project management team, we delve into their motivations for utilizing EB-5 funds and their future plans for the project. Understanding their strategic direction and goals is critical in assessing the project's potential for success.
Resolution of Questions
We use this phase to address any questions or concerns that may have arisen during our previous reviews. This provides clarity on any outstanding issues and ensures that all aspects of the project are thoroughly understood.
Step 9: External Research and Analysis
We conduct external research to provide context for the project's position. This research includes industry insights, market dynamics, regulatory compliance, and risk assessments to ensure that you have a holistic view.
This research encompasses:
Industry Insights
We review industry reports, publications, and interviews with experts to assess current trends and challenges in the relevant industry. This research offers valuable context for the project's position within the industry.
Market Dynamics
We analyze market demand and the competitive landscape for similar projects in the area to gauge the project's potential for success.
Regulatory Compliance
Our assessment includes zoning, land use regulations, environmental requirements, and building codes, ensuring the project aligns with applicable regulations.
Risk Assessment
Our analysis considers a range of potential risks, encompassing economic, environmental and political factors, providing a holistic view of external influences on the project.
Step 10: Ongoing Monitoring and Assessment
Our commitment to your success extends beyond the initial due diligence phase. We continuously monitor projects to adapt to changing circumstances and provide you with the most accurate and up-to-date information for your investment decision.
Conclusion
Our comprehensive approach to each step of our diligence process ensures that potential investors and immigration lawyers are well-equipped to make informed decisions. We prioritize suitability and compliance, providing clear insights into the strengths, risks, and mechanics of the EB-5 investment opportunity, all in alignment with industry standards and regulatory requirements. This transparent evaluation and well-rounded assessment offer a holistic understanding, enhancing your ability to navigate the complexities of EB-5 investments successfully.
At EB5 Diligence we are committed to empowering you with the knowledge needed to confidently navigate the world of EB-5 investments. Contact us today to embark on your EB-5 journey.