Is my project suitable for EB-5 Financing? Smart Economic Development Conference May 1, 2014
EB-5 Overview Established by the Immigration Act of 1990 Administered by INS originally and now the USCIS Use foreign investment to spur job creation to stimulate the U.S. economy Foreign investor is required to make an investment of $1M in non-tea locations or an investment of $500,000 if the project is located within a TEA Each EB-5 investment must create 10 new American jobs per investor There are many other restrictions, however this is the basic premise 10,000 green cards are reserved yearly for EB-5 investors and derivatives a) 10,000 Visas 2.857 Visas Per Investor = 3,500 Investors b) 3,500 Investors 500 Regional Centers = 7.00 Investors available to each Regional Center c) Annual EB-5 capital apportioned to each Regional Center: 7 Investors x $500,000 = $3,500,000
Association with a Regional Center Can provide capital for qualified construction projects. High Degree of Flexibility in Structuring Used as alternative to municipal bond financing, construction loans, mezzanine financing, etc. Used as private construction funding (senior or subordinated debt) Structured as either tax-exempt or taxable Flexibility in collateralization and security Attractive cost of capital in comparison to traditional lenders or equity investors As a pubic agency As a private developer What is unique to EB-5 as compared to traditional financing? Costs and issuer obligations when compared to municipal bonds.
How a Regional Center Operates Sourcing Investors Maintaining Investor Relationships Roles of a Regional Center Sourcing Projects Structuring Projects Regional Center Investor Developer
CMB Regional Centers are the most diverse Regional Centers in Project Development CMB Model Focuses on Job Creation CMB EB-5 funds have been used for government-related, public-private as well as private projects 5
Investor Requirements 1. Investor remains in investment 2. Create 10 new full-time JOBS Investor Goals 1. Green Card 2. Return of Capital Investment 3. Return on Investment CAN YOU CREATE 10 JOBS WITH $500,000? $40,000 per employee per year + taxes $50,000 $50,000 x 10 Jobs = $500,000 Investment is used up in the first year! YET USCIS requires employment to last approximately 2.5 years. 6
Investor Requirements 1. Investor remains in investment 2. Create 10 new full-time JOBS Investor Goals 1. Green Card 2. Return of Capital Investment 3. Return on Investment JOB CREATION SOLUTION UTILIZING $500,000 IN EB-5 INVESTMENT WITH OTHER CAPITAL - Example - $20 million EB-5 capital + $60 million outside capital = $80 million for job creation 7
Over 2,250 Investors CMB Regional Centers Success Track I-526 Project Approval Success Rate: 100% I-829 Approval Success Rate: 100% I-924 Approval Success Rate: 100% Over 48,000 NEW JOBS created Over 1,220 I-526 Petition Approvals $1.3 Billion in EB-5 Capital Raised Over 150 I-829 Approvals 25 Fully Subscribed Projects 8
Goals of Investor 1. Permanent Residency (Green Card) 2. Return of Original Capital Investment 3. Return on Investment A. How goals must be built into the investment B. Public agency goals (potential conflicts), TEA letters C. Private developer goals (potential conflicts)
TEA Calculation Change The State of California TEA Designating Authority, the Governor s Office of Business and Economic Development, is considering a change in the method by which unemployment will be calculated Every year new data is released and updates are required This year the data is not only being updated, but the base information used to calculate this data is changing In years past the 2000 census provided detail for the census tract unemployment rates This data was updated to the current year by applying the Bureau of Labor Statistics Methodology Rather than continuing this process, California is going to change the base year from 2000, to an average of the last five years The purpose of EB-5 is to identify and assist areas of high unemployment Using an average diminishes the areas of unemployment
TEA Calculation Changes The State of Iowa TEA Designating Authority, is considering a change in the method by which unemployment will be calculated Every year new county and national unemployment data are released and updates are required to the corresponding census tract unemployment rates This year several States are not only updating the data, but the base information used to calculate this data is being changed In years past the 2000 census provided detail for the census tract unemployment rates This data was updated to the current year by applying the Bureau of Labor Statistics Methodology known as census share disaggregation Rather than continuing this process, many States are going to change the base year from 2000, to an average of the last five years The purpose of EB-5 is to identify and assist areas of high unemployment Using an average diminishes the effects of unemployment across the county
Iowa Projects Past and current Iowa projects suitability for EB-5 financing
Orascom
CJ Bio
Microsoft Data Farm
Casinos Sioux City Larchwood Cedar Rapids Davenport Source: Iowa Gaming Association - www.iowagaming.org
Iowa Wind Farms
Is my project suitable for EB-5? Warehouse Rehabs Commercial Buildings Utility scale Solar Projets Industrial Buildings Residential Developments Environmental Remediation Horizontal Construction Multifamily Developments Public Infrastructure IVANPAH
To give you and idea of how EB-5 funding can be utilized, the following list has categories of CMB EB-5 capital uses BERRYESSA RESIDENCES - SAN JOSE, CA Residential Developments Multifamily Developments Industrial Buildings Horizontal Construction FAIRFIELD LUXURY APARTMENT - DALLAS, TX Warehouse Rehabs Commercial Buildings GOODYEAR HEADQUARTERS KEN SHAW WAREHOUSE WEBSTER DENTAL SCHOOL
STATER BROTHERS Roadways Environmental Remediation Transit Oriented Developments Amazon Distribution AMAZON Warehouse Flood Control Sewer Water Retention Basins MILLION AIR Airport US Customs Runway Improvements EL MONTE WATER RETENTION MILITARY BASE REUSE 20
IVANPAH Rooftop Solar Utility Solar Power Ethanol Bio-refinery $1 MILLION PROGRAM TEXACO, TEXAS Luxury Condos Mixed-Use Development Student Housing Historical Renovation Hotel Rehabilitation Hotel Construction NORTH DAKOTA BIO-REFINERY BUCKINGHAM GREAT WOLF LODGE 21