The Different Types of EB-5 Projects

WRITTEN BY

EB-5 Insider Team

A group of professionals with years of experience helping people immigrate to the US

Note: This article is for informational purposes only. We are not providing legal advice or selling securities. The articles and content on this site are of a general informational nature only and should not be relied upon for individual circumstances.

Let’s get a few things out of the way.

Direct vs. Indirect (RC) Investments

First, there are Direct EB-5 investments, where you can start a business and work alongside an immigration attorney to structure the business to qualify for EB-5 benefits.

Things to keep in mind here: 

  • You will still need to meet the minimum investment requirements for the business, i.e., you need to ensure it is in a TEA area to qualify for the $800,000 investment minimum threshold. If the area does not qualify for TEA, the minimum investment will be $1,050,000.
  • To satisfy the program’s requirements, you will need to create 10 direct jobs and be able to track them throughout your EB-5 immigration.
  • It’s a very ‘hands-on’ approach, meaning you must work alongside your immigration attorney to ensure you meet immigration requirements and the requirements of running a successful business. For this very reason, many investors who could structure their own business for an EB-5 benefit, choose to do their EB-5 investment through a Regional Center (RC), because they would rather spend their time focusing on doing what they do best: running a successful business.
  • Lastly, setting up a business could cost more than the minimum investment requirements, and you are on the hook for the additional expenses if you want to receive your immigration benefit, as the business must succeed, at least through immigration capital. Return of Capital (RoC), well, that is up to you and your business’s ability to turn a profit.

If you think doing a direct EB-5 investment works for your personal situation, that’s great! Reach out and we can connect you with EB-5 immigration attorneys who can get the job done and do it right. Most importantly, they have the track record to do this and walk you through the process.

For the reasons mentioned, most EB-5 investors choose the indirect or Regional Center (RC) approach.

Why?

It’s easier and hands-off, and you are (hopefully) able to work with a large team of seasoned professionals who have decades of combined experience in making real estate (RE) transactions work.

Even more important, as mentioned in our project selection article, you need to pick an RC/operator, not just a project, as the two are never unmarried.

Regional Center Project Designations

High Unemployment Area (HUA) TEA Projects10% visa set-aside
Rural TEA Projects20% visa set aside (*Priority Processing)

*Priority processing has been shown to be fast, not only for the investor but also for the projects being processed.

These projects are worth considering if you need immediate processing due to visa constraints within your country of birth or if you want or need things faster.

Things to keep in mind here, rural means rural.

Infrastructure TEA Projects2% visa set-aside

Most Common EB-5 Structures

Debt

The vast majority of projects you will find in the market are structured as debt investments.

Why?

From a capital structure, this can mean lower risk. You are in a better position to be repaid and a better position should anything unforeseen arise during the investment period.

Also, your repayment timeline is relatively fixed, and you have a maximum date of repayment and recourse if obligations are not met.

Who is this for?

Investors looking for an EB-5 investment with a fixed investment return and a lower-risk position.

Equity

You will not find a lot of investments structured as equity in the market, but they do exist

Why? Are they for you?

If you’ve never invested in a private placement and/or real estate transaction and are trying to understand CRE equity investments, and/or are swayed by the expected return, this may not be right for you. These are typically structured for individuals who are looking for Opportunistic returns and understand the risks.

Keep in mind, with any EB-5 investment, immigration benefits are not dependent upon the investment success–As long as job creation is satisfied, i.e., the project is built, and at cost, you will satisfy your immigration requirements.

Different Types of Debt

Not all debt is considered the same, nor does it have the same rights in terms of capital-in/capital-out, or the capital being repaid and timeline of repayment.

Senior Loan

Typically, it is considered the most secure position within a CRE investment.

Reasons for that can be obvious for those in CRE, but let’s break it down so that you understand your own risks.

In a Senior position, you typically contribute the last dollar to a project and the first dollar out.

Additionally, you will have a first lien on the property, which means that should the project underperform or not go as planned, you have recourse. Rather, the General Partner will have recourse to immediately course-correct the project.

Mezzanine Loan

Within a Mezzanine loan or subordinated loan, you are in a secondary debt position.

This should be more than adequate in most situations, assuming normal debt ratios.

Where this gets problematic is when things go wrong, and in real estate, things can go wrong.

What is important to understand is you are in a secondary position, which means, should things go wrong, your recourse is secondary.

Recovering a project typically will include litigation, which means time. With CRE, time is key.

Asset Classes

Various types of asset classes are commonly used for EB-5 investments.

MultifamilyApartments for rent, high-rise, garden-style
HospitalityResorts, hotels, limited-Service, long-term stay
Office/Mixed UseOffice buildings, retail, restaurants, or a combination of two or more of these
IndustrialWarehouse, flex, e-commerce, last-mile, cold storage, data centers, etc.
Life Sciences & Health CareLaboratories and offices for research, senior living, hospitals, medical office

Projects structured within rural areas can be multifamily, hospitality, or industrial, and the capital could sit anywhere in the capital stack. HUA projects are in higher-population areas with high unemployment, but they can be done in any of these types of assets.

The most common projects in EB-5 are those that create a lot of jobs, so larger-scale projects in the regional center structure work well.

There are certainly trends in real estate in terms of different asset classes. For example, offices have not bounced back nearly as much post-pandemic as other asset classes. Therefore, you probably do not want to invest in an office building without any tenants in a city that has a large percentage of WFH employees or where rents are very high.

Summary & Takeaways

All in all, it comes down to the specific project and ensuring it qualifies for EB-5, creates the required jobs, and gives you your immigration benefit in a reasonable timeframe. This will take into account where the project is located and what type of project it is, whether rural, HUA, or non-TEA.

The next part is the return of capital when you are eligible.

Therefore, the type of project and your position in that project are important to achieving these goals. All of these things mentioned come down to the operator’s ability to execute on their promise and vision and ensure they have executed deals like this in the past, received the immigration benefit, and also returned capital to investors.

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