Steve_

I have a feeling it will get extended again, bit of a no-brainer in the current economic climate. Maybe not in the exact same format. But thanks for the caselaw.

Steve_

Useful post, thanks. Do you have any specific examples of regional centers that have coughed up the money? (Not so much because of whether it's a good investment but because it might be a good type of investment.) I'm assuming it's going to be real estate based though.

I have to say I wouldn't have put money into anything largely real estate based because of the current mess anyway (although in 2007 you could understand why someone might of), but it's one thing to read a prospectus, it's another to actually have facts.

Like I said I know someone who moved to California and invested in some farming collective.

411

I have attached a short article. It isnt the answer to your question but I thought it was interesting to read.

usadvisors

Hi Steve,
Our understanding, which is based on discussions with investors and attorneys, is that at this moment PIDC, CCAE and Am. Life have returned some principal, SDIBI, CMB and Vermont have not. Some PIDC and Am Life projects, we have been told, have also had difficulties in repaying the investment. Several sources have told us that a group of Am Life investors were quite upset that they had to wait for so long to get repaid (7+ years) that they were close to taking legal action and were placated by being paid $350,000 to surrender their interest in the partnership, but that could not be confirmed.

Those investors in the CCAE Almond farms were probably the luckiest of all as the increase in the standard of living in Asia has promoted a tremendous increase in the value of the Almond farms in California and that investment has done probably the best in all of the EB-5 program. Conversely the investments in the ski resorts may be the most in trouble, although of the two, Sugarbush is in a much more financially stable position. Investors in Jay Peak will be receiving time share / fractional interest so there is little chance that they will recover much of their principal invested.

You brought up an interesting point about being an investor in real estate post 2007. We recently did a risk analysis on an Assisted Living Facility which, if structured properly, could be a good investment as it has the potential for the underlying asset to appreciate as well as generate positive margin from a growing population of affluent seniors entering the market, so no brainer right? Well as a Limited Partner your position would be substantially different from someone who bought the index or actual asset.

The problem in this particular case was that the developer had purchased the property for $1.54 million in 2008 and then sold it to the LP in the offering for $2.88 million while commercial property prices in the area had remained flat. In addition, the developer awarded himself a $2.3 million dollar fee for supervising the project. When one examined the Sources and Uses statement, you would see that less than 43% of the budget was for purchasing the land and construction, the rest was for developer fees and expenses. In fact over $1 million (of the $3 Mio. raise) was for marketing, promotion and travel expenses to raise the EB-5 funding, so the developer was charging the investors for all of the expenses related to raising the funds.

In this case (and it is not an isolated example of what is being sold in the market) even if the asset were to increase in value 50% over the next 5-7 years, the investment would still probably loose money due to all of the expenses and fees that were dumped on the LPs at subscription that would not add any value to the underlying asset. The point is that even if you were fortunate enough to invest in the best asset class available, the structure of the deal could dilute or eliminate most of your investment. This is true for loan based models as well as they may not be able to show sufficient value created to sell or refinance the asset and repay the EB-5 LPs.

411

Really good information here although I would have thought most loan based projects like Canam and those loan based within AL would have paid their investors back. The president of AL recommended I invest in a loan based project if I wanted my money back immediately.

I chose to set up an assisted living centre since it is very staff intensive and even if the business is failing the underlying asset is appreciating. I took the 40hrs class and passed the state exam. All that is required is to carryout the modifications and apply for the facility license which will require the department to come and inspect the property.

One other very staff intensive business which I believe has real estate as an underlying asset is a call centre. I have this as a back up plan which will certainly be mentioned in the business plan to avoid an RFE. My location is not far off from no longer being high unemployment so I really have to act fast for my $500K to be sufficient.

scrubbedexpat099

Ouch

Timeshares around here can be something you pay to get out off.

Steve_

Mmm, it is, I wonder how much they coughed up for that FOIA request. A fair bit I suspect.

Steve_

Which coincidentally I'm pretty sure is what the people I knew in California invested in, so I appear anecdotally to have gotten a far rosier impression of the program as a whole than I should have.

So basically a way to make easy money out of people who want to move to the US.

So having to please US Govt. agencies appears to be no real impediment to ripping people off. Good to know. (Although I could learn that lesson from watching Lehman Brothers fail.)

The thing that gets me about it is that there probably are people out there who are okay with the idea of losing $500,000 to get LPR status - but you don't get LPR status, you get conditional LPR status.

Really useful information again, thanks.

Steve_

I knew someone on E-2 who bought a travel agents, that was pretty staff intensive although it failed during the recession. With the likes of Expedia and travelocity etc. it's probably too dated an idea now.

Wouldn't a hotel franchise be a simple one to do? Although first of all you've got to buy a hotel which is seven figure territory.

411

Some of the RFEs are pretty obvious :

Just as holders of counterfeit Permanent Resident cards cannot be Qualified Employees, employees that claim U.S. citizenship will not be counted unless a copy of their birth certificate, Certificate of Naturalization, or U.S. passport is provided. As noted above, a driver's license or Social Security card is not evidence of citizenship or immigration status for I-829 purposes.

The Service records indicate that at least 18 of the 23 employees appear to be illegally in the United States assuming some[one] else[’s] identity[. If] this is an error noted on the I-9, please make the appropriate corrections.”

No amount of part-time positions is equal to a full-time position. The petitioner was not able to show he employed 10 people full-time.

a portion of the claimed $500,000 investment of the capital appears to have been withdrawn and distributed to the petitioner thereby decreasing his claimed capital investment by approximately $9,563 from $500,000 (2004) to $490,437 (2007).

But an RFE for this reason is rather concerning :

The case cannot be approved with the way the subscription agreement is currently worded. Therefore, please submit an amended Subscription Agreement signed and dated by the petitioner, which eliminates the refund of funds to the investor if the I-829 is denied.

411

It probably would have qualified!

not necessarily buy, rather build a small hotel which was my original plan but it isnt sufficiently staff intensive like an Assisted living. Most large hotels use the tenancy occupation model where

Some RFEs scrutinized claims of jobs created in companies locating in a building constructed with EB-5 capital. They refused to credit jobs of companies that relocated to the building,

The only way a AL can fix their RFEs if infact they have been caught out by the tenancy occupation model would be to terminate a tenancy that has already been created with a firm that relocated which seems rather messy.

The goal should be to employ more than 10 full time and investing more than £500K just incase!

S Folinsky

As an aside, I recall a case from a colleague about 15 years ago of an individual investment. The investor has both money and an idea and started up a company. The EB-5 was approved in short order. When it came time to remove the condition, the investor contacted his old attorney.

The enterprise had succeeded beyond all expectations -- it now had over 200 employees and was making money hand over fist. In fact, it was so successful that the company was bought out by a huge well-known US corporation! That said, the original investor obtained stock in the huge US company in addition to $125 million cash and he remained in management. The I-829 focused on the success of "then enterprise" which was still "directed" by the original investor. Attorney was scared since original investor no longer had any direct ownership interest in the investment. The condition was removed. YMMV big time.

scrubbedexpat099

Do we seem that naive?

scrubbedexpat099

Somebody ban this dufus.

Steve_

How is that obvious? Isn't it illegal?

From M-274:

So how precisely do you get that information from your employees? Or is it not "improper" if it's in relation to an I-829? How stupid.

This appears to be the relevant caselaw. So tax records (W-2s I assume) or I-9s or "other similar records".