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Steve_ May 28th 2012 12:01 am

Getting money back from EB-5 investment
 
Has anyone actually managed to pull this off after having their conditions removed from their LPR status?

Or were you so thrilled with the investment you decided to keep it?

Boiler May 28th 2012 9:37 pm

Re: Getting money back from EB-5 investment
 
I have seen it mentioned in a thread last year.

But it has also been said that return of the investment should be considered a bonus.

411 May 29th 2012 8:06 am

Re: Getting money back from EB-5 investment
 
For those who invested 4% has got to be better than 1% in the bank ;)

Boiler May 29th 2012 1:40 pm

Re: Getting money back from EB-5 investment
 
Spanish government pays more than that.

Steve_ May 29th 2012 4:16 pm

Re: Getting money back from EB-5 investment
 
I just keep thinking about it for some strange reason, bizarrely mainly because I think to myself these investments must be reasonably decent and well thought out if they've had to please USCIS. And there's not much rate of return on anything else at the moment.

I knew someone in California who invested in some farming collective thing though and they were reasonably happy with it but didn't seem to have much idea if they'd ever get their capital back.

$500,000 is a lot of money though, obviously.

Boiler May 29th 2012 4:41 pm

Re: Getting money back from EB-5 investment
 
Cheap for a GC.

cranston May 29th 2012 5:14 pm

Re: Getting money back from EB-5 investment
 

Originally Posted by Steve_ (Post 10088925)
I think to myself these investments must be reasonably decent and well thought out if they've had to please USCIS.

IMO, from the USCIS side, there are 3 main issues, (1)was the money earned legally (2) are the job creation numbers realistic / provable and (3) does the investor keep their money in for the minimum period needed,

I see no evidence to suggest that USCIS cares if the investor makes or losses money.

411 May 29th 2012 5:26 pm

Re: Getting money back from EB-5 investment
 

Originally Posted by cranston (Post 10089058)
I see no evidence to suggest that USCIS cares if the investor makes or losses money.

I agree but the use of the 10,000 available visas yearly is growing exponentially. Im wandering how they will deal with the cap being met perhaps they will start finding undue faults with applications :frown:

Steve_ May 31st 2012 5:40 pm

Re: Getting money back from EB-5 investment
 

Originally Posted by cranston (Post 10089058)
I see no evidence to suggest that USCIS cares if the investor makes or losses money.

Yes true but it obviously focuses the minds of the people setting up the investment. Which is what I'm concerned about. But I want to get my money back.

Steve_ May 31st 2012 5:41 pm

Re: Getting money back from EB-5 investment
 

Originally Posted by Boiler (Post 10088991)
Cheap for a GC.

Honestly that is somewhat a secondary concern anyway. At least for me.

Steve_ May 31st 2012 5:48 pm

Re: Getting money back from EB-5 investment
 

Originally Posted by 411 (Post 10089086)
I agree but the use of the 10,000 available visas yearly is growing exponentially. Im wandering how they will deal with the cap being met perhaps they will start finding undue faults with applications :frown:

Well the impression I'm getting from reading the posts on here and also all the USCIS blurb of late is that they're super keen to get people to invest because the quota was unused, so they've put more people on it, and the end result has been more bureaucratic nit-picking which is actually counterproductive! :lol:

It's just the investments themselves now look much more attractive because they're usually under the auspices at some point of some local govt. entity and the rates of return were never that exotic but at the moment they look quite good.

But one assumes at some point they will go back to looking rather unimpressive so an exit strategy is important.

However from an immigration standpoint, I have no doubt more people will want to use EB-5, if only because the Canadian IIP now has a much higher investment amount required. But the IIP is less risky than EB-5.

From the standpoint of a Canadian the quality of the investment is more important and getting LPR status is less important than for other immigrants.

411 Jun 1st 2012 11:22 am

Re: Getting money back from EB-5 investment
 
Well sunset for the EB5 is september hopefully I can get my EB5 application shoved in before then :sneaky:
I agree return is most important, im buying undervalued commercial real estate as part of the required $500K investment. I purchased a 2500sf building 4 miles from LAX for $170K working on a short sale chiropractors office on 7500 sf lot close by. Once I get that ill put my business plan together. Exit strategy? appreciated real estate. Rate of return? entirely up to how hard I intend to work the business... but Im almost certain that it will be above 4% considering that just leasing either premises gives a yield of about 11%

S Folinsky Jun 1st 2012 3:52 pm

Re: Getting money back from EB-5 investment
 
Some general comments:

The EB-5 status was created by the Immigration Act of 1990 -- it was somewhat controversial given a visceral reaction against "buying a green card." I recall a speech by then Congressman Bruce Morrison who was chair of the Immigration Subcommittee of House Judiciary Committee in 1987 regarding the then proposed legislation. He did not like it, however, as a Representative from Connecticut he was aware of the fact that Yale University would admit children of large donors. He analogized the two situations.

On the "sunset" -- that is for the "regional center" program ONLY. The individual EB-5 investment category is not set to expire.

On OP's question -- one might want to look at a group of four cases published in Summer 1998 in volume 22 of the I&N Decisions: Soffici 22 I&N Dec 158, Izummi 22 I&N Dec. 169, Hsiung 22 I&N Dec 201, and Ho 22 I&N Dec. 206. On the refund of investment, Izummi is of particular interest.

usadvisors Jun 1st 2012 10:36 pm

Re: Getting money back from EB-5 investment
 
There are only six EB-5 Regional Centers which have been successful in getting an investor's I-829 petition approved and even fewer that have returned any of the principal at all. If you consider that most of the capital invested over the past five years (which accounts for over 90% of the capital invested in the program's entirety) went into commercial real estate projects then one should definitely be concerned about getting their full principal repaid.

There are many reasons why most investors will only get a fraction of their capital investment returned, but here are a few:

1. The prices paid for real estate prior to 2007-2008 were among the highest ever paid in the U.S. market
2. The development fees associated with these Limited Partnership pools were also among the highest seen in any investment class
3. The costs of materials, labor and equipment were also at an all time high due to the frenzied pace of activity and global competition for resources (remember China buying all of the steel that they could?)

This resulted in the EB-5 GPs and LPs paying more to have their projects developed than the traditional sources of funding (banks) would participate in, hence their reason for funding through EB-5. The GPs typically don't care as they have no or little equity in the capital stack and the LPs all of the risk in the development costs and expenses. The agents, "finders" and promoters could care less as they are paid a commission up front for getting investors to sign up.

Carry forward to the market valuations for these assets which were built into existing inventory and declining absorption and the investors will find that while the market has improved from 2008 it has not reached pre-recession valuation levels. Many of these assets are under (or non) performing and if the GPs do exit to a REIT or through a refinancing, they may receive only a fraction of the original development or capital expenditure.

Certain asset classes have suffered most of all, such as resort properties as U.S. disposable income is still depressed and there is too much uncertainty about current economic conditions for the average American to indulge in purchasing secondary rental properties or going on extended vacations. Others such as a few (not all) hotel properties have actually increased in value given the increased tourism from abroad.

In general, most private equity investments, and especially commercial real estate with among the highest risk/return standard deviations of any asset class, coupled with the transactions and development fees amounting to 10-20%+ of the transaction for the EB-5 investors, then one can see how difficult it would be to expect to receive the original investment returned.

So while it is uncertain how much the Limited Partners will receive in return for their original $500,000 capital contribution, it should not come as a surprise if many only get a fraction of what they were expecting, to expect otherwise, given the current market, the choice of investment and associated fees, would be unreasonable.

ginstwin Jun 1st 2012 10:41 pm

Re: Getting money back from EB-5 investment
 

Originally Posted by usadvisors (Post 10095613)
There are only six EB-5 Regional Centers which have been successful in getting an investor's I-829 petition approved and even fewer that have returned any of the principal at all. If you consider that most of the capital invested over the past five years (which accounts for over 90% of the capital invested in the program's entirety) went into commercial real estate projects then one should definitely be concerned about getting their full principal repaid.

There are many reasons why most investors will only get a fraction of their capital investment returned, but here are a few:

1. The prices paid for real estate prior to 2007-2008 were among the highest ever paid in the U.S. market
2. The development fees associated with these Limited Partnership pools were also among the highest seen in any investment class
3. The costs of materials, labor and equipment were also at an all time high due to the frenzied pace of activity and global competition for resources (remember China buying all of the steel that they could?)

This resulted in the EB-5 GPs and LPs paying more to have their projects developed than the traditional sources of funding (banks) would participate in, hence their reason for funding through EB-5. The GPs typically don't care as they have no or little equity in the capital stack and the LPs all of the risk in the development costs and expenses. The agents, "finders" and promoters could care less as they are paid a commission up front for getting investors to sign up.

Carry forward to the market valuations for these assets which were built into existing inventory and declining absorption and the investors will find that while the market has improved from 2008 it has not reached pre-recession valuation levels. Many of these assets are under (or non) performing and if the GPs do exit to a REIT or through a refinancing, they may receive only a fraction of the original development or capital expenditure.

Certain asset classes have suffered most of all, such as resort properties as U.S. disposable income is still depressed and there is too much uncertainty about current economic conditions for the average American to indulge in purchasing secondary rental properties or going on extended vacations. Others such as a few (not all) hotel properties have actually increased in value given the increased tourism from abroad.

In general, most private equity investments, and especially commercial real estate with among the highest risk/return standard deviations of any asset class, coupled with the transactions and development fees amounting to 10-20%+ of the transaction for the EB-5 investors, then one can see how difficult it would be to expect to receive the original investment returned.

So while it is uncertain how much the Limited Partners will receive in return for their original $500,000 capital contribution, it should not come as a surprise if many only get a fraction of what they were expecting, to expect otherwise, given the current market, the choice of investment and associated fees, would be unreasonable.


Very interesting points and well written.
Cant disagree with much that you have said.

However if one would look to an EB5 today your points 1 and 3 would show better value today. In other words investments this year have a better chance in my opinion than those of 2007-08.

All investments are risky just look at todays stock market move, however to answer the OP question i think that asset backed developments with no loans tied to them may have a chance of repayment.


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