Articles Posted in EB-5 Financing

Published on:

08 February 2016

Hotel Lawyer in Los Angeles at the latest EB-5 Summit

If you have been thinking about tapping into EB-5 financing for your development project, this is the time to make your decision and act quickly. If you need background on what the EB-5 program is about, how it has gone mainstream with institutional investors for several years, and is now providing a steady stream of reliable capital, please see the articles referenced at the bottom.

We think that JMBM’s Global Hospitality Group® EB-5 financing team has a pretty good perspective on the opportunity, the risks, and how to get clean execution. For the 18 months ended December 31, 2015, our team closed more than $1 billion of EB-5 financing loans, and we sourced more than $700 million of these loans for our clients.

If you have missed our reporting of key events affecting the availability of EB-5 financing here, you need to know that the EB-5 program was extended for another year through September 30, 2016 without any changes. But just as the maximum number of visas has been reached in each of the past two years, the experts expect that we will “cap out” at the maximum 10,000 visas even earlier in 2016 – possibly as early as May or June.

And the “reformers” are still out there, with proposals to revise the EB-5 program the next time it comes up for renewal. So this is a great time to move into action while EB-5 financing continues to be accessible for top developers with great projects and a strong track record.

We are confident that most people who delay will wish they had started earlier and gotten in on this great source of relatively inexpensive financing early in the game.

The NES Financial EB-5 Innovation Summit 2016 – Los Angeles, California

NES Financial is one of the top providers of administrative services for EB-5 financing. They focus on escrows and other technology-enabled services for the efficient administration of EB-5 financial transactions, 1031 exchanges and fund administration. See www.nesfinancial.com.

JMBM’s EB-5 financing team attended an NES-sponsored “Summit” in Los Angeles on February 4 at the Los Angeles City Club, and it was a great program. I particularly enjoyed the “State of the Industry” presentation by Reid Thomas, Executive Vice President of NES Financial.

Here are a few highlights and slides from Reid’s presentation, presented here with permission.

Some highlights on the state of EB-5 financings

Continued expansion of regional centers. There are now almost 800 regional centers in the United States offering to raise EB-5 capital for developers. We continue to believe that less than 10% of the regional centers have raised almost all of the EB-5 capital to date. This makes it critical that developer select the “right” regional center or the developer may spend a lot of time and money with very poor results.

Where the EB-5 projects are located. It is no surprise that most of the EB-5 activity is in California, New York, Texas and Florida. In California, Southern California dominates the picture. That said, one of our closings in December for $40 million EB-5 financing was in Nebraska. So the right developer with a great project and proper guidance can find success even outside Los Angeles or New York!

The following slide shows project activity by state in 2015.

5b

Who is raising the capital — concentration on the most active developers.  The 80-20 rule applies to EB-5 financings. 20% of the projects raise 80% of the capital and 80% of the projects raise only 20% of the capital. The 80-20 rule seems to apply to almost everything in life, and EB-5 financing is no exception.

The average EB-5 capital raise for 2015 is $50 million.

What sectors have the most EB-5 projects? (number of projects, not amount of capital)

The following slide shows the breakdown of EB-5 financing by number of projects in each industry sector. Notice that the top five sectors are:

  1. Resorts, casinos, hotels
  2. Multifamily
  3. Mixed-use/office
  4. Medical/health care
  5. Retail/restaurant

The fastest growing segment of projects in 2015 was multifamily. Multifamily went from the number 5 referred sector in 2014 to the number 2 preferred sector in 2015, in terms of projects by industry sector.

6a

What sectors raise the most EB-5 capital?  (total dollars of capital)

In general, the amount of EB-5 capital raised roughly parallels the industry sector projects, but there are significant differences. The following slide shows the distribution of the EB-5 capital actually raised by industry sector.

Note that, in terms of capital raised, public works greatly exceeded retail/restaurant. Again, the growth in EB-5 financing for multifamily was explosive! In terms of capital raised, multifamily barely registered on the scale in 2014, but almost equaled the other top two leaders in 2015. This is an amazing growth.

6b

What is the size of projects and the amount of EB-5 capital raised?

We specialize in assisting clients raising at least $20 million of EB-5 capital. Although there are a few exceptions, most of our sources are not very interested in raising less than that, unless it is part of a series or a template that can be repeated. Even then, the “sweet spot” that we know for EB-5 capital is substantially above $20 million.

However, it is noteworthy that NES Financial’s data shows that in 2015 almost half of the projects (by number) involved an EB-5 capital raise of less than $20 million. However, in terms of dollars raised, more than 90% involved the capital raise of $20 million or more, and more than 50% of the projects involved $100 million or more. 22% of the projects involved $500 million or more.

In historical trends, note that the target raise for EB-5 financing in 2011 was approximately $23 million. In 2014 it was more than $52 million, and in 2015 it was $47 million. This is the data that produces the average EB-5 capital raise of $50 million at the current time.

7b

Other observations — where is/will EB-5 capital come from.

EB-5 debt continues to dominate. The sweet spot for EB-5 financing is mezzanine debt that will cost 6 or 7% per annum as an all-in cost to the developer/borrower on a 5 to 7 year term. Some experts expected that EB-5 would be used more in an equity position, but that has not developed.

China continues to be the dominant source of funds for EB-5 financings. The drop to 2nd place is so significant that it is difficult to imagine. However, Latin America is coming on as an EB-5 investment source as well as the Middle East and Gulf regions. It will be interesting to see if investors from other countries have different expectations on returns than those from the traditional Chinese investor.

However, there is a clear trend toward geographical diversification and there may be some changes. Although Columbia, Venezuela and Brazil have experienced explosions in EB-5 capital raise as high as 1400%, they still pale compared to China. However, these 3 countries have finally eclipsed Korea in terms of EB-5 capital, and Korea has historically been the number 2 source of funding for EB-5 financing.

Why you want to start raising your EB-5 capital NOW . . .

With the EB-5 program extended for another year (through September 30, 2016) without a single change in the rules, we are advising our developer clients to proceed with all due haste in pursuing their EB-5 financing. On this timing issue, our thinking is very simple:

There has been something of a hiatus or gap in EB-5 financings as developers and lenders waited to see if Congress would change the law on essential details that affect how (or even whether) a project can be structured for EB-5 — matters such as the minimum investment, how or whether one could qualify as a TEA, how the minimum new jobs requirement would be calculated, and other important business and legal details.

Now, as the program has been renewed without a single change, lenders and foreign investors are rushing to fill the pipeline again. And it is much more desirable to be at the front of the line, rather than at the back of the line.

As of December 31, 2015, JMBM’s team has closed more than $1 billion of EB-5 loans, and sourced more than $700 million of EB-5 funding for our developer clients. Please give us a call if you would like to see if we can help you.

Other articles on EB-5 Financing

To access our rich library of articles on EB-5 financing, go to www.HotelLawyer.com, scroll down the right-hand side under LEARN MORE ABOUT and click on “EB-5 Financing.” For your convenience, here are a few popular EB-5 articles that may be of interest:

EB-5 Immigrant Visa program extension signed into law — without any changes. EB-5 financing continues for new development projects.

JMBM has sourced more than $700 million of EB-5 financing for new development projects

Hotel Financing 2015: JMBM’s “preferred” EB-5 construction financing program for top developers and projects.

FAQs about EB-5 project financing for new hotel development

Hotel development & EB-5 financing: Why you don’t want to form your own regional center

Hotel development financing: How to win the race for EB-5 capital

Financing hotel development today: The 5 questions every hotel developer is asking about EB-5 financing

Hotel Lawyer to Developers: Looking for EB-5 Financing? The China “Retrogression” means you should act sooner than later!

Jim Butler is a founding partner of JMBM, and the founder and chairman of JMBM’s Global Hospitality Group® and Chinese Investment Group™. He is recognized as one of the top hotel lawyers in the world and has authored or co-authored The HMA & Franchise Agreement Handbook, How to Buy a Hotel Handbook, and The Lenders Handbook. Jim has led the Global Hospitality Group® in more than $71 billion of hotel transactional experience, involving more than 3,800 hotel properties located around the globe. 310.201-3526 or jbutler@jmbm.com

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. Why don’t you give us a call (or send an email) and let us know what you working on? We would like to see if our experience might help you create value or avoid unnecessary pitfalls. Who’s your hotel lawyer?

 

Published on:

18 December 2015

Hotel lawyer with great news for developers: the EB-5 immigrant visa financing program has been renewed — approved by Congress and signed by the President. It is being continued without change through September 30, 2016.

As of December 31, 2015, JMBM’s team has closed more than $1 billion of EB-5 loans, and sourced more than $700 million of EB-5 funding for our developer clients.

A funny thing happened on the way to the 2016 Federal budget approval last week. One of the “riders” to the omnibus appropriations bill was the EB-5 legislation sponsored by Senators Leahy and Grassley. For months preceding the scheduled Congressional action, many stakeholders in the EB-5 industry spent untold hours in negotiating complex provisions to deal with certain concerns regarding the program. These negotiations resulted in multiple drafts of the proposed legislation being exchanged between Congressional staff and industry leaders, with the “final” draft receiving the unanimous approval of the trade organization for regional centers, the Invest in the USA or IIUSA. It was a good compromise on many knotty issues.

Then at the proverbial 11th hour . . . on Wednesday, December 16, the elaborate “final” compromise proposal was jettisoned in favor of a simple extension of the expiration date for the Regional Center program to September 30, 2016, without any other changes to the program.

The EB-5 regional center program is extended without any other changes.

Yes. That is right. After all the discussions and proposals, THE ONLY CHANGE IN THE LAW IS AN EXTENSION OF THE EFFECTIVE DATE FOR THE PROGRAM THROUGH NEXT YEAR.

Now, as the program has been renewed without a single change, lenders and foreign investors are now rushing to fill the pipeline again. And it is much more desirable to be at the front of the line, rather than at the back of the line.

Nothing was done about any other issues, including the following: CONTINUE READING →

Published on:

08 December 2015

Editor’s note: The EB-5 program has been renewed! The article below describes the changes to the EB-5 Immigrant Investor Visa program that were ALMOST enacted in December 2015. At the eleventh hour, Congress completely shelved all the proposals discussed below, and instead decided to continue the program, without any change, through September 15, 2016. 

For the current status of the EB-5 financing program, see “EB-5 Immigrant Visa program extension signed into law — without any changes. EB-5 financing continues for new development projects.

Hotel Lawyer preview of the new EB-5 financing rules.

Although minor tweaks and adjustments continue to be made to legislation in the final hours before Congress votes, it looks like we have a pretty good idea of what the new rules will be for EB-5 financing. Top takeaways for developers are:

  • The EB-5 regional center program will be extended for 5 years
  • Developers will be able to raise 60% more EB-5 capital on the same number of jobs
  • Minimum investment will be raised to $800,000 (not expected to deter investors)
  • TEAs will be forced into a “modified California model” of not more than 12 contiguous tracts
  • NOW is a good time to get started on EB-5 financing before the New Year rush
  • There will be much greater scrutiny and compliance required of those in the capital raising process, and there may be a trickle-down effect on developers (unless they want to form and use their own regional center)

Read on for more details. CONTINUE READING →

Published on:

 

02 October 2015

We are pleased that the Continuing Resolution passed by Congress yesterday includes a temporary extension of the EB-5 Regional Center Program. This extension allows the program to continue generating foreign direct investment and creating U.S. jobs through December 11, 2015.

In addition to extending the current program to December 11, this will also provide additional time for Congress to consider a long-term reauthorization bill that would include reform measures to strengthen federal oversight and the integrity of the program. Members of Congress from both parties and both the House and Senate are negotiating in good faith.

This week, two Senate bills were introduced that propose revisions to the EB-5 program.

Last week, our team closed $350 million in EB-5 financing for our developer clients. We have sourced more than $700 million in EB-5 financing for developer clients and believe the EB-5 program will continue to be an important source of funding for qualified projects.

We will continue to report on EB-5 developments as they unfold. CONTINUE READING →

Published on:

21 September 2015

The Global Hospitality Group® is best known for its expertise in connection with hotels and resorts. We also have an active restaurant practice, and like a hotel, a restaurant is an operating business integrally intertwined with special purpose real estate. We frequently advise restaurant owners and operators on labor and employment, ADA, management, and finance and licensing issues, and we have a particular expertise relating to celebrity chef deals.

Senior Global Hospitality Group® member David Sudeck recently participated in a roundtable discussion about the food and beverage industry in Los Angeles, published in the Los Angeles Business Journal. The following discussion about licensing issues, EB-5 and crowdfunding investment in restaurant projects, gift card and loyalty programs and tax planning strategies is based on the roundtable and includes some clarifications and updates.

 

The Food & Beverage Industry in Los Angeles: A Roundtable Discussion
Supplement to the Los Angeles Business Journal

The food and beverage industry is unique in many ways. And here in Los Angeles, where we have some of the best dining and food-for-purchase options in the nation, there may be an even more finely tuned set of rules for success. Stir in an unpredictable economy and you’ve got a sector of Southern California business that continues to evolve faster than most. To make some sense of this exciting and unpredictable realm, the Los Angeles Business Journal turned to some of the leading experts in the region – from the financial, legal and business perspectives – to get their diverse insights and assessments regarding the current state of the industry that Angelenos most certainly couldn’t live without!

CONTINUE READING →

Published on:

09 September 2015

 

Editor’s note: The EB-5 program has been renewed! Congress completely shelved all the proposals discussed below, and instead decided to continue the program, without any change, through September 15, 2016. 

For the current status of the EB-5 financing program, see “EB-5 Immigrant Visa program extension signed into law — without any changes. EB-5 financing continues for new development projects.

EB-5 is at a critical renewal point

The next 3 weeks are going to be crucial for the EB-5 industry as the current legislation sunsets on September 30, 2015. While the consensus is that this important program will be renewed, and perhaps made permanent, there are lots of currents circulating about possible changes in the program.

We want to share with you some keen insights we recently received.

EB-5 update and insights from an industry insider

Below is the full text of a letter recently sent to industry colleagues by Pat Hogan, President, CMB. Pat is one of the leading proponents of EB-5, and is also a founder and board member of the IIUSA (Invest In the USA) which is the national industry trade association for the EB-5 Regional Center Program.

Greetings,

I wanted to share my thoughts with you after having recently visited no less than 60 Congressional and Senatorial offices within the last 40 days. I also just attended the American Immigration Lawyers Association (AILA) EB-5 Investors Summit this past weekend in Las Vegas.

CONTINUE READING →

Published on:

18 March 2015

Click here for the latest articles on EB-5 Financing. 

Editor’s update: As of December 31, 2015, JMBM’s team has closed more than $1 billion of EB-5 financing for our clients!

 

The buzz continues on EB-5 financing for development projects.

EB-5 financing is an important and viable source of construction financing for hotels, hotel enhanced mixed-use, and other development projects. Five years ago, when JMBM started helping hotel developers with EB-5 financing, many worried about whether this is a legitimate and reliable financing source.

Now, after billions of dollars of development have been funded with EB-5, this type of financing is regarded as mainstream, and is used by many institutional players including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of the largest owners of hotels such as the Related Companies and Silverstein Properties.

As an active source of EB-5 funding for select developers, JMBM’s Global Hospitality Group® team has been busy too. We caught up with Jim Butler and Jonathan Bloch for an update on recent developments in this area as summarized in the Q and A below.

Q: How much EB-5 financing has JMBM sourced for its clients?

Our team has sourced more than $700 million of EB-5 funding for our developer clients.

  • In 2014, our team sourced and closed more than $200 million in EB-5 mezzanine loans for our clients.
  • To date in 2015, our team has sourced more than $475 million in EB-5 mezzanine loans for our clients which are signed deals expected to fund before the end of the year.
  • And there is about another $100 million in the pipeline that does not yet have a signed commitment.

Over the last 5 years we have worked on more than 60 EB-5 projects, primarily representing developers in getting EB-5 financing — projects all over the country, including high profile locations in California, New York, and Texas, but also in more bread-and-butter locations including Nebraska and Maryland.

Q: That is more than $700 million sourced by JMBM. What do you mean by “sourced”?

The “sourcing” is a process. What we do depends on the client. Typically, we help the client position and structure itself and the project for optimal EB-5 financing — presenting the best profile to get the fastest and most certain funding of the largest amount feasible. It includes identifying and introducing our client to one or more appropriate funding sources, negotiating a term sheet, and taking the deal through funding closing. CONTINUE READING →

Published on:

28 January 2015

Click here for the latest articles on EB-5 Financing. 

This article was first published by EB5Investors.com on January 28, 2015.

 

Polis Bill Reform EB-5 Immigrant Investor Program

With the regional center program set to expire in September 2015, the EB-5 industry has been given new life in the form of the American Entrepreneurship and Investment Act of 2015. The Act was introduced today by Congressmen Jared Polis (CO-02) and Mark Amodei (NV-02), and is a follow-up to last year’s bill of the same name. The bill would make the regional center program permanent and allow for continued job creation and a more reliable stream of foreign capital.

“Our nation has always been at its strongest when we attracted the best and brightest minds to help build and invest in our economy,” said Rep. Polis. “The EB-5 visa program is an important tool that brings innovation and investment to the United States, and this bipartisan bill will improve and make permanent the program so that foreign investment and talent will continue to flow into our businesses, and strengthen our economy.”

“This bi-partisan, pro-investment, pro-growth and pro-jobs bill is one piece of the legislative solution to reform legal immigration,” said Rep. Amodei. “As stated in Article I, Section 8, Clause 4 of the Constitution, ‘The Congress shall have power to… establish a uniform rule of naturalization.’ That is a responsibility we owe the country to take seriously.”

The legislation makes several much-needed improvements, most notably making the regional center program permanent. It also creates new designations for Targeted Employment Areas, and leaves those designations up to the state’s discretion. CONTINUE READING →

Published on:

11 January 2015

Click here for the latest articles on EB-5 Financing. 

 

JMBM is a Platinum Sponsor of the EB-5 Investors Conference in Las Vegas on January 17, 2015 and will moderate and talk about EB-5 for hotel development

JMBM’s Global Hospitality Group® is pleased to be a Platinum sponsor of the upcoming EB-5 Investors Conference at the Wynn Encore Resort in Las Vegas on January 17, 2015. This is one of the premier conferences on this subject in the entire United States.

Partner, Jonathan Bloch and I will moderate and participate in a panel on Hotel Development – Jonathan as a speaker, and myself as a moderator. In addition, JMBM’s Global Hospitality Group® Vice Chairman, Guy Maisnik and Partner, David Sudeck will be attending to meet with potential clients and friend to help explore this opportunity.

Our panel on EB-5 for Hotel Development will be from 11:30 am to 12:30 pm on Saturday, January 17, 2015. We hope you will join us for our session and reach out to us if you would like to get together to explore the EB-5 financing opportunity. We are able to help qualified premier developers source low-cost EB-5 financing for their project.

Why EB-5 and this Conference?

EB-5 financing is being used widely by some of the largest owners of hotels and restaurants, and we will be discussing how developers are taking advantage of this capital. EB-5 financing has provided developers with low-cost, non-recourse, five to six year financing for construction and development of new projects.

Whether you are new to EB-5 financing or have used it in the past, this one-day conference has something for everyone. CONTINUE READING →

Published on:

06 December 2014

Click here for the latest articles on EB-5 Financing. 

 

JMBM is sourcing low-cost mezzanine capital for new construction through EB-5 financing for its top developer-clients.

To qualify for this program, the borrower must be an experienced developer with a superb track record, a superior reputation and a great project. If you don’t meet those threshold requirements, then don’t read any further, because this program does not apply to you.

If you are still reading, the question is: “Can you benefit from mezzanine financing with an all-in cost to you of approximately 6 – 7% per annum?”

If so, you may want to look into JMBM’s “preferred” EB-5 financing program which is summarized below.

Highlights of JMBM’s Preferred EB-5 Financing Program for new construction & development

  Financing type Mezzanine debt or preferred equity
  Cost 6 – 7% per annum, all-in cost to the developer
  Loan size $20 million – $200+ million
  Term 5 – 6 years
  Portion of the capital stack 30 – 40% of the total project cost (excluding land)

Exactly what can JMBM do to help me with EB-5 financing for my development project?

Client confidentiality precludes us from listing clients and projects we have assisted with this program, but suffice it to say that some of the best known names in the business are tapping into this funding source to fill out their capital stack at a favorable cost. And we have helped some of the biggest and highest profile players.

In 2014, we represented clients in identifying, obtaining and closing more than $200 million of EB-5 funding, and as of December 2014, we have commitments for more than $300 million in the pipeline for 2015.

We specialize in representing developers and projects that we believe can qualify for “preferred” status. This concept is discussed in great detail in this article: “Hotel development financing: How to win the race for EB-5 capital.”

For developers and projects that qualify for “preferred” status, we provide business and legal advice to guide the developer through the entire capital raising process. This includes validating that the developer can qualify for the favorable financing and actually sourcing the capital. Here is a more complete list of how we can usually assist: CONTINUE READING →