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Hotel Lawyer: Why NOW may be the best time for developers to start EB-5 financing

16 August 2016

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

Is there a serious risk that EB-5 will expire September 30, 2016?

Anything is possible when Congress is in session, but none of the experts we talk to believe that the EB-5 program will be allowed to lapse.

As discussed below, certain key provisions of the EB-5 program dealing with regional centers will “sunset” or expire on September 30, 2016. And, as part of the effort to extend the regional center program or make it permanent, there are some proposals to modify potentially significant aspects of the EB-5 program.

No one should be complacent about Congressional “renewal”, but the industry fully expects the EB-5 program will be reauthorized on terms that maintain the viability of program. Some proposals are more or less attractive to certain affected parties, but we expect the final resolution to be satisfactory.

With Congress likely to act soon, should any developers start EB-5 financing now? YES!

Amidst the uncertainty of when and how the EB-5 renewal legislation will be finally resolved, some developers have decided to do nothing with the EB-5 financing opportunity until all the dust settles. Such timing is not certain.

Developers who want to take advantage of EB-5 funding should get started now

Many hope that Congress will act before September 30, 2016. Others think that with election-year turmoil, as it did last year in the budget stalemate, Congress may “kick the can down the road” with one or more interim extensions of the EB-5 program.

We believe the “wait and see” approach is a mistake for many developers — particularly those who are ready to start construction now. Here is why:

  1. Nominal cost. The cost is relatively nominal to clear certain preliminary hurdles, to evaluate availability of EB-5 financing, identify a regional center funding source, and even negotiate a preliminary term sheet. The small cost of completing these preliminaries early should be greatly outweighed by the benefits.
  2. Be at the front of the line. If you have a project that is ready to start construction (or very close), you want to be at the head of the wave of new EB-5 projects coming into the pipeline for marketing to immigrant investors. You want to identify and sign up the best regional center you can get to optimize the size, cost, timing and certainty of your EB-5 capital.
  3. Avoid the traffic jam. The early bird will tie up the best lenders and terms. The top regional centers have good capacity but we expect their bandwidth to be filled quickly after the final EB-5 legislation is adopted as many hundreds of developers create a massive traffic jam on the road to EB-5 funding.

Given the timing of U.S. holidays and the Chinese New Year, the strategy of starting now on EB-5 financing might mean that you can close your EB-5 funding many months earlier than with the “wait and see strategy.”

We believe the “wait and see” approach is a mistake for many developers — particularly those who are ready to start construction now

Time to evaluate the right strategy for you?

We have a lot of practical experience in helping our developer clients raise EB-5 funding. As now, our JMBM EB-5 Financing group has closed more than $1.5 billion of EB-5 financing and sourced more than half of that for our clients.

If you would like some help to evaluate whether EB-5 could work for you, or what strategy is best for you, then give us a call. There is no cost for an initial discussion.

Jim Butler, +1-310-201-3526 or jbutler@jmbm.com

David Sudeck, +1-310-201-3518 or dsudeck@jmbm.com

 
What should you do now?

We may not know all the details of how this will turn out, but virtually everyone involved in EB-5 is highly confident that the EB-5 program will be continued in a viable form. EB-5 is an important and proven source of new development financing that creates new U.S. jobs.

Developers who want to take advantage of EB-5 funding should get started now (at least with evaluation).

Time to evaluate the right EB-5 strategy for you?

We have a lot of practical experience in helping our developer clients raise EB-5 funding. If you would like some help to evaluate whether EB-5 could work for you, or what strategy is best for you, then give us a call. There is no cost for an initial discussion.

Jim Butler, +1-310-201-3526 or jbutler@jmbm.com

David Sudeck, +1-310-201-3518 or dsudeck@jmbm.com

 

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 funding for new development: JMBM has closed more than $1.5 billion of EB-5 financing.

EB-5 extended without change: President Donald Trump signs bill

What’s happening with EB-5 financing for new development projects? Is it still available?

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

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

Picture of Jim Butler
This is Jim Butler, author of
www.HotelLawBlog.com and hotel lawyer. We represent hotel owners, developers and investors. We have helped our clients find business and legal solutions for more than $71 billion of hotel transactions, involving more than 3,800 hotels. As of January 31, 2017, we have closed more than $1.5 billion of EB-5 financing for our clients’ projects, and sourced most of that. I invite you to contact me to explore how our experience and resources might help you accomplish your goals. 310.201-3526 or jbutler@jmbm.com