Assuming regional centers largely make their money by lending the pooled funds from investors to project developers on specified interest, which is a considerable sum of money over a few years. As a typical EB-5 investor investing with a regional center, can I partake in that share of profit? For example, if $1M and a 5% annual rate for 5 years leave you with roughly $250,000 interest as pure profit. Isn’t the regional center just profiting like mad?
Answers
Marisa Casablanca
Immigration Attorneys DirectoryMost Regional Centers grant an annual interest rate. If it is something that is important to you more than the green card, you may elect to go with those projects, but it is more important to focus on reducing the risk of your capital and obtaining the green card rather than the annual interest. The developers are “making a killing” but that is part of our economic capitalist society. As I tell my clients “Welcome to America”.
Remember to not trust what you are being told but make sure everything is in writing.
Andres Echevarria
Immigration Attorneys DirectoryYes. An EB-5 investor can share in the profits of a regional center, but this depends on the specific terms of the investment agreement between the investor and the regional center. Typically, the investment structure and the rights to profits or returns are outlined in the offering documents, such as the private placement memorandum or the subscription agreement. Equity vs. Debt Investment: The nature of the investment (equity or debt) can affect profit-sharing. Equity investors may receive dividends or a share of profits, while debt investors might receive interest payments. Any profit-sharing arrangement must comply with U.S. securities laws and EB-5 program requirements.
Kirk A Carter
Immigration Attorneys DirectoryEach regional center operates differently, but typically fall into one of two general categories: loan based programs: and equity based programs.
The loan based program typically pool their investors money and loan these funds to blue chip companies and quasi-governmental authorities to help them fund a particular project. The funds are typically loaned at lower rates for a finite period of time. The benefit to such programs is the existence of an exit strategy. Investors in a quality loan based program typically see some, if not all, of their investment returned to them at the end the loan period, reducing their risk of total loss. The trade off for tying up their money for that period is the green card received and some modest participation, if any, in the interest income. Think of these programs like bonds, where an investor trades off some of the upside to reduce the downside risk, and secure a way to get their money back. Loan based programs are often the best choice for those who can’t afford to have their money tied up on an indefinite basis.
In contrast the equity based programs offer higher rewards in exchange for greater risk. These are essentially unregistered securities, where the pooled sums might fund a new business venture, such as the construction of a hotel or the operation of a manufacturing company. With the risk such projects entail, investors demand a greater reward - receiving a green card may not be enough. Few programs of this type have exit strategies, other than the ultimate goal to,either throw off significant regular income, or alternatively wait until the business us sold and the profits are distributed among the investors. Such programs are not advisable for those who cannot afford to lise or have thus money tied up for long periods of time. Successful equity based programs often attract both immigrants seeking a green card and the ultra-rich looking for places to park large sums of money. Such individuals would not tolerate a low rate of return, given their motivation to make their money grow rather that just secure a green cad.
Which investment is right for you depends on what your individual goals and risk tolerance are. We as lawyers can not recommend particular programs as we are neither qualified nor properly licensed to provide investment advice. We typically advise clients to work with a licensed investment advisor. There are many who focus their advice on the quality of various EB-5 regional centers, conducting extensive research and analysis on a finite number of projects, after first assessing their objectives and risk tolerance of each client. Ultimately the goal is to find regional centers that matches your overall objectives, and that is rarely a single recommendation, but are instead a series of options which fall within your stated objectives . If those objectives require market or better rates of return, there are regional centers which may be able to deliver, but the trade of will likely be greater risk.
Charles H Kuck
Immigration Attorneys DirectoryThey are profiting, and unless you agreement lets you share in that profit, you get nothing.
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