Selecting the right EB-5 project is the most critical decision you will make in your immigration journey. A successful project not only leads to a Green Card but also ensures the return of your capital. This guide covers the essential steps of due diligence to help you make an informed choice.
The Two Goals of Due Diligence
Your due diligence process should focus on two equally important goals:
- Immigration Success: Does the project have a high probability of creating the 10 required jobs per investor and meeting all USCIS requirements for your I-526E and I-829 petitions?
- Financial Security: Is the project financially viable? What is the likelihood that your $800,000 investment will be returned at the end of the loan term?
Never sacrifice one goal for the other. A project that seems financially lucrative but has a weak job creation plan is a poor choice, as is a project that creates many jobs but has a high risk of failure.
Key Areas of Project Evaluation
When reviewing a project's offering documents (like the Private Placement Memorandum or PPM), focus on these critical areas:
- Job Creation Methodology: The project's economic report should clearly explain how jobs will be created. Look for a significant "job cushion"—that is, the project is projected to create well over the minimum 10 jobs per investor (e.g., 15-20 jobs per investor).
- Capital Stack: Understand how the project is financed. How much of the total cost is senior debt, developer equity, and EB-5 capital? A project with a healthy amount of developer equity shows the developer has "skin in the game."
- Exit Strategy: How will you get your money back? The documents must clearly define the exit strategy, which is typically a sale of the asset or a refinancing of the project loan. Understand the loan term and any potential extensions.
- Project Feasibility: Has an independent third party conducted a market feasibility study or appraisal? This provides an unbiased view of the project's potential for success.
Expert Tip
Consider hiring a professional due diligence firm. For a fee, these firms can provide an in-depth, independent analysis of a project's immigration and financial risks, which can be invaluable.
Evaluating the Regional Center and Development Team
The people behind the project are just as important as the project itself. Investigate the track record of both the Regional Center and the property developer.
- Track Record: How many EB-5 projects have they completed? What is their success rate for I-526E and I-829 approvals? Have they successfully returned capital to investors from previous projects?
- Experience: Does the developer have extensive experience with projects of a similar type and scale?
- Transparency: Is the Regional Center responsive to your questions? Do they provide clear, comprehensive documentation?
A long and successful track record is the best indicator of future success. Be wary of new Regional Centers or developers without a proven history in the EB-5 space.
