All investments come with a certain amount of risk, and this is no different for the investments made through the EB-5 program, where in fact the law mandates on at risk equity investment.
As it related to an EB-5 investor, risk is defined as the financial position into which the investor will place himself or herself in an attempt to obtain US residency by investing into an approved EB-5 project of any nature.
Risk may be inherent in any aspect the investment, for example:
- The type of investment
- The location of the project
- The capital structure
- The history of the Regional Center and any minor projects
- The integrity of the people behind the Regional Center or the project
Every EB-5 investor must investigate and know his or her own level of tolerance and choose an investment project accordingly.
When selecting an investment, it is crucial for the investment and for the investor that before investing, the project is thoroughly examined on its own economic merits, irrespective of the US residency benefits.
To this end, the investment should meet the following criteria:
- The investment should be reasonably secure, even though there must be a perceived risk element.
- The return on the investment should be reasonable and in step market conditions.
- The project developers should also be substantially invested in the project themselves and therefore have a vested interest in seeing the project succeed.
- You should reasonably expect a return of your principal at the conclusion of the process, or be made aware of a clear and articulated fully EB5 compliant exit strategy.
- The US residency benefits must not be compromised in any way.
Only when you can answer yes to all of the issues above, should you feel comfortable in determining that a particular investment is the right one for you. You are also encouraged to visit the project site or regional center and meet with its principles and the developers.
When visiting the project site or regional center you should make detailed inquiries about the project and your investment in it and expect to receive transparent responses. As the investor, you are also free to make inquiries to the sponsor’s staff and profession counsel.
Any principle that refuses such a visit or does not provide full documentation and full disclosure should be considered suspect and not worthy of your investment.
Contact An Experienced EB-5 Attorney
It is important that you are fully apprised and informed of every investment decision and that you are accompanied by professionals who will so advise you. For more information regarding what you need to know when selecting an EB-5 investment, contact an experienced EB-5 attorney at David Hirson & Partners, LLP (or email us at: [email protected]) who can answer questions.