“The Evolving Role of EB-5 Counsel” Considerations for Multi-Party Representation in EB-5 Deals

Navigating a Changing EB-5 Sector

As the EB-5 market continues to mature, so will the quality and sophistication of the players and projects in this industry. As clients evolve, so must attorneys. Gone are the days when an EB-5 firm could focus on only one area (such as filing I-526 petitions). Clients will often expect their EB-5 counsel to guide them through the entire life cycle of an EB-5 deal. Counsel’s role and guidance may be drastically different depending on the client being represented in an EB-5 transaction.

For example, take your typical EB-5 hotel project. Say the client is the developer and their goal is to determine the amount of EB-5 financing that their project can reasonably rely on. In addition to the immigration aspects of EB-5, one will need to understand both the project development process and financing needs of the developer to effectively advise them. Counsel may be asked to work closely with the hotel’s development team to analyze the projected budget, current capital stack, and whether EB-5 can feasibly fill the rest of the gap. Once a baseline understanding of the proposed plan is established, counsel will typically work alongside an economist to advise the developer on the economic methodology and the underlying assumptions that are necessary for job creation.

If the hotel’s job creation is based on hard and soft construction costs, steps may include analyzing the current budget and comparing the costs to construction bids that have been received and how they line up with similar projects in the area. This analysis will help stress test the underlying assumptions to determine the range of job creation, which will ultimately determine the range of EB-5 financing available. Finally, since EB-5 financing doesn’t happen overnight (somebody has to originate the loan after all), it may be necessary to advise the client to secure sufficient non-EB-5 capital or arranging for bridge financing to ensure that construction (and job creation) can continue without delay.

On the other hand, if the client is an EB-5 investor who is considering the same hotel project for his or her EB-5 investment, the analysis will need to be tailored to this specific situation — namely, how likely will the project satisfy the job creation requirements for this investor’s I-526 and I-829 petition? Thus, counsel may begin with the same general analysis by stress testing the reasonableness of the project’s estimated job creation but should then specifically analyze how the jobs wills be assigned to the investor. Additional factors should be accounted for, such as the number of investors who have filed in the project, country of nationality, and job sharing provisions in the offering documents. For example, although jobs may be allocated by “first in, first out” basis in order of I-829 filing, the project may be more attractive to an investor of Vietnamese nationality since he or she will be allocated jobs earlier than investors from China due to retrogression/backlog.

Finally, if the client is a migration agent, due diligence on the project’s investment structure might also be necessary. This will require an understanding of EB-5 project structuring, such as what guarantees and assurances are typically available (and negotiable). To illustrate, it’s well understood that many escrow structures do not afford the same level of investor protection as they did in the past, since funds are typically released upon I-526 filing. However, if investors are asked to bypass the protections of escrow, then they may understandably want the project to help mitigate that risk by providing for a refund if an I-526 petition is denied. The agent may seek counsel’s advice to assess the quality of these particular provisions, including the trigger and timing of any repayment, to evaluate whether they effectively protect an EB-5 investor.

Because of our firm’s comprehensive experience representing all sides of an EB-5 transaction, we can help our clients step into the shoes of each party in an EB-5 deal — be it developer, investor, or agent — understand their viewpoint and effectively advise them. These are issues we navigate on a routine basis as we work closely with clients throughout the EB-5 process: from creation of Regional Centers, advising developers on structuring and deploying EB-5 financing, and guiding investors through the I-526 and I-829 process.

Ultimately, a more sophisticated market benefits everyone in the EB-5 industry. The more experienced players in the market understand that just because a project is “EB-5 compliant” does not mean it is a good EB-5 investment — it simply means the project will not be denied for obvious violations of EB-5 regulations. It’s a bare minimum requirement. However, an “at-risk” investment does not require an investor to make a reckless investment. These higher standards will help guide our industry toward creating smarter, better investment opportunities for everyone involved.

About the Authors

Nima Korpivaara joined David Hirson & Partners, LLP in 2014. He handles all types of U.S. immigration, including complex matters associated with corporate business structure and EB-5 investor applications. Nima practices in the fields of corporate, investor (E-2 and EB-5) and family immigration law, representing large and small clients within a variety of industries. This includes temporary and short-term work visas, business visas, permanent residence (employment-based and family-based) and naturalization. Nima has successfully represented thousands of investors in receiving EB-5 green card approval, as well as dozens of Regional Centers in successfully receiving designation from the USCIS.

Phuong Le’s EB-5 practice focuses on advising businesses, developers, and Regional Centers with structuring, deploying, and managing EB-5 financing. He draws upon an extensive background advising parties on all sides of EB-5 transactions, including individual investors, business owners, developers, and agents. Prior to joining David Hirson & Partners, LLP, Phuong was in-house counsel for a large Southern California EB-5 Regional Center and real estate developer. He has successfully advised a wide range of businesses with their EB-5 financing needs, including commercial real estate developments, multifamily apartment buildings, boutique and full service hotels, medical office buildings, nightclubs, and restaurant franchises. He works closely with businesses throughout the EB-5 financing process, including structuring debt/equity EB-5 offerings as part of a diversified capital stack and coordinating complex review and structuring with securities attorneys, economists, business plan writers, and escrow banks. Phuong regularly consults businesses on forming and managing their own Regional Centers, including filing annual I-924A compliance reports and creating I-526 and I-829 templates to ensure Regional Centers and investors have consistent work product, including peer review of other attorneys’ EB-5 filings.

About David Hirson & Partners, LLP David Hirson & Partners, LLP has over three decades of experience working on EB-5 cases. Managing Partner, David Hirson, has been handling cases in the EB-5 program since it was first put into effect in 1991. The attorneys at David Hirson & Partners are frequently called upon by trade groups, investors, projects, and universities to serve as subject-matter experts on the topic of EB-5 investment visas. In addition to the attorneys at David Hirson & Partners, the firm’s highly trained and knowledgeable staff are able to quickly and accurately produce source of funds and project documents, which are key to providing eligibility for the EB-5 visa.