What are the pros and cons of investing with a newer EB-5 developer as opposed to a veteran EB-5 developer?
Why is it important to look at the experience of an EB-5 developer and not just depend on the merits of the regional center?
Newer EB-5 DevelopersPros
- Newer project developers offer competitive incentives such as lower management fees.
- They often focus on one or two industries and build a lot of experience in those fields.
- Since they are newer, they rely more heavily on the legal advice of their immigration attorneys.
- Without the huge budget of a big EB-5 development company, a newer company may not take on as much risk as a bigger company might.
Cons
- They don't have the years of experience that a large development company has, so they may not be able to fix construction problems that come up as well as a more experienced company might.
- They have a smaller team handling the project and a smaller budget.
- They don't have the same marketing capacity as a bigger firm. It may be harder or take longer for a newer EB-5 developer to find foreign investors.
Veteran EB-5 DevelopersPros
- Veteran EB-5 development firms often have extensive in house counsel and expert advisers.
- They usually have a strong history of I-526 petition approvals and I-829 petition approvals. (However, please note that past experience does not guarantee future approvals...)
- Typically firms that have been in the EB-5 industry longer have a more in depth knowledge of this complex program.
- If problems arise during project construction, experienced developers can handle them and keep the project on track and therefore investors have a stronger chance of meeting their requirements and deadlines and obtaining their green cards.
- They may have redeployment strategies for EB-5 investors from Mainland China.
Cons
- A larger development company can better hide petition denials or project failures. Statistics that are self reported can be deceptive.
- These veteran companies can ignore or fail to pursue legal advice from their immigration attorneys if they think they understand the legal issues, which sometimes leads to major issues with the projects.
- These development companies can charge higher prices because they have status and network connections that almost guarantee they'll obtain investors.
- These companies may be more willing to expand into new industries or new geographical regions, which means they're higher risk projects compared to smaller newer firms that have years of experience in one industry and one region.
Why should EB-5 investors conduct so much due diligence into the developers or management companies instead of the regional centers?Regional centers, while important, should not always be the deciding factor. This is because many developers or management companies rent their regional center. The large EB-5 development or management firm could also own multiple regional centers. How they decide what regional center to use for a given project rests largely on location. While regional center reputation is important, development companies may focus more on geography because developing a project in a targeted employment area (TEA) lowers the EB-5 minimum investment requirement from $1,000,000 to $500,000. A lower investment requirement attracts more investors.
For more information on EB-5 projects, developers and regional centers, send us a message.