- What is the ideal type of project?
The North Dakota/Minnesota EB-5 Regional Center does not focus on a specific industry, but rather looks for structurally solid deals, with experienced management teams. In general, real estate development projects are most popular in the EB-5 market. However, our portfolio would suggest that we are open to “non-traditional” EB-5 projects as well.
- What size projects do you look for?
The North Dakota/Minnesota EB-5 Regional Center prefers projects that are seeking $30 million, or more, and are interested in a minimum of $10 million in EB-5 funding. There is no limit on how large of a project we are willing to take on. We’ve taken on projects ranging from the $10 million to $250 million in EB-5 funding. Our main focus is on working with solid projects that will meet the EB-5 job creation requirements.
- What risk do companies have in accepting EB-5 investments?
Companies interact with the money as they would with any other financing investment, albeit often at a lower cost.
- Is EB-5 financing cheaper than other sources of capital?
In many instances, yes EB-5 funding is a lower-cost of capital than alternatives. This is because EB-5 investors’ demand for return on their investment is often lower than other sources of capital. In addition, securing EB-5 capital increases the overall liquidity of a project which, in turn, reduces the cost of acquiring capital from other sources.
- Can the North Dakota/Minnesota EB-5 Regional Center fund an entire project with EB-5?
No, the North Dakota/Minnesota EB-5 Regional Center typically seeks projects that are funded with 30-40% or less of the overall project. Requiring projects to come up with 60-70% of other project financing, which mitigates investors’ risk. Lastly, we require project principals to put equity into the project, to ensure they have “skin in the game.”
- What is a TEA and what is the difference between the investment amount?
A Target Employment Area (TEA) is a geographic/geopolitical area identified as having an unemployment rate 1.5X the national average or a rural area with a population below 20,000. The minimum investment amount in a TEA is $500,000 or $1 million if not classified as such. In all cases except rural, the TEA must be backed by substantial data to show it is in fact 1.5X the national average and it must be a single Metropolitan Statistical Area.
- What are the job creation requirements?
10 new U.S. jobs must be created, per EB-5 investor invested into the project. These can be direct, indirect, or induced jobs. Direct jobs are the traditional employee/employer positions; indirect and induced jobs are those that result when the direct employees spend their newly earned pay in the economy or other economic activity occurs through investments such as construction spending.
- How is the EB-5 investment structured?
Most projects are structured as a loan model, where a Limited Partnership or Limited Liability Company is formed as the basis for the new commercial enterprise requirement. The single purpose Limited Partnership or Limited Liability Company, then lends the money to the project. The General Partner, which will include the North Dakota/Minnesota EB-5 Regional Center, is responsible for initiating and managing the EB-5 investments, as well as working to ensure that the project is in compliance with all laws and regulations pertaining to the EB-5 Program.
- As a borrower, what are the company requirements and responsibilities for EB-5 program compliance?
The borrower’s responsibility is to satisfy the terms of the loan agreement. As part of the terms of the loan agreement, the borrower will be required to spend the proceeds of the loan on qualified expenditures; and provide documentation on actual construction spending or such expenditure documentation acceptable to the Lender. Furthermore, the borrower must be able to provide documentation on job creation, which can consist of general ledger reports, invoices, construction contracts and other such documents.
- Do you structure projects as equity investments or solely as a loan?
The North Dakota/Minnesota has structured projects as both equity and debt. We have found the loan model is greatly preferred by investors and makes the entire EB-5 process very clear for both the borrower and lender.
- What is the term (length) of the loan?
EB-5 loans through the North Dakota/Minnesota EB-5 Regional Center are typically structured for 5-7 years. The borrower is required to make non-compounding, interest only, quarterly payments on the amount of the loan that has been advanced. A balloon payment of the principal is due upon maturity of the loan.
- What EB-5 related expenses and fees is the borrower responsible for?
This is determined on a project-by-project basis, but typically includes an administration fee, a document preparation fee and an origination fee. The borrowers are responsible for payment of their own legal costs (including legal counsel), as deemed necessary in the preparation and review of all financing and security documents.
- How does the North Dakota/Minnesota EB-5 Regional Center receive their compensation?
The North Dakota/Minnesota EB-5 Regional Center’s role is much like that of any financial lending institution. Our revenues come from fees and the interest paid by the borrower on the loan.