EB-5 Q&A for Potential EB-5 Projects

1. What is a TEA and the difference between the $500k and $1M investment?

A Target Employment Area (TEA) is a geographic/geopolitical area identified as having an unemployment rate at or above 150% of the national average or a rural area not in a Metropolitan Statistical Area (MSA) with a population below 20,000. The basic amount a foreign national must invest, as required by the EB-5 program, is $1 million. The amount is reduced to $500,000 if the investment is made in a Target Employment Area (TEA). In many cases TEA’s have been defined as areas as large as an entire county or parcels of land as small as a census tract. In all cases except rural the TEA must be backed by substantial data to show it is in fact 150% of the national average and it must be a single Metropolitan Statistical Area (MSA). A simple state letter is not enough it must have the data backup. Question: How many $1million projects are there in the U.S.? Answer is almost none! (CMB has one and another planned) Why? Is the entire U.S. a high unemployment area? Of course not. Some Regional Centers are cheating the EB-5 program. Caution you could be asked at the I-829 if you made the required investment for that particular area! Be prepared, make sure your Regional Center is not gaming the system.

2. As a borrower with CMB, what are the requirements (responsibilities) for EB-5 program compliance?

In regard to EB-5 participation, the Borrower does not have any EB-5 regulatory responsibilities, liabilities or requirements to the individual investors. The Borrower’s only 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 the projects identified in the loan agreement and the authorization to raise capital letter. The Borrower is also required to provide documentation on actual construction spending or such expenditure documentation acceptable to the Lender. Documentation to provide job creation can consist of general ledger reports, invoices, construction contracts and other such documents.

A Word About Job Creation:

In our opinion, the primary requirement of the EB-5 program is for each investor to demonstrate the creation of 10 new, full time American jobs as a result of their investment. These can be direct or indirect 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. The CMB investment model relies upon indirect and induced job creation that results from construction spending. Other forms of job creation are reserved to be claimed at the I-829 stage such as direct construction jobs that last over 2 years, operational phase jobs, direct jobs and job creation as a part of revenue generation. Traditionally, we use these job sources as our buffer on “extra” jobs. Using this method, we are able to show that indirect and induced jobs are created at the moment monies are spent. Further, indirect and induced jobs also meet all of the requirements that are placed upon EB-5 investors. The timing of construction and the construction spending will determine how soon and in what amounts CMB EB-5 investor capital can play a role. One of the most important benefits to a regional center investment is the ability to use indirect and induced job creation to meet the job creation needs of the EB-5 investors. A non-regional center EB-5 investment is restricted to direct job creation in the particular business they invest.

3. When does CMB start raising capital?

CMB will begin raising capital (assuming all documents are in order) based upon the timing of job creation in a specific project. EB-5 investments have a limited window of time in which to demonstrate new job creation. We will need to match the timing of construction spending with our funding efforts but CMB’s ability to raise capital is heavily dependent upon the quality of the investment and the likelihood the investment will meet the goals of the EB-5 investor. In past partnerships we have successfully raised as much as $90 million in as little as 32 days. In all cases we will need specific information and documents which will include: project details and timetables, authorization to raise capital, loan agreement and much more in order to successfully achieve the goals of both Lender and Borrower. The development often originates with an authorization to raise funds, massive amount of documents about the projects, negotiations on collateral, intercreditor agreements, corporate guarantees, project guarantees and more followed by a signed loan agreement.

Additionally, all the partnership documents must be produced and the investor must read and understand the investment.

4. How does CMB receive their compensation?

CMB’s role is much like that of any financial lending institution. Our revenues come in part from the interest paid by the borrowers on loans from CMB investment partnerships.

Q. What about expenses, fees, etc. attributable to the borrowing of funds?

This is determined on a project by project basis. CMB’s fees to the borrower may include a document preparation fee and an origination fee. There are no other legal or marketing costs associated to the Borrower that are payable to CMB. 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.

5. What types of projects are you looking for?

CMB’s focus has been and continues to be infrastructure related projects on basic construction related projects (horizontal or vertical). We are also seeking projects that demonstrate a public private partnership. Mostly the projects must show the job creation will occur in the time frame of the partnerships’ limited partners’ conditional residency period.

6. How large of a project can you become involved in? (What Size Range)

There is a ratio of CMB investment capital to outside capital that determines a limit to our lending capabilities which all links to job creation. There are also limitations based upon the ability of the Borrower to service debt and to repay the loan at maturity. However, we believe we can raise significant EB-5 capital (hundreds of millions) given a solid investment that demonstrates qualified construction spending that match up with the requested lending amount and demonstrates the ability to service debt and repay the principal within the time frame of the EB-5 investment loan.

7. Are you looking for an equity position or solely a creditor/debt position?

CMB EB-5 investments have traditionally been loan based investments. This does not mean that we would not consider a properly structured equity investment. Any equity investment would still need to demonstrate how it can achieve the goals of the CMB EB-5 investor.

8. What is the term (length) of the investment and when does this time start?

All CMB investment loans have been for six years. Each borrower is required to make quarterly interest payments on the amount of the loan that has been advanced. The loans have a single principal payment that is due at maturity. The six year term of CMB loans gives the borrower time in which to construct the new infrastructure and develop a mature revenue stream. The six year “clock” on the loan begins when the last funds are advanced to the borrower.

Q. Can I repay early without penalty? How early?

The ultimate goal of every EB-5 investor is to gain permanent residency in the United States. In order to achieve this goal they are required to submit an I-829 petition that demonstrates they are (1) fully invested the required amount of capital ($1million or $500,000) at risk and (2) the requisite ten new American jobs have been created. Each CMB investment loan agreement contains provisions preventing repayment during the first 42 months. We believe this will allow adequate time for our investors to achieve their immigration goals. Each Borrower is free to prepay the loan, without penalty, after this 42 month period of time.

Contact CMB For EB-5 Information