While an EB-5 investment is an “at-risk” investment made to create jobs resulting in permanent residency for the EB-5 investor, all investors should try to minimize risk as much as possible. First, EB-5 investors should ensure there is a large amount of developer equity in the project, this incentivizes the developer to complete the project and that they will not walk away from the EB-5 project during times of financial turmoil. Moreover, it’s beneficial to choose a project with a capital stack that’s already completed, meaning it doesn’t rely on EB-5 investor’s money for completion. Instead, EB-5 money is coming in to reduce costs. This is important because if all the EB-5 capital is not raised, the project can still be completed – mitigating immigration (job creation) and capital repayment risks.
Lastly, investors should ask if the money is in first position, second position, or equity. This along with the project’s combined loan-to-value and exit strategy are crucial when analyzing a project.
