Sunday, October 30, 2011

Enter the Draggin': Big Promises, Slow Execution Creates EB-5 Turmoil in China

As busy as some EB-5 megaprojects are in China, and as much money as much as they are collecting, seems the "shovel" in the "shovel-ready" is a bit behind the momentum: our second full week in China has led to a number of conversations with Chinese brokers with clients who funded EB-5 projects many months ago...and are still on "hold".  The reason: most EB-5 projects being marketed in the Far East are EB-5 dependent for execution.  Translation:

  1. A bank promises the GP that they'll fund 33% if the project gets local government and EB-5 funding for the balance.

  2. The county/city (or both) agree to cover a third of the deal if the balance is covered by a bank and/or EB-5 funding SO...

  3. The GP shows up in China with "confirmed" investments from the bank and from the government...but can't even START till the last investor is funded.

There are but a handful of EB-5 projects which are:

  • not dangerous "troubled" enterprises and

  • already active and operating

It is these rare projects which offer immediate I-526 filings, no delays, and the assurance that the investor's green card doesn't depend on the GP's ability to secure ANOTHER 50 investors before the project can even get rolling.  The logical result of all this is pretty predicatable: Chinese agencies tired of making excuses for stalled EB-5 launches contacting Sharon and me to "switch" escrow to bona fide, working EB-5 ventures with no strings attached.

Fortunately for them, we happened to have precisely what they need. :-D



Xiamen Food for Thought...

This Xiamen delicacy almost proved too much for HRM Sharon, who politely declined when the dish was unveiled at dinner last night by our gracious host.  I've never seen Sharon even WINCE with all the zany Chinese stuff we've been honored with, so I took great delight thinking for a moment I could best her.  But when I ate one, she was checkmated and ate the whole thing...(-:

Local Sea Worm in Cold Jellyfish Puree

There is nothing...NOTHING...we will not do to spread the good news of Lake Point EcoVentures EB-5....

Tuesday, October 25, 2011

Crouching Tiger, Hidden Clauses: The Devil's in the Details

CHENGDU-  A passing observation: as my friendship continues to develop with the amazing group of folks with whom Sharon has been working here in China, the comfort level settles in mutually.  One of the sidebars to our efforts to present Lake Point EcoVentures Phase I to prospective EB-5 investors seeking a secure route to U.S. Permanent Residency is the agents' increasing interest in understanding the nuances of OTHER EB-5 projects which have been aggressively marketed to them and their clients.

It remains true that if you have nothing good to say about someone/something, best to say nothing at all; at the same time, when a specific legal question is asked, one is ethically bound to answer it truthfully.  In reviewing but a handful of the latest EB-5 offerings stuck in front of me by imploring Chinese EB-5 agents trying to decipher PPM minutiae, I have found:

  • OFAC registration instructions specifically required for Chinese investors (OFAC does NOT apply to Chinese nationals)

  • Limited Partnership agreements bearing the name of other unrelated projects, which were apparently missed in the document editing

  • Regional Centers claiming that they were approved when they are NOT USCIS approved but pending

  • Gross exagerrations on the valuation of property used as "security" for EB-5 investors, e.g., land currently listed at $2M cited as having a $15M valuation in 6 years

  • My favorite: a developer taking a letter from a city official who is "supporting the effort" for their megaproject and extrapolating that language into the "pledging" of public which cannot be legally conveyed or obligated!

Nice, huh?  ABSOLUTELY SHAMELESS stuff.  Sharon and I now have a firm policy with the agents with whom we are working: ask, and ye shall receive the TRUTH.  The upside of having U.S. EB-5 attorneys on your team, I suppose.

Monday, October 24, 2011

China EB-5 Agencies Speak with One Voice: "Protect Our Clients!"

NANJING-  Day Seven of our EB-5 marketing trip to China and Vietnam has us dividing and conquering:  Sharon is closing deals in Guangzhou while I flew ahead to Chengdu, capital of the Sichuan Province and inventors of paper money, to train our collaborating team for Thursday's big Lake Point EB-5 seminar.  Seems they are still quite busy making money in China, paper and otherwise:  we've enrolled 9 of our 20 EB-5 investor slots for Lake Point EcoVentures during our first week here!

There is one reason for this mind-bending success, and her name is Sharon Shi, plain and simple.  The past week has had us visiting the creme de la creme of Chinese agents, those princes revealed through Sharon's seven months of frog-kissing in 2010. Our princely welcome and open doors are the result of much effort on her part last year, and as I sit writing this in City #4, I am humbled when I reflect on the 40+ cities she traversed in search of the best possible network of EB-5 immigration agents.

Like me, Sharon is a believer in "people" versus "paper", and the agencies with which we are collaborating range in EB-5 experience from novice to seasoned veterans.  Some are venturing into EB-5 for the first time; others are asking me to dissect and opine on competing projects they are considering,  delving into technical minutiae which far exceeds the understanding of many immigration attorneys who are suddenly "EB-5 attorneys" (cheap but warranted shot (-;).  What these agencies all have in common is a deep concern over the misleading marketing utilized by many EB-5 projects,  the questionable job creation rationales, and the breathtaking ambition of megaprojects which really can't even break ground until the 40th EB-5 investor has had his or her I-526 approved.  These good folks have come to understand that it is indeed possible make a nice EB-5 living while still protecting the interests of your clients.

Small wonder that we are being grilled with very savvy questions and I find myself reaching out to Scott Barnhart to explain some rather esoteric econometric concepts.  Sharon has brought us to a very special group of folks who, after the contracts are signed, after the last Peking Duck pancake has been consumed, want to sleep at night knowing that they've selected the very best EB-5 project they could to both assure permanent residency for the client...and avoid squandering $500,000 on a dead-end deal.

Remember this, folks: the days of "Well, I'm never going to get a penny back on my investment but at least I'll get the I-829 approved" are HISTORY as of 2010.  There are but a handful of select projects -- all loan based, with fixed exit strategies, and all carefully structured to protect the interests of the investors entrusting them with their money -- who can get you to America in one piece.

Wednesday, October 19, 2011

Beijing Rocks! Lake Point EcoVentures EB-5 Receives Red Carpet Welcome

Day Two wrapping up in Beijing and I am seriously impressed.  Sharon's pre-existing agency relationships are making this a comparative walk in the park compared to the last time I ambled through this neck of the woods.  The best immigration agencies, the smartest questions, the sharpest people...Lake Point EcoVentures Phase I's 20 EB-5 investor slots are the talk of the town.

It's nice to be wanted. (-:  Beijing is an attractive, cosmopolitan city with incredible restaurants, malls...serious consumer firepower.  My first impressions couldn't be better. And, not to be disappointed, the Peking Duck DOES taste better in Peking.  The other offerings at that particular restaurant...well....

Peking Menu

Friday, October 14, 2011

Thursday, October 13, 2011

T Minus 3 Days: On Trust and EB-5 Marketing in China

Just finished a chat with my still-jet-lagged partner Sharon Shi, who is somewhere West of Shanghai with a serious case of insomnia and EB-5-itis.  Sharon left Monday, arrived Tuesday, and will be meeting me in Beijing next week to begin what is turning into a rather grueling seminar schedule.  When you're gearing up for a 3 week, nonstop road show in China and Vietnam, melatonin doesn't cut it.  And, as you can imagine, getting ready for this kind of road trip is no minor event and I have been scrambling to get things in order before I leave this weekend.  In reality, between Skype, email, and cell phones, the biggest challenge is the time difference.  Hard to be perky for a conference call when it's 9 am for the immigration broker and 9 pm here.

We are off to a tremendous start with investor placements as a result of Sharon's trusted relationships with some mid-size and smaller brokers...and time's have certainly changed.  A year and half ago, if I wanted to propose a project to a registered Chinese immigration agent, it was very difficult even if you got on the plane; in the past six months, Sharon and I have been visited at our Chicago and Miami offices by a half dozen agencies ranging in size from medium to very large. If you had told me last year that THEY would be flying to speak with ME at MY office, I would've laughed.

But it isn't wanderlust that's sending them our way.  The better Chinese agencies have long been aware that all that glitters isn't gold.  Considering the recent catastrophe involving  Missouri's Mamtek Regional Center, it's easy to see why smart China agents are doing their homework as far their U.S. partners.  As 15 very unlucky Chinese investors are just learning now, their $7.5 million investment in Mamtek -- along with the state of Missouri's $17.6 million in direct assistance and $39 Million in industrial bonds issued by the City of Moberly -- have evaporated.  Gone. The $65 Million deal which was proposed to create over 600 jobs has fired its four employees, left the job site, shut down its website...and now refuses to meet with lenders or return phone calls.

This recent mess led to yet another spirited debate this morning with my friend Michael Gibson, EB-5 Due Diligence maven and publisher of the best EB-5 Resource on the Web.  We emailed back and forth about the question of "due diligence" and how to protect investors from this  kind of mess. He asked me how I evaluate prospective EB-5 investments and my reply was simple:  I don't.   The handful of EB-5 centers and projects I am willing to put my name on are selected as good GREEN CARD vehicles, not "investments".  I select private offerings into which (hopefully) you can park your money, get a dinky rate of return, be confident that you'll get your permanent residency (remember: conditional residency and I-526 approval is based on projections; I-829 approval depends on results), have a clear exit strategy with a timeline...and, through intelligent risk control, have a pretty good chance of getting your capital back at the end of the game.

As I asked him to make my point: is ANY EB-5 project really a "good investment"?  Who on earth would buy into an EB-5 Limited Partnership to maximize their return on investment (ROI)?  Find me one American (or anyone else who doesn't want U.S. permanent residency) who is willing to accept a 2% ROI on a capital venture project with no recourse!   So that's the deal: I am not an investment advisor  -and, believe me, I have the portfolio history to document that thoroughly (-;.  What I AM is a grizzled old investment-based immigration veteran with a militant sense of fair dealing.   I select the projects Sharon and I market in the Far East, Latin America, and the Middle East by looking at the people behind the deal, the structure, the REAL job creation potential, and the exit strategy.  Interest rates and investment returns are of absolutely no interest to me...OR to the vast majority of EB-5 investors entrusting EB-5 projects with their capital! Ask 'em!  So if you are looking for a good EB-5 project through which you can get permanent U.S. residency with as controlled a risk as possible, I'm your man.  If, on the other hand, you are looking for a good "investment" to my good friends at JP Morgan, because what I've got for you is definitely not the best place to park your hard-earned money.

Due diligence is indeed critical, but once a project passes muster, DD doesn't do a thing stop dishonest people.   I know of several megaproject Regional Centers getting I-526s approved whose mind-boggling job numbers will never fly at the I-829 level, yet sales remain brisk; on my desk I have three I-829 denials from yet another huge Regional Center whose website to this DAY boasts of a "100%" record of approval.  While Missouri's Mamtek exploded, there are others which will quietly implode via exaggerated job projections, unreported material changes, and all kinds of other stuff.  Like Mamtek, each of these invariably will have scores of politital big wigs, senators, governors, etc., all of whom gushed about the wonderful project before it went kaput, and just as the unfortunate citizens of Missouri and their suddenly-downgraded bond rating will be cleaning up their mess for years to come, so will the citizens of other cities and states where EB-5 projects fail. 

I learned a long time ago that a person's handshake matters infinitely more than what the pile of contracts may say. I've come to understand these past few years that the people behind any EB-5 venture matter far more than how the prospectus reads.  Here's how the process works for us:

  • I get approached on a deal and meet the people looking for capital.  If there is anything more to the deal than the quid pro quo of "low interest EB-5 loan in exchange for a ferocious commitment to the needed job creation and capital return within a reasonable period of time", I'm outta there.  Not interested.  (I've yet to see a single equity-based EB-5 project return capital to their investors so I won't build one that way and with ONE exception to date, I won't market them either.)  After reviewing 20-30 projects in a month, I'll usually find one deal I like for whatever reasons, but it hinges on one element: I've come to trust the people behind the deal.

  • Once that happens, I need to sell Sharon on it.  Sharon's no pushover, because she has to answer to her Asian agents.  Most times I can persuade her, thought, because she trusts my judgment and experience, and knows that while I am capable of making mistakes,  I am incapable of ever endorsing an EB-5 project I myself would not invest in if I was the EB-5 investor.

  • Next, with Sharon on board, it's time to talk to the Chinese immigration agents...agents who have placed dozens of investors through Sharon as a result of her relentless seminar tours through China.   Agents who TRUST Sharon.

  • So begins their barrage of DD questions (nothing beats explaining "rights of redemption" on Skype at 11 pm on a Tuesday, believe you me.)  But because Sharon has developed a group of TRUSTED Chinese agents, we do the long, tedious back and forth until THEY are satisfied.  Most often they are, sometimes they politely say "no thanks" to a project I like; they know what they can place, we don't always.

  • Finally, the China agents who come on board reach out through their organization with information on the EB-5 project, answer questions, and use the TRUST their reputations have earned them to have prospective investors give the deal a listen...and possibly invest.

So there you have it, I've done it again, giving away all my trade secrets. (-:  Seriously, though, can't you see how it works?  TRUST!  Latin America, Europe, Middle East, Far's all about trust.   There are over 180 approved Regional Centers and hundreds of EB-5 projects under them in the U.S. and there are but handful whose structure and histories have earned my trust.  End of story.


Wednesday, October 5, 2011

Announcing Our China/Vietnam Seminar Tour: Oct. 16 - Nov. 9, 2011

On October 16th, the distinguished Chinese-American attorney Sharon Shi and I will begin a three week EB-5 marketing tour in China and Vietnam.  Sharon, my shiny new partner, spent most of 2010 closing EB-5 deals in China; she decided, despite her astonishing success last year going it alone, that taking a cranky old know-it-all this time around might improve sales, and the feedback from our agents in China so far seems to corroborate her theory.  (You'll be hearing more about Sharon as soon as we get our various sites updated.)

Our lead mission is to fill a $10M/20 investor tranche for Lake Point EcoVentures EB-5.1  Lake Point EcoVentures is a remarkable private-public venture where the GP is mining valuable aggregate rock (from which highway construction materials are made) while converting a rare 2200+ acre piece of the Everglades into an environmental recovery zone...and donating the land to the public!  While Scott Barnhart's economic projections and the USCIS agree that the job numbers support 54 EB-5 investors, we're capping it at 20 EB-5 slots, leaving 2.7 jobs for every job needed for our 20 lucky Limited Partners.  EB-5 funding constitutes only 10% of the venture; the project offers a 5 year loan structure paying 1.5% per annum (woo-hoo!) with liquidity of principal at the fifth year anniversary of original I-526 approval...but how often does an EB-5 investor get to partner with a Forbes group of GPs? 

Lake Point is without a doubt the most solid, safest EB-5 investment opportunity I've ever seen...and I constructed the whole deal from the ground up to insure the investors WILL get their I-829s approved.  (For our attorney and migration agency readers with clients seeking an EB-5 opportunity:  talk to me NOW if you want to know more.  We expect to fill all 20 slots before returning in November!)2

Sharon and I are scheduled for 20+ events in Beijing, Shanghai, Guangzhou, Nanjing and then on to Ho Chi Minh City in Vietnam...we have approximately 8 jillion individual client meetings and will be working on Saturday and Sundays.  I have promised to keep my whining to a minimum and Sharon has assured me that I will not be put in any compromising situation to eat anything I don't want to eat, especially the Dreaded Century Egg.

Stay tuned: I'm taking the camcorder so this could get interesting....(-;

1 The site link above tells the story but is being updated: the Regional Center was originally created to fund Lake Point ONLY.  Since then, the RC has been renamed American Venture Solutions (AVS) Regional Center and the Lake Point project is AVS' first project to market.  The new AVS site will reflect these changes in the very near future. BOTH THE REGIONAL CENTER AND THE PROJECT ARE USCIS APPROVED!

2 THIS IS NOT AN OFFERING FOR THE SALE OF A SECURITY!  Prospective Investors may contact us so that we can provide the necessary documentation establishing that the prospect is an "accredited investor" within the meaning of the U.S. Securities and Exchange Act.  Upon satisfactory confirmation of such status, detailed offering materials may be provided to any accredited foreign investor interested in the opportunity.

Saturday, October 1, 2011

Orlando: EB-5 Financing of Real Estate

Well,  Brian Su's first "real-estate-focused" EB-5 event yesterday expected.  The room was packed with the usual suspects -- and a lot of new folks -- and the topical theme was definitely more advanced than Brian's prior events.

Opening speaker Robert Divine - a top-tier EB-5 attorney -- delivered a clear and consice explanation of how construction jobs interplay within job count dynamics in Regional Centers.   Ronnie Fieldstone -- whose excellent article on securities compliance issues for EB-5 I published in Wednesday's Immigration Insider -- did a masterful job in clarifying SEC-related issues.  (I was delighted to see his new partner -- my OLD partner in the 90's -- Randy Sidlosca in attendance!).

Candidly, when you are part of these events on a regular basis, you tend to measure the usefulness of the seminar by the amount of notes you find yourself taking.  Using that yardstick, yesterday's seminar was the most productive EB-5 event I've attended.  Lots of notes, lots of new perspectives.  The speakers were great, the questions were smart, and the event reflected Brian's evolving awareness of the need for more sophisticated EB-5 events.   My old friend Ed Beshara - we were friends 20 years ago, when this whole EB-5 thing was new and very scary -- is now among the country's most experienced EB-5 attorneys and shared his insight with an appreciative crowd.  My partner in crime, economist Scott Barnhart, brought the house down Friday afternoon with his "economics-professor-meets-Jon-Stewart" shtick, keeping things fun.  As usual, I was the target of much of his abuse but as always, a steady stream of minor epiphanies about the intricacies of job count calculation were revealed.   Absolutely priceless education you CANNOT get anywhere else.  Thanks as always, Dr. B.

Brian, I emailed you yesterday and I'll tell you now publicly: you deserve a MEDAL for your efforts in creating what you've done with these events.  All of us in this sector appreciate your hard work and tireless efforts to keep this vital part of U.S. immigration policy at the forefront of the national immigration agenda.  Safe travels, my friend.