Construction Financing: Utilizing Tax Credits, Tax...

Construction Financing: Utilizing Tax Credits,Tax Increment Financing, EB-5 Visa Programand Crowdfunding Websites

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

TUESDAY, NOVEMBER 15, 2016

Presenting a live 90-minute webinar with interactive Q&A

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NOTE: If you are seeking CPE credit, you must listen via your computer — phone listening is nolonger permitted.

Today’s faculty features:

Lisa Berden, Member, Dorn Berden, Southfield, Mich.

Debbie A. Klis, Partner, Ballard Spahr, Washington, D.C.

Markley S. Roderick, Shareholder, Flaster/Greenberg, Cherry Hill, N.J.

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NOTE: If you are seeking CPE credit, you must listen via your computer — phonelistening is no longer permitted.

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FOR LIVE EVENT ONLY

Sound QualityIf you are listening via your computer speakers, please note that the qualityof your sound will vary depending on the speed and quality of your internet connection.

If the sound quality is not satisfactory, you may listen via the phone: dial1-866-873-1442 and enter your PIN when prompted. Otherwise, pleasesend us a chat or e-mail sound@straffordpub.com immediately so we can address theproblem.

If you dialed in and have any difficulties during the call, press *0 for assistance.

NOTE: If you are seeking CPE credit, you must listen via your computer — phonelistening is no longer permitted.

Viewing QualityTo maximize your screen, press the F11 key on your keyboard. To exit full screen,press the F11 key again.

Continuing Education Credits

In order for us to process your continuing education credit, you must confirm yourparticipation in this webinar by completing and submitting the AttendanceAffirmation/Evaluation after the webinar.

A link to the Attendance Affirmation/Evaluation will be in the thank you email that youwill receive immediately following the program.

For CPE credits, attendees must participate until the end of the Q&A session andrespond to five prompts during the program plus a single verification code. In addition,you must confirm your participation by completing and submitting an AttendanceAffirmation/Evaluation after the webinar and include the final verification code on theAffirmation of Attendance portion of the form.

For additional information about continuing education, call us at 1-800-926-7926 ext.35.

FOR LIVE EVENT ONLY

In order for us to process your continuing education credit, you must confirm yourparticipation in this webinar by completing and submitting the AttendanceAffirmation/Evaluation after the webinar.

A link to the Attendance Affirmation/Evaluation will be in the thank you email that youwill receive immediately following the program.

For CPE credits, attendees must participate until the end of the Q&A session andrespond to five prompts during the program plus a single verification code. In addition,you must confirm your participation by completing and submitting an AttendanceAffirmation/Evaluation after the webinar and include the final verification code on theAffirmation of Attendance portion of the form.

For additional information about continuing education, call us at 1-800-926-7926 ext.35.

Program Materials

If you have not printed the conference materials for this program, pleasecomplete the following steps:

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• Double click on the PDF and a separate page will open.

• Print the slides by clicking on the printer icon.

FOR LIVE EVENT ONLY

If you have not printed the conference materials for this program, pleasecomplete the following steps:

• Click on the ^ symbol next to “Conference Materials” in the middle of the left-hand column on your screen.

• Click on the tab labeled “Handouts” that appears, and there you will see aPDF of the slides for today's program.

• Double click on the PDF and a separate page will open.

• Print the slides by clicking on the printer icon.

CONSTRUCTIONFINANCE:CONSTRUCTIONFINANCE:Tax Incentives

Lisa BerdenDorn Berden, PLLC

TYPES OF INCENTIVES IN THECAPITAL STACK

State Tax Credits

Local Tax Abatements

CDBG/Department of Transportation/NaturalResource Grants

Federal Tax Credits New Markets Tax Credits

Federal (and possibly state) Historic Tax Credits

Low Income Housing Tax Credits

Tax Increment Finance

State Tax Credits

Local Tax Abatements

CDBG/Department of Transportation/NaturalResource Grants

Federal Tax Credits New Markets Tax Credits

Federal (and possibly state) Historic Tax Credits

Low Income Housing Tax Credits

Tax Increment Finance

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NEW MARKETS TAX CREDITS Federal program to encourage

investment in economicallychallenged communities.

Threshold question: is project in aQualified Census Tract (or will itmeet Targeted PopulationRequirements).

If yes, financial analysis of projectbenefit. Benefit is forgivable loan,but cost can be prohibitive onsmaller projects.

Don’t forget to calculate CODincome if project owner is a forprofit entity.

7 Year Compliance Period.

Qualifying project types:

• Federally Qualified HealthCare Facility

• Charter School

• Higher Ed

• Mixed UseRetail/Office/Residential

• Industrial

• Community Theater

• Renewable Energy

Federal program to encourageinvestment in economicallychallenged communities.

Threshold question: is project in aQualified Census Tract (or will itmeet Targeted PopulationRequirements).

If yes, financial analysis of projectbenefit. Benefit is forgivable loan,but cost can be prohibitive onsmaller projects.

Don’t forget to calculate CODincome if project owner is a forprofit entity.

7 Year Compliance Period.

Qualifying project types:

• Federally Qualified HealthCare Facility

• Charter School

• Higher Ed

• Mixed UseRetail/Office/Residential

• Industrial

• Community Theater

• Renewable Energy

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Leveraged Structure

Tax Credit Investor Lender

100% equityownership

ProjectInvestmentFund

Loan investor uses toleverage tax credits

CommunityDevelopment Entity

Project(Qualified Active Low IncomeCommunity Business)

Provide tax credits;charge mgmt fees

CDE provides ”A” and “B” loansto Project.

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HISTORIC TAX CREDITS

20% federal tax credit forrehabilitation of historic structures

Some states have companionstate tax credit

Program is run through state SHPO

Rehabilitation must be substantial

Multi-step process: (i) historicalsignificance; (ii) description ofwork; and (iii) certification ofcompleted work.

Credits earned upon Part IIIapproval

Qualifying Project Types:

• Certified historicallysignificant building

• Rehabilitation costsexceed pre-rehab cost ofbuilding

• Non-residential use (hotelsqualify as commercialuse)

20% federal tax credit forrehabilitation of historic structures

Some states have companionstate tax credit

Program is run through state SHPO

Rehabilitation must be substantial

Multi-step process: (i) historicalsignificance; (ii) description ofwork; and (iii) certification ofcompleted work.

Credits earned upon Part IIIapproval

Qualifying Project Types:

• Certified historicallysignificant building

• Rehabilitation costsexceed pre-rehab cost ofbuilding

• Non-residential use (hotelsqualify as commercialuse)

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Property Owner, LLC

Tax Credit Investors

Construction Lender

Debt service=rentpayments

99.9% of HTC

HISTORIC TAX CREDITS

Property Owner, LLC

Master Tenant

Building Tenants

Developer

Manager (DeveloperAffiliate)

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LOW INCOME HOUSING TAX CREDITS

State Housing Agencies Administer Program UnderIRS Regulations

4% v 9% credit

Project must stay low income 15 years by statuteand at least another 15 by agreement (30 yearminimum)

Credits take over 10 year period, but recapture canoccur if affordability requirements not met for the 15year statutory compliance period

Property owner can take credit, but usually findsinvestors in one project or in syndicate

State Housing Agencies Administer Program UnderIRS Regulations

4% v 9% credit

Project must stay low income 15 years by statuteand at least another 15 by agreement (30 yearminimum)

Credits take over 10 year period, but recapture canoccur if affordability requirements not met for the 15year statutory compliance period

Property owner can take credit, but usually findsinvestors in one project or in syndicate

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SIMPLE LIHTC STRUCTURE

StateHousingAuthority

ProjectDeveloper/GeneralPartnerApplication

for taxcredits

Tax CreditInvestor/Limited Partner

Investment 99.99% TaxCreditsState

HousingAuthority

Low Income Housing ProjectGeneral Partner: .01%

Limited Partner: 99.99%

Tax creditallocation toproject

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TAX INCREMENT FINANCE

How it Works:

• Base Tax is Always Assessed and Paid to Taxing Authority

• The Incremental Increase in Tax Resulting From theImprovements to the Property are Used to RepayQualifying Developer Project Costs

• What Constitutes Qualifying Project Cost Depends on theAuthorizing TIF Legislation. For example, if it is aBrownfield TIF, then only Work Plan, Phase I and Phase IIand Remediation Costs Might Qualify.

• A Better Option If the TIF Legislation is Limited May be aTax Abatement, Especially if Your State Offers a “Freeze”on Taxes to the Pre-Improvement Amounts.

How it Works:

• Base Tax is Always Assessed and Paid to Taxing Authority

• The Incremental Increase in Tax Resulting From theImprovements to the Property are Used to RepayQualifying Developer Project Costs

• What Constitutes Qualifying Project Cost Depends on theAuthorizing TIF Legislation. For example, if it is aBrownfield TIF, then only Work Plan, Phase I and Phase IIand Remediation Costs Might Qualify.

• A Better Option If the TIF Legislation is Limited May be aTax Abatement, Especially if Your State Offers a “Freeze”on Taxes to the Pre-Improvement Amounts.

13

LISA BERDEN

Thank you!

LISA BERDENDorn Berden PLLC

lisa@dornberden.com

248.509.4498

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A Primer - EB-5 Financing as anAlternative Source of Capital

Construction Financing: Utilizing Tax Credits, TaxIncrement Financing, EB-5 Visa Program andCrowdfunding Websites

STRAFFORD CLE/CPE WEBINAR - NOVEMBER 15, 2016

A Primer - EB-5 Financing as anAlternative Source of Capital

Construction Financing: Utilizing Tax Credits, TaxIncrement Financing, EB-5 Visa Program andCrowdfunding Websites

STRAFFORD CLE/CPE WEBINAR - NOVEMBER 15, 2016

Debbie A. Klis, Esq.klisd@ballardspahr.com

The EB-5 Investment Visa• The EB-5 Visa for Immigrant Investors is a U.S. employment-based (EB) visa

created by the Immigration Act of 1990 to stimulate economic activity and jobgrowth, while allowing eligible aliens to become permanent residents.

• The EB-5 Program provides a method of obtaining a Green Card for foreignnationals who invest money in the United States.

• This Program enables a foreign national to obtain permanent residence statusmore expeditiously than would most other options.

• The EB-5 Program has evolved into a low-cost source of alternative financingfor U.S.-based projects.

- To obtain the visa, individuals must invest at least $1,000,000 creating atleast 10 jobs full-time (35 hours) for qualified employees.

- By investing in certain qualified investments or regional centers with highunemployment rates (i.e., "Targeted Employment Areas”), the requiredinvestment amount is $500,000.

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• The EB-5 Visa for Immigrant Investors is a U.S. employment-based (EB) visacreated by the Immigration Act of 1990 to stimulate economic activity and jobgrowth, while allowing eligible aliens to become permanent residents.

• The EB-5 Program provides a method of obtaining a Green Card for foreignnationals who invest money in the United States.

• This Program enables a foreign national to obtain permanent residence statusmore expeditiously than would most other options.

• The EB-5 Program has evolved into a low-cost source of alternative financingfor U.S.-based projects.

- To obtain the visa, individuals must invest at least $1,000,000 creating atleast 10 jobs full-time (35 hours) for qualified employees.

- By investing in certain qualified investments or regional centers with highunemployment rates (i.e., "Targeted Employment Areas”), the requiredinvestment amount is $500,000.

EB-5 Investment Requirements• Investment Amount

- The investor is required to invest $1,000,000 (or $500,000, if theinvestment is within a Targeted Employment Area (TEA), i.e., 150% of thenational average unemployment statistic or a rural area).

• Job Creation Requirements

- Each investor must create 10 full-time U.S.-based jobs.

- Job creation can be through both direct and indirect jobs.

• Source of Investment Funds

- Investor must demonstrate the EB-5 Visa investment capital is from a legalsource, acquired, directly or indirectly, by lawful means.

- Investor must document the path of the funds with bank statements plussupporting documents to establish the source of funds including a valid"pattern of income" such as through income tax records and savings recordsto prove funds were accumulated over time.

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• Investment Amount

- The investor is required to invest $1,000,000 (or $500,000, if theinvestment is within a Targeted Employment Area (TEA), i.e., 150% of thenational average unemployment statistic or a rural area).

• Job Creation Requirements

- Each investor must create 10 full-time U.S.-based jobs.

- Job creation can be through both direct and indirect jobs.

• Source of Investment Funds

- Investor must demonstrate the EB-5 Visa investment capital is from a legalsource, acquired, directly or indirectly, by lawful means.

- Investor must document the path of the funds with bank statements plussupporting documents to establish the source of funds including a valid"pattern of income" such as through income tax records and savings recordsto prove funds were accumulated over time.

Types of U.S. Projects Using EB-5 Funds

Private Equity Investments

• EB-5 money can be used forbusinesses (non-real estate) thatcreate direct jobs in a newcommercial enterprise:

- manufacturing plants, fishingbusinesses, dairy farms and ITfirms, senior living facilities,

- medical device companies,hospitals, universities, servicecenters and research facilities

- restaurants, charter schools,

- other business seeking capitalwith job creation to supportinvestment

Real Estate Investments• Most projects pursued by Regional

Centers involve real estate including:

- office and retail buildings

- shopping centers & strip malls

- hotels, conference centers, dorms,ski villages and ski resorts

- casinos, shipyards, senior care

- big box stores and sports stadiums

- apartments, condos and single-family home developments

- solar-plants and wind farms

- other mixed-used developments18

• EB-5 money can be used forbusinesses (non-real estate) thatcreate direct jobs in a newcommercial enterprise:

- manufacturing plants, fishingbusinesses, dairy farms and ITfirms, senior living facilities,

- medical device companies,hospitals, universities, servicecenters and research facilities

- restaurants, charter schools,

- other business seeking capitalwith job creation to supportinvestment

• Most projects pursued by RegionalCenters involve real estate including:

- office and retail buildings

- shopping centers & strip malls

- hotels, conference centers, dorms,ski villages and ski resorts

- casinos, shipyards, senior care

- big box stores and sports stadiums

- apartments, condos and single-family home developments

- solar-plants and wind farms

- other mixed-used developments

Commercial Office Projects• Office building and shopping center projects have been very popular EB-

5 projects; obtaining a feasibility report is essential to approval

• New construction of office buildings yields high indirect and inducedjobs

• Tenant improvement costs may be included to increase indirect andinduced job count

• If construction equals or exceeds 24 months then construction jobs maybe included to increase job numbers

• Regarding new direct jobs, the assumption is that for office buildings andshopping centers, no net increase in jobs occurs—revenue simply shiftsto the new office spaces and retailers

• While USCIS will consider arguments that an establishment doesproduce a net increase in jobs

USCIS tends to favor certain projects overothers—though this tendency has changed overtime.The project types most likely to be approved byUSCIS include restaurants, hotels, medicaloffices, hospitals, senior living centers, and singleand multi-family residential dwellings. On theother hand, USCIS is less likely to approve officebuilding and shopping center projects, eventhough these have been popular in the past.USCIS rationale for the approval of certainproject types over others seems to be directlyrelated to the creation of operations jobs. Theassumption is that for office buildings andshopping centers, no net increase in jobsoccurs—revenue simply shifts to the new officespaces and retailers.While USCIS will consider arguments that anestablishment does produce a net increase injobs, for example, due to a shortage of particularretail goods, proving that new operations jobs areactually created in the region as a result of theproject can be challenging and will require anexperienced EB-5 company.

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• Office building and shopping center projects have been very popular EB-5 projects; obtaining a feasibility report is essential to approval

• New construction of office buildings yields high indirect and inducedjobs

• Tenant improvement costs may be included to increase indirect andinduced job count

• If construction equals or exceeds 24 months then construction jobs maybe included to increase job numbers

• Regarding new direct jobs, the assumption is that for office buildings andshopping centers, no net increase in jobs occurs—revenue simply shiftsto the new office spaces and retailers

• While USCIS will consider arguments that an establishment doesproduce a net increase in jobs

USCIS tends to favor certain projects overothers—though this tendency has changed overtime.The project types most likely to be approved byUSCIS include restaurants, hotels, medicaloffices, hospitals, senior living centers, and singleand multi-family residential dwellings. On theother hand, USCIS is less likely to approve officebuilding and shopping center projects, eventhough these have been popular in the past.USCIS rationale for the approval of certainproject types over others seems to be directlyrelated to the creation of operations jobs. Theassumption is that for office buildings andshopping centers, no net increase in jobsoccurs—revenue simply shifts to the new officespaces and retailers.While USCIS will consider arguments that anestablishment does produce a net increase injobs, for example, due to a shortage of particularretail goods, proving that new operations jobs areactually created in the region as a result of theproject can be challenging and will require anexperienced EB-5 company.

Retail EB-5 Projects

• Retail EB-5 projects are growing in popularity for both residentialand commercial mixed-use projects

• Hurdle: proving that the Project will create the required number ofjobs – this requires proving that the new jobs at a retail store in thenew building/mall would not have existed otherwise

• If the developer has an ownership interest in its tenants, than thecausal connection can be established

- The theory: if the developer itself owns an interest in the tenant, thedeveloper is really constructing the project for themselves, so the resultingjobs are the developers’

• Assuming no/very few direct jobs relating to the residential aspectsof development, job creation numbers for residential projects relyon indirect jobs, construction jobs & retail direct jobs

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• Retail EB-5 projects are growing in popularity for both residentialand commercial mixed-use projects

• Hurdle: proving that the Project will create the required number ofjobs – this requires proving that the new jobs at a retail store in thenew building/mall would not have existed otherwise

• If the developer has an ownership interest in its tenants, than thecausal connection can be established

- The theory: if the developer itself owns an interest in the tenant, thedeveloper is really constructing the project for themselves, so the resultingjobs are the developers’

• Assuming no/very few direct jobs relating to the residential aspectsof development, job creation numbers for residential projects relyon indirect jobs, construction jobs & retail direct jobs

Residential EB-5 Projects

• Residential EB-5 projects are growing in popularity for both residentialonly and mixed-use projects

• Assuming no or very few direct jobs on the premises of the apartments,condos or housing development, job creation numbers for residentialprojects rely on:

- Two-year construction period to make use of the construction jobs inthe job count

• If one project’s construction period is <2 years, considerbundling one or more projects as one project (must have thesame contractor)

• Still doable even with less than a 2-year construction period

- Approved hard and soft costs to benefit from the indirect andinduced jobs created in the regional center

21

• Residential EB-5 projects are growing in popularity for both residentialonly and mixed-use projects

• Assuming no or very few direct jobs on the premises of the apartments,condos or housing development, job creation numbers for residentialprojects rely on:

- Two-year construction period to make use of the construction jobs inthe job count

• If one project’s construction period is <2 years, considerbundling one or more projects as one project (must have thesame contractor)

• Still doable even with less than a 2-year construction period

- Approved hard and soft costs to benefit from the indirect andinduced jobs created in the regional center

Key Ways to Use the EB-5 Program

• Form your own Regional Center

- Loan to your own project(s)

- Loan to third-party projects

• Procure a loan from an USCIS-approved Regional Center

- Confirm the RC’s approval in the project’s geographical area

- As of 2013 Policy Memo, pre-approved labor codes not required

• “Rent” a USCIS-approved Regional Center

- Per a rental agreement for a fee or a % of a project’s revenues

- Actual partner in a joint venture proposed by an outside party

• Direct Investment by an EB-5 investor directly in a project

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• Form your own Regional Center

- Loan to your own project(s)

- Loan to third-party projects

• Procure a loan from an USCIS-approved Regional Center

- Confirm the RC’s approval in the project’s geographical area

- As of 2013 Policy Memo, pre-approved labor codes not required

• “Rent” a USCIS-approved Regional Center

- Per a rental agreement for a fee or a % of a project’s revenues

- Actual partner in a joint venture proposed by an outside party

• Direct Investment by an EB-5 investor directly in a project

The Regional Center

Most EB-5 investments occur through a Regional Center –

• An entity involved with the promotion of economic growth,productivity, job creation, and increased capital investment.

• An entity that has received “Regional Center” designation from theUSCIS following the submission of documents supported by aneconomic report, showing how the regional center: will promote economic growth create jobs make capital investments

Regional Centers match foreign capital with developers/entrepreneurswho need funds.

More and more, developers/entrepreneurs launch their own RegionalCenter to cut out the middleman.

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Most EB-5 investments occur through a Regional Center –

• An entity involved with the promotion of economic growth,productivity, job creation, and increased capital investment.

• An entity that has received “Regional Center” designation from theUSCIS following the submission of documents supported by aneconomic report, showing how the regional center: will promote economic growth create jobs make capital investments

Regional Centers match foreign capital with developers/entrepreneurswho need funds.

More and more, developers/entrepreneurs launch their own RegionalCenter to cut out the middleman.

Job Creation is a Key Factor• Direct Jobs

- Identifiable jobs within a new commercial enterprise

- Permanent full-time jobs defined as a minimum of 35 hoursper week over the course of that project

- Construction jobs exceeding 24 months

• Indirect/Induced Jobs

- Jobs shown to be created collaterally, or

- Jobs shown to have resulted from the investment in the newcommercial enterprise

- To include the indirect/induced jobs, the project must befunded through a regional center

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• Direct Jobs

- Identifiable jobs within a new commercial enterprise

- Permanent full-time jobs defined as a minimum of 35 hoursper week over the course of that project

- Construction jobs exceeding 24 months

• Indirect/Induced Jobs

- Jobs shown to be created collaterally, or

- Jobs shown to have resulted from the investment in the newcommercial enterprise

- To include the indirect/induced jobs, the project must befunded through a regional center

Regional Center Basics

• Investor must invest 100% of the $1,000,000 ($500,000 in aTEA plus an admin fee – currently approx. $55,000).

• Money can go:

To the project immediately

To escrow and release subject to a holdback

To escrow and release upon a benchmark

• Regional Center – administers the EB-5 projects

• New Commercial Enterprise – investors subscribe to this entity

• Job Creating Entity – recipient of the EB-5 funds that createsthe actual jobs

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• Investor must invest 100% of the $1,000,000 ($500,000 in aTEA plus an admin fee – currently approx. $55,000).

• Money can go:

To the project immediately

To escrow and release subject to a holdback

To escrow and release upon a benchmark

• Regional Center – administers the EB-5 projects

• New Commercial Enterprise – investors subscribe to this entity

• Job Creating Entity – recipient of the EB-5 funds that createsthe actual jobs

Pros & Cons of Using an Existing Regional Center

The benefits to the developer of using an existing Regional Center:

- Avoidance of the time and expense associated with setting up a RegionalCenter (approval time right now is approximately 9-12 months)

- Developer’s only responsibility is to negotiate the investment for the projectfrom the Regional Center

- The Regional Center is responsible for locating foreign investors

The downsides to the developer of using an existing Regional Center:

- Regional Center might reject the project or might require unfavorableterms and high fees & interest rate, and/or proceed at a slow pace

- Regional Center would receive the profit spread between the 0.5-1% prefto the EB-5 investors + marketing fees (1.0-3.00%) and the 4.0-7.0% (ormore) interest charged to developer

- Developer is missing the opportunity to have a Regional Center in placeto fund a pipeline of future real estate projects

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The downsides to the developer of using an existing Regional Center:

- Regional Center might reject the project or might require unfavorableterms and high fees & interest rate, and/or proceed at a slow pace

- Regional Center would receive the profit spread between the 0.5-1% prefto the EB-5 investors + marketing fees (1.0-3.00%) and the 4.0-7.0% (ormore) interest charged to developer

- Developer is missing the opportunity to have a Regional Center in placeto fund a pipeline of future real estate projects

Advantages of Creating a Regional Center

• Regional Center designation by the USCIS provides legitimacy forthe project, which may help in marketing to foreign investors.

• Regional Center designation is a one-time designation allowingfuture projects to be marketed without incurring delays.

• A project may be pre-approved by USCIS which facilitatesfundraising.

• In addition to funding their own projects, Regional Centers canprofit by funding projects developed by developers/entrepreneurs.

• Regional Centers are permitted to count indirect and induced jobsplus direct jobs, in meeting the 10-jobs-per-investor requirement.

• The Regional Center is an asset that can grow geographically.

27

• Regional Center designation by the USCIS provides legitimacy forthe project, which may help in marketing to foreign investors.

• Regional Center designation is a one-time designation allowingfuture projects to be marketed without incurring delays.

• A project may be pre-approved by USCIS which facilitatesfundraising.

• In addition to funding their own projects, Regional Centers canprofit by funding projects developed by developers/entrepreneurs.

• Regional Centers are permitted to count indirect and induced jobsplus direct jobs, in meeting the 10-jobs-per-investor requirement.

• The Regional Center is an asset that can grow geographically.

Disadvantages of Creating a Regional Center

• Regional Center certification takes between 9 and 12 months.

- Regional Center certification is not the same as approval of anyparticular Regional Center project unless the application included an“actual” project vs. an exemplar project.

• Newer Regional Centers find it a bit more difficult to competein their marketing efforts with long-existing regional centerswith a track record of many immigration approvals

• The costs of locating investors have increased in recent years

- Annual marketing fees of 2-4% of funds raised

• Regional Centers have ongoing filing requirements with theUSCIS to avoid de-certification

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• Regional Center certification takes between 9 and 12 months.

- Regional Center certification is not the same as approval of anyparticular Regional Center project unless the application included an“actual” project vs. an exemplar project.

• Newer Regional Centers find it a bit more difficult to competein their marketing efforts with long-existing regional centerswith a track record of many immigration approvals

• The costs of locating investors have increased in recent years

- Annual marketing fees of 2-4% of funds raised

• Regional Centers have ongoing filing requirements with theUSCIS to avoid de-certification

Summary of EB-5 Program Successes

• Since 2008, the EB-5 Program has generated more than $13 billionin foreign investment creating tens of thousands of jobs.

• Currently, more than $9 billion in EB-5 capital is pending federalgovernment approval.

• In the last quarter of 2015, more than 6,500 investors submittedpetitions to participate in the program - a number nearly equal towhat was submitted in the first three quarters of fiscal year 2015.

• The EB-5 Program contributed $9.62 billion to gross domesticproduct from 2010-2013 while supporting an average of 29,300jobs per year.

• EB-5 spending contributed $3.58 billion to GDP, created more than41,000 jobs, and generated more than $805 million in federal andstate tax revenue in FY2013 alone.

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• Since 2008, the EB-5 Program has generated more than $13 billionin foreign investment creating tens of thousands of jobs.

• Currently, more than $9 billion in EB-5 capital is pending federalgovernment approval.

• In the last quarter of 2015, more than 6,500 investors submittedpetitions to participate in the program - a number nearly equal towhat was submitted in the first three quarters of fiscal year 2015.

• The EB-5 Program contributed $9.62 billion to gross domesticproduct from 2010-2013 while supporting an average of 29,300jobs per year.

• EB-5 spending contributed $3.58 billion to GDP, created more than41,000 jobs, and generated more than $805 million in federal andstate tax revenue in FY2013 alone.

EB-5 Program Benefits to the Project

• The EB-5 Program can be used as an alternative funding source – When traditional forms of capital come up short or are too costly and

would affect the ROI, developers seek low-cost funds.

• Investors receive a de minimis pref (0.5% to 1.0% lately), which makesthis investment a low-cost source of funding.

• Investors pay an upfront administrative fee ranging between $50,000 and$60,000 each to cover the program promoter's broker costs.

• Marketing agents in the foreign countries market the project and locateeligible investors for a portion of the administrative fee and an annualpercentage (1.0% to 4.0% lately).

• EB-5 funding works well along side Historic Tax Credits, New MarketsTax Credits, Revenue Bonds, TIFs, Low Income Housing Tax Credits,Housing & Urban Development (“HUD”) financing, Crowdfunding, etc.

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• The EB-5 Program can be used as an alternative funding source – When traditional forms of capital come up short or are too costly and

would affect the ROI, developers seek low-cost funds.

• Investors receive a de minimis pref (0.5% to 1.0% lately), which makesthis investment a low-cost source of funding.

• Investors pay an upfront administrative fee ranging between $50,000 and$60,000 each to cover the program promoter's broker costs.

• Marketing agents in the foreign countries market the project and locateeligible investors for a portion of the administrative fee and an annualpercentage (1.0% to 4.0% lately).

• EB-5 funding works well along side Historic Tax Credits, New MarketsTax Credits, Revenue Bonds, TIFs, Low Income Housing Tax Credits,Housing & Urban Development (“HUD”) financing, Crowdfunding, etc.

For Questions and Additional Information

Debbie A. Klis, Esq.Ballard Spahr, LLP1909 K Street, NW, 12th FloorWashington, DC 20006-1157Tel 202.661.7661klisd@ballardspahr.com

Atlanta | Baltimore | Bethesda | Denver | Las Vegas | Los Angeles | New Jersey | New YorkPhiladelphia | Phoenix | Salt Lake City | San Diego | Washington, DC | Wilmington | www.ballardspahr.com

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Debbie A. Klis, Esq.Ballard Spahr, LLP1909 K Street, NW, 12th FloorWashington, DC 20006-1157Tel 202.661.7661klisd@ballardspahr.com

Atlanta | Baltimore | Bethesda | Denver | Las Vegas | Los Angeles | New Jersey | New YorkPhiladelphia | Phoenix | Salt Lake City | San Diego | Washington, DC | Wilmington | www.ballardspahr.com

www.flastergreenberg.comPennsylvania | New Jersey | Delaware | New York

Presented by:

Mark Roderick, Esq.

New Jersey | Cherry Hill LinwoodPennsylvania | PhiladelphiaNew York | Manhattan PleasantvilleDelaware | Wilmington November 15, 2016

• Definition of Crowdfunding: Raising MoneyUsing the Internet

• Donation-Based Crowdfunding (Kickstarter)• Equity-Based Crowdfunding• Lessons from Donation-Based Crowdfunding

www.flastergreenberg.com

• Definition of Crowdfunding: Raising MoneyUsing the Internet

• Donation-Based Crowdfunding (Kickstarter)• Equity-Based Crowdfunding• Lessons from Donation-Based Crowdfunding

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• My Blog (www.CrowdfundAttny.com)• Crowdfunding Cheat Sheet• Regulation A+ Primer• Title III Primer• Regulation A Timeline• Corporate Structure for a Crowdfunding

Business

www.flastergreenberg.com

• My Blog (www.CrowdfundAttny.com)• Crowdfunding Cheat Sheet• Regulation A+ Primer• Title III Primer• Regulation A Timeline• Corporate Structure for a Crowdfunding

Business

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• Crowdfunding is Just the Internet Coming to the FinanceIndustry

• Other Industries Affected by the Internet• Retail (Amazon)• Travel (Expedia, Kayak, etc.)• Hotels (Hotels.com, Airbnb)• Taxis (Uber, Lyft)• Government• Others

• Connecting Buyers and Sellers• Driving Down Costs• Eliminating Middlemen (brokers, lawyers, etc.)• It Ain’t Going Away

www.flastergreenberg.com

• Crowdfunding is Just the Internet Coming to the FinanceIndustry

• Other Industries Affected by the Internet• Retail (Amazon)• Travel (Expedia, Kayak, etc.)• Hotels (Hotels.com, Airbnb)• Taxis (Uber, Lyft)• Government• Others

• Connecting Buyers and Sellers• Driving Down Costs• Eliminating Middlemen (brokers, lawyers, etc.)• It Ain’t Going Away

35

• All about Private Networks• Where You Live, Whom You

Know, Whom Your FatherKnows, Etc.

• Lots and Lots of Middlemen• Very Expensive and Time-

Consuming

www.flastergreenberg.com

• All about Private Networks• Where You Live, Whom You

Know, Whom Your FatherKnows, Etc.

• Lots and Lots of Middlemen• Very Expensive and Time-

Consuming

36

• 30 Second History of U.S. Securities Laws• Key JOBS Act Change: General Solicitation Permitted

for First Time in History• Title II Crowdfunding• Title III Crowdfunding• Title IV Crowdfunding• Crowdfunding Cheat Sheet• P2P Lending: Prosper and Lending Club

www.flastergreenberg.com

• 30 Second History of U.S. Securities Laws• Key JOBS Act Change: General Solicitation Permitted

for First Time in History• Title II Crowdfunding• Title III Crowdfunding• Title IV Crowdfunding• Crowdfunding Cheat Sheet• P2P Lending: Prosper and Lending Club

37

• Wild Wild West• Accredited Investors Only• No State Regulation• No Information Required• Legal Since 09/23/2015• Projected Deal Volume in 2015: More Than $1

Billion

www.flastergreenberg.com

• Wild Wild West• Accredited Investors Only• No State Regulation• No Information Required• Legal Since 09/23/2015• Projected Deal Volume in 2015: More Than $1

Billion

38

• Non-Accredited Investors Allowed• No State Regulation• Raise up to $1 Million Per Year• Limits on Amount Invested• Lots of Information Required• Portal Required to Register• Legal Since 05/14/2016• Title III Primer

www.flastergreenberg.com

• Non-Accredited Investors Allowed• No State Regulation• Raise up to $1 Million Per Year• Limits on Amount Invested• Lots of Information Required• Portal Required to Register• Legal Since 05/14/2016• Title III Primer

39

• Non-Accredited Investors Allowed• No State Regulation• Raise Up To $50 Million Per Year• Lots of Information Required• Approval by SEC Required• Legal Since 06/19/2015• Regulation A+ Primer

www.flastergreenberg.com

• Non-Accredited Investors Allowed• No State Regulation• Raise Up To $50 Million Per Year• Lots of Information Required• Approval by SEC Required• Legal Since 06/19/2015• Regulation A+ Primer

40

• They Have Money• Customers• Neighbors• Special Interest

www.flastergreenberg.com

• They Have Money• Customers• Neighbors• Special Interest

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• About 90% of all Crowdfunding is Real Estate• Investors Prefer Debt• More and More Portals• More Segmentation to Come• REITs Are Being Crowdfunded• Holy Grail: Secondary Market

www.flastergreenberg.com

• About 90% of all Crowdfunding is Real Estate• Investors Prefer Debt• More and More Portals• More Segmentation to Come• REITs Are Being Crowdfunded• Holy Grail: Secondary Market

42

www.flastergreenberg.comPennsylvania | New Jersey | Delaware | New York

Mark Roderick, Esq.856.661.2265mark.roderick@flastergreenberg.comwww.markroderick.net@CrowdfundAttny

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