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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
The audio portion of the conference may be accessed via the telephone or by using your computer'sspeakers. Please refer to the instructions emailed to registrants for additional information. If youhave any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
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.
Tips for Optimal Quality
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 [email protected] 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.
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 [email protected] 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:
• 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.
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
6
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
7
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.
8
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)
9
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)
10
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
11
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
12
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
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, [email protected]
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.
16
• 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.
17
• 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.
19
• 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
20
• 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
22
• 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.
23
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
24
• 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
25
• 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
26
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
28
• 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.
29
• 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.
30
• 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 [email protected]
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 [email protected]
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
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• 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
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• 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
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www.flastergreenberg.comPennsylvania | New Jersey | Delaware | New York
Mark Roderick, Esq.856.661.2265mark.roderick@flastergreenberg.comwww.markroderick.net@CrowdfundAttny
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