We've done/are doing a couple of projects with EB-5 capital, like I'm sure some of you are. Just did an analysis where we realized that the principal of an EB-5 regional center was making a killing off our deal because his fixed rate is high for today's standards, and he's charging interest off funds we haven't drawn on yet.
This got me thinking- is this a lucrative business to be in? Seems like a lot of capital from China is trying to come in through the EB-5, so raising capital is not a challenge. Its a good way for developers to put up less equity for a proejct, so there's demand for it. A lot of EB-5 principals start out as immigration lawyers, seems like a good exit opp for them. Curious to see if anyone has any insights regarding this topic.
An EB-5 Regional Center may collect basis points for any capital raised. They may also charge fixed annual maintenance fees for taking care of all of the investor compliance paperwork, annual regional center compliance filings, and for being the regional center sponsor affiliated with the project. How are they able to charge interest? They are not the direct investors.
Of course, the investors receives the interest payments. But don't the principals get a cut? The investors receive a certain interest rate, which from my understanding for investors in regional centers is pretty low (2-3% range). But if the developer is paying 5% fixed, doesn't the premium go to the principal, in addition to other fees?
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