EB 5 Lending vs CRE Bank Lending
I was wondering if anyone could help me weigh the pros and cons of joining a smaller CRE firm that does Asset Management and Underwriting (mostly EB-5 lending and some development) vs. working as a CRE Banker/Underwriter at a larger Bank. What would be the differences in exit options & future opportunities if I were to join the CRE firm?
The EB-5 firm does mezz and senior secured lending and is also a Developer on a few projects. However, this would be a more junior position. Bank offers a more senior role but I have a banking background so it's more of the same. All-in compensation is slightly better with the smaller firm, but Bank obviously has lesser bonus and the RE firm has more of a bonus component.
What market?
Both firms lend across all markets in the US but they are located in SoCal. Bank position will likely have more local projects. CRE firm does mostly construction but larger mixed-use projects that have may multifamily, hotel, a retail component or even condo development etc. These projects are usually located in top markets in the US (SF/Boston/LA/NY) CRE lending position lends to all property types but mostly industrial and multifamily (=$50MM)
Which EB-5 firm in SoCal? PM me if you'd prefer.
I thought EB-5 funding was equity. Is this not the case?
There are two models, the equity model and the debt model. They do both.
I thought EB-5 was dissolved recently. Does the program still exist?
Yes, the program still exists but not sure of how easy it is now, to get a EB-5 deal done.
Closing EB5 deals is a nightmare right now. We turn down almost all deals with EB5 at this point and we're brokers lol.
So here's my opinion after having worked with one of the largest EB5 players on a large SoCal development deal. They are here today gone tomorrow. EB5 is still the Wild West.
Basically there was a significant pullback of money flowing out of China to the US for the purpose of real estate. This a affected EB5 and lower level buyers too. My buddy had a Chinese guy buying a couple Dollar Generals a year for about $2mil each...money dried up quick.
My EB5 source one day just stopped calling me back and they're huge. And yes they do Mezz too. They're out of the greater LA market so I'm wondering if it's the same shop.
There is an institutional CRE firm in East Orange county that is ran by American born Chinese with deep ties to Chine. CEO and I are just LinkedIn buddies but have exchanged emails more than a few times. Summer of last year he confirmed what I'm writing about now...That larger EB5 money ($20mil and up lets say) has dried up.
Have things changed? I don't know cause I'm done with EB5. I know a midmarket PE firm in the Bay that is done with EB5 too.
Now, if you're working with a division of Related Companies who does EB5 or something similar, things could be different, I don't know.
Proceed with caution with EB5.
Thank you so much. I am going weigh this heavily considering I have another option too. I spoke to a buddy from B-school and he said that EB-5 being a govt program makes it very vulnerable to Chinese and US policies and that is why he would be hesitant too. A CRE lending position would be more secure/stable at the moment especially in comparison to the headwinds that EB-5 is facing.
i'll second this opinion of eb-5. the whole idea of eb-5 is that it only works if you employ a certain number of people, so it basically has to be new development or heavy redevelopment. but there are lots of other requirements too.
my experience is that only a small percentage of the deals that on the surface look like they will qualify actually do, and even then the closing percentage is extremely low.
but i also think it has to do with what's going on here. there are a lot of intermediaries here and b/c of that, the effects of over-optimism and over-promising are kindof magnified, not to mention it makes it harder to pencil out b/c of all the fees.
so you get this thing where there's an individual in another country, who then invests through a wealth manager in that country, who connects via an eb-5 intermediary in that country to an eb-5 intermediary in the US, who then tries to place capital with a fund, that is subsequently trying to place debt or equity on a specific project with a developer who is courting a lot of other people.
that is a lot of layers. and developers have a hard enough time raising capital when it's from their buddies at the country club let alone someone on the other side of the world through a chain of different people they don't know, and who each take a cut.
i think it just turns into a royal PITA, especially when capital is so easy to come by in the US right now. equity investors are all but throwing themselves at deals, so to make these things work i think they have to be really big and you gotta figure out how to remove at least a couple of the intermediaries.
i have seen a group in houston that has done some deals - https://www.houstoneb5.com/</a">www.houstoneb5.com
Just to add a little color, we're also seeing a secondary market of EB-5 money because in some cases, the EB-5 deals are maturing before the 5 years and the Chinese don't want their money out. So there's an opportunity to re-place the EB-5 money in another deal, which has pretty much no requirements (other than typical coverage ratio requirements). It really is pretty cheap mezz/pref money.
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