2Overview of Presentation: 2EB-5: The BasicsIndividuals who might consider EB-5Direct vs. Regional CenterRegional Center EntitiesHow to create a Regional Center
3EB-5 : The Basics Congress created EB-5 category in 1990 10,000 green cards available each year in this preferenceTwo types of EB-5 cases: Direct and regional centers (RCs)90-95% of EB-5 petitions now through RCsI-829s: filed months after investor gets conditional resident statusI-829 procedure generallyLegislative status of EB-5 program – extended to September 30, 2015 – sunset of pilot program – likely to be signed this week.November 3, 2011
4EB-5 Basic Requirements New commercial enterprise (created after November 29, 1990)Must “benefit the U.S. economy”Must create at least 10 full-time jobsMust invest $1 million, or $500,000 if targeted employment area (TEA) (rural or high unemployment)Procedure: File I-526 (invest/actively in the process of investing), then I-485/CP for CPR. Within 90 days of 2 yr anniversary, file I-829.November 3, 2011
5Individuals Who Should Consider EB-5 Parent who wants the children to go to school in the U.S.Investors from non-treaty countries and E-2 investors who don’t qualify for regular EB-5 or age out child.RetireesPotential L-1 applicants who are nationals of China or RussiaEntrepreneurs who want to set up a new business in the United States that will not create 10 jobsF-1 student who wants to start a businessNovember 3, 2011
6Individuals Who Should Consider EB-5 6Spouse of permanent residentCEO/manager of a company who is not an L-1A transfereeForeign nationals in a multiple-year immigrant quota waiting listIndividual owner of a business outside of the United States who doesn’t qualify for an L-1H-1B nearing six year limitPotential H-1B shut out by quotaNovember 3, 20116
7Difference between Direct EB-5 and Regional Center EB-5? 7Difference between Direct EB-5 and Regional Center EB-5?
8Individual EB-5 Investor buys business or starts new business 8Investor buys business or starts new businessMust be 10 direct employeesFew applications
9Regional Center EB-5 What is a regional center? 9What is a regional center?Over 95% of all applicationsHuge increase in past 3 years (over 242 approved)Main advantage =Indirect employment counts
10What are Regional Center EB-5 Entities? 10What are Regional Center EB-5 Entities?
11Regional Center Entity 11Apply to USCIS for designation approvalOngoing administration and compliance responsibilitiesMarkets projects for investorsDue diligence regarding investors’ source of fundsPrepares I-526 and I-829 packagesRon
12How to create a regional center? 12How to create a regional center?
13Form I-924 Application Considerations and Costs 13Professional feesGovernment filing fees for I $6,230Regional center recoupment of costs through charges to investorsRegional center charges to project promotersMOU for Affiliated Projects Financing costsSource of Funds reviewBanking & Escrow costs
14When is money available to developer? 14Investor must invest 100% (usually $500,000) before I-526 filedMoney can goTo project immediately – if so TEA designation made at this timeTo escrowReleased when investor’s I-526 is approved
15How much Capital can be raised? 15Depends on job creationEconomist report projects job creationDivide by 10 = maximum number of investorsMultiply by $500,000 = maximum capital raise
16Investment Must Be “At Risk” 16Guaranteed redemption disallowedWhat is allowed?Third party insuranceHow does it work?Does it violate “at risk” provisions?Ron
17EB-5 Securities & Corporate Legal Considerations 17ARREA National ConferenceLas Vegas – September 25, 2012Presented by:Jor Law, Esq.
18Biography - JorHomeier & Law, P.C. is a law firm devoted exclusively to corporate and business transactional law, including securities, for clients ranging from established and publicly traded companies, to startup businesses and entrepreneurs in a wide range of industries. The firm’s practice includes finance, secured lending, mergers and acquisitions, licensing, securities, venture capital, new media, technology, e-commerce, and other general transactions. Homeier & Law, P.C., is a leader in EB-5 related corporate and securities transactions, and represents a number of regional centers as well as private EB-5 clients.Jor Law is a founding shareholder of Homeier & Law, P.C. As part of his regular corporate and securities practice, Jor routinely advises on EB-5 related transactions. In that capacity, Jor represents both investors looking to invest through the EB-5 program as well as businesses seeking capital through the EB-5 program including through regional centers. Jor frequently presents at EB-5 industry events, including those held by the American Immigration Lawyers Association, State Bar of California, and Los Angeles County Bar Association. Jor received his J.D. from Columbia University and his B.A. from UC Berkeley. Jor is a member of the California and New York State Bars. In December 2008, Mr. Law was named a "Best Lawyer" by LegalForce. For three years in a row, in each of 2009, 2010, and 2011, Jor was recognized by Super Lawyers magazine as one of “Southern California’s Super Lawyers – Rising Stars,” placing him among the top 2.5 percent of the best up-and-coming attorneys in Southern California who are 40 years old or younger, or who have been practicing for 10 years or less.
19Disclaimer19This presentation is designed to provide practical and useful information on the subject matter covered. However, it is provided with the understanding that no legal, tax, accounting, or other professional services are being rendered or provided. If legal advice or other expert assistance is required, the services of a competent professional should be sought.
20Structuring: Equity or Loan or Equity & Loan Model? 20General Partner (usually the Regional Center)Capital Raising Entity & Project CompanyGeneral Partner (usually RC)Capital Raising EntityProject CompanyInvestorInvestorInvestorInvestorInvestorInvestor
21Common EB-5 Documents Consents, restrictions, etc. Due Diligence 21Consents, restrictions, etc.Due DiligenceLOIs vs Term sheetsEquity vs Loan AgreementsGuarantees & Security AgreementsSubordinationCall/putSide lettersLeases / Management Agreements, etc.Consulting AgreementsJoint VentureResolutions & Corp Housekeeping
23How does EB-5 involve securities law? 23It’s just like a domestic money raise:Financing secured from passive investors+Success dependent on management by others=A security
24Objectives of the Securities Laws 24Two goals of Securities Lawsadequate disclosure (tell the truth)prevent fraud (don’t lie)Means to goal – registration and/or disclosureLawsSecurities Act of 1933 – main (“primary transactions” by issuer)Exchange Act of 1934 – for “secondary transactions” (resales by shareholders)Blue SkyForeignDon’t forget… the 1940 Acts [ ICA… IAA ]
25Securities law requirements 25The offering of a security must be registered or exemptRegistration – IPO; expensive (time and $)Exemption – must fit within, or lostPrimary FEDERAL exemptions: Reg D and Reg SExample requirements:Private offering (Reg D)Non-U.S. persons (Reg S)Don’t forget STATE exemptionsDon’t forget exemptions for large complex raisesInvestment Company Act: < 100 s/h … “qualified purchasers”Section 12(g) Exchange Act: < 500 s/h [JOBS = now 2,000!]* Need to tread carefully – i’s & t’s – CAN be done
26Finders Broker-dealers –vs- Finders Finders do not 26Broker-dealers –vs- FindersBroker-dealers are usually finders;Not all finders are broker-dealersFinders do notSolicit investorsParticipate in securities offeringRegularly introduce investorsReceive compensation based on successFinder issues – extremely fact specific so case-by-case
27Three stages when securities docs are needed 27Generic doc set – accompany Regional Center application filing with USCISMost general, least specific – still needs to address anticipated project typesOffering doc set – used to solicit investorsMost detailed - disclose all specific terms of actual project being soldExemplar doc set – for USCIS to use as template for measuring all I-526sBIG marketing plus – offering pre-approvedCaution: no material changes after submission to USCIS or start review anew
28The Team Team worries about details – YOU focus on Big Picture 28“Same old, same old” – done domestically all the timeThis is a securities offering – SEC compliance requiredSame as typical U.S. domestic equity raise – Reg D (+ Reg S)Need a team to prepare all parts of the offering:Business plan – plan writerJob creation report – economistSecurities offering documents – securities counsel (H&L does)Transaction documents (debt/equity) – business lawyer (H&L does)Entity formation(LPs, LLCs) – corporate lawyer (H&L does)Financial pro forma projections – reviewed by CPAsMarketing: foreign broker introductions – U.S.-based EB-5 consultantTeam worries about details – YOU focus on Big Picture
29Contact29Michael G. Homeier, Esq. – (818) (direct);Jor Law, Esq. – (818) (direct);Clem Turner, Esq. - (646) (direct);Vanessa Au, Esq. – (818) (direct);Corporate Law Securities Law Business Transactions – EB-5
30What other options exist for raising capital under the EB-5 program? 30Having project “adopted” by certified regional centerPurchasing already certified regional center – caution as to geographic scope & industry typePooled investment with individual EB-5 petitionsTroubled businesses – credit for preserving jobsLaura to ask Ron
31How does the developer find investors? 31Where are investors?Personal contacts?Brokers overseas?
32Role of immigration counsel 32Advising developers of optionsPutting together team of professionalsReviewing documents for immigration complianceFiling regional center applicationPreparing and filing application for project preapprovalFiling EB-5 petitions for investors
33Due Diligence SERVICES EB-5 Funding &Due Diligence SERVICESProposal Prepared Exclusively For:2012 AREAA National Convention in Las Vegas, NevadaSerious Resources.Serious commitment.September 25, 2012Member, FINRA/SIPC
34A FINRA Registered Broker-Dealer Our resources and commitment have earned us a role as a market leader in providing investment banking and corporate advisory services to both leading and emerging financial institutions and businesses.Our professionals possess significant experience in nearly all facets of business transactions including debt & equity capital placements, mergers and acquisitions (over 90 M & A transactions over the past 20 years), recapitalizations and accounting and due diligence analysis.Clients in our Creditor Advisory practice include most of the nation’s top financial institutions and we have performed in excess of 2,700 engagements on their behalf.During 2011:LCG performed over 550 engagements for more than 55 different financial institutions.LCG and its affiliates assisted 45 businesses in successfully navigating the current economic environment, including financings, mergers and acquisitions, and restructurings.34
35Lender’s Consulting Group Lender’s Consulting Group provides independent due diligence and transaction support services to the financial services industry. Our professionals have extensive experience in credit underwriting, auditing, public accounting, workout management, business operations and account management. Our specialized experience provides lenders and investors with additional insight into transaction risks that cannot be provided by most other accounting and audit firms.Field ExaminationsSurvey ExamsRecurring ExamsLender Due DiligenceCredit and Operations ReviewsBank Acquisition Due DiligenceValuation ServicesPortfolio ValuationBusiness ValuationQuality of EarningsAnalysis of Historical Revenue Trends and SustainabilityAnalysis of Recurring vs. Non-recurring ExpensesAnalysis of Cash Flow Projections35
36Bridging the Abyss between Lenders and Borrowers A sampling of our institutional clients:36
37LCG Capital AdvisorsLCG Capital provides a broad range of investment banking and advisory services for its clients. A FINRA registered broker-dealer and SIPC member firm, which provides advisory services related to corporate mergers, acquisitions and divestitures, recapitalizations, equity placements and certain other advisory and investment banking services..Debt and Equity PlacementDebt Offerings and RefinancingEquity OfferingsCapital Structure StrategiesM&A AdvisorySell Side and Buy SideManagement BuyoutsDebtor AdvisoryRestructuring and PlanningWorking Capital ManagementPre-Bankruptcy Planning37
38Our TeamMike Xenick - Managing Partner Years of Experience: 22 Expertise: EB5 Advisory, Private Equity, Mergers & Acquisitions Previous Employers: Atlantic American Capital Advisors, Communications Equity Associates, Ernst & Young Education: Masters and Bachelors in Accounting - University of FloridaBrian Smith - Managing Partner Years of Experience: 18 Expertise: Corporate Finance, Commercial Credit, Structured Finance Previous Employers: Textron Financial Corp, Health Capital Education: Bachelors in Finance and Economics - University of TampaPaul Epstein - Managing Partner Years of Experience: 18 Expertise: Commercial Credit, Underwriting, Due Diligence Previous Employers: CitiFactors Financial, Healthcare Financial Services Education: Bachelors in Finance - University of Tampa38
39Our TeamChristopher Pizzo - Managing Director Years of Experience: 21 Expertise: Corporate Finance, Mergers & Acquisitions, Restructuring & Turnaround Previous Employers: Ernst & Young, The Knot, Vested Capital Partners Education: MBA in Finance - NYU, Bachelors in Accounting - SUNY AlbanyMaryJane Wermuth – Associate Years of Experience: 5 Expertise: Corporate Finance, Mergers & Acquisitions, Restructuring & TurnaroundPrevious Employers: Merrill Lynch, Gulfcoast Business Finance, Inc. Education: MBA in Finance – University of TampaJessica Lister – Analyst & Project Manager Years of Experience: 2 Expertise: EB-5 AdvisoryPrevious Employers: American Land Lease Education: Bachelors in Finance – University of South Florida39
40EB-5 Funding Advisory Services Practice LCG provides a broad range of advisory and support services to companies and individuals involved in U.S. immigrant investor programs, including the Immigrant Investor Pilot Program (“EB-5 Program”). Our clients include:USCIS-approved EB-5 Regional CentersRegional Center applicants, affiliated project developersRegistered foreign and U.S. securities representativesWe are trusted advisors to the principals and senior executives of these entities in their efforts to access U.S. and international capital markets to successfully and safely fund their project offerings.As a broker-dealer registered with the SEC and FINRA, LCG’s process ensures the entire transaction is completed in compliance with U.S. securities laws and guidelines, especially transaction solicitation and payment of agent referral fees.40
41EB-5 Program Advisory Services Practice FINRA Compliant Placement AgentCompliance with U.S. Securities LawsSolicitationInvestor SuitabilityPayment of referral feesReview, Analysis & Preparation of Project Transaction and Subscription DocumentsAccess to LCG’s secure virtual data roomInvestor Intake and Related Compliance“Know your customer”Suitability/Accredited Investor formsCoordinate flow of investor capitalPayment of agent referral fees Regional Center Advisory & SupportDetailed Analysis of Prospective ProjectsDue Diligence and Market ResearchCapital Markets AssessmentsRisk Assessment and MitigationCertified Business Valuations & AppraisalsQuarterly Analysis of RC Project Portfolio41
42EB-5 Funding Process The LCG & USAdvisors EB-5 Program Process The Initial EvaluationPreparation for the Proposed TransactionMarketing the TransactionPrivate PlacementClosing the TransactionThe LCG & USAdvisors EB-5 Program Process42
43EB-5 Funding Process Access to project information EVALUATIONPREPARATIONMARKETINGPLACEMENTAccess to project informationEvaluate and analyze business plan, pro forma financials, business caseAssess management team/project ownersOther detailed due diligence – project and EB-5 Program in conjunction with USAdvisorsMove forward with accepted projectsCLOSINGAgree on processDevelop process timelineAssist with prep or review of PPMAssist with or review marketing materialsSet up initial data roomInitial investor target list through proprietary referral networkPrepare & coach project management on processListing of project on EB5Info.comContact referral networkDistribute 1-page project description to interested partiesEvaluate suitability of interested investorsDisseminate PPM and other marketing information to suitable investorsDisseminate support information and answer questionsAssemble remaining due diligence data roomFacilitate completion and submission of subscription docsFacilitate transfer of Admin Fee and investment into escrowAssist investor counsel with I-526 prepCommunicate project progress and updates to investors during I-526 approval processClosing43
44LCG’s EB-5 Funding Advisory Services Practice We offer safety, security and risk mitigation to the project owner/developer and Regional CenterEB-5 Private Equity PlacementsSolicitation and Funding of Private Equity & Debt CapitalAccess to Foreign EB-5 Investors via LCG’s Proprietary Global Referral NetworkU.S. Debt and Equity PlacementsStructuring of Entire Capital StackAccess to U.S. Debt & Equity Capital via LCG’s Proprietary U.S. Lender DatabaseUnderwriting Services/Collateral AnalysisRegistered U.S. Securities Representatives (“Agents”)Assist with Initial & Ongoing Securities Registrations and ComplianceAccess to High Quality Projects for PlacementWe work with U.S. based real estate agents (AREAA members) to add to our network as registered reps, providing new commission opportunities44
45Contact InformationTampa HeadquartersFifth Third Center201 E. Kennedy BlvdSuite 325Tampa, FL 33602Phone: (813)Mike Xenick, Jessica Lister,Web:New York • Chicago • Houston • Dallas • Boston • Atlanta • Miami • Indianapolis • Los AngelesLCG is a trade name for LCG Capital Holdings, LLC and its subsidiaries and affiliates which include: LCG Capital Group, LLC, a Florida limited liability company, which provides debt placement, commercial real estate financing, loan portfolio divestitures, and certain other financial advisory services; LCG Advisory Services, Inc., a Florida corporation, which provides strategic advisory, light turnaround and distressed consulting, restructuring advisory, accounting support, interim CFO/controller services, and other corporate consulting services; and LCG Capital Advisors, LLC, a Florida limited liability company and a FINRA registered broker-dealer and SIPC member firm, which provides investment banking, private placement and merger, acquisition and divestiture advisory services.Serious Resources.Serious commitment.45