“Hiring Professional Money Managers to Lower and Diversify Project Risk Should be a Must for Investors”

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“Hiring Professional Money Managers to Lower and Diversify Project Risk Should be a Must for Investors”

RCBJ October

by Abteen Vaziri, Managing Director, Brevet Capital Management 

One of the first questions that EB-5 investors are coached into asking regional center operators is whether the project operator has any I-526 approvals, I-829 approvals, or any project paybacks. These lines of questioning are somewhat unfair, and their answers are potentially misleading given that many newer regional centers have not been around long enough to have reached the point of I-829 approvals, and hence project paybacks. For most EB-5 investors, the most important criteria in evaluating an EB-5 investment is approval of their I-526 petition and ultimately securing conditional and permanent residency for themselves and their families. The second criteria is the likelihood of receiving a return of their capital. While investors seek out and hire the top immigration attorneys and select projects with a past history of I-526 and I-829 approval in order to maximize the likelihood of securing the first objective, the majority of investors seek little to no outside counsel in evaluating the second. Selecting a project with an exemplar petition approval record and hiring a competent attorney only decreases the risk of not attaining the first criteria, but does nothing for the second criteria. Why are investors not hiring professional money managers to manage their EB-5 real estate investors? Why is there not enough emphasis on this point by the industry? Securing both permanent residency and a return of investors’ funds should be the goal for all EB-5 investors. In addition to evaluating project performance and hiring top immigration attorneys, investors should be as focused on hiring professional money managers to oversee investment strategy in order to achieve the best results from EB-5 investment.

Today there are more than 1,100 regional centers, and less than 10% of them existed even 5-7 years ago. Given that the EB-5 project cycle can often take 8 years or more, the vast majority of them have not had enough time in the business to have completed an entire cycle. One look at the statistics posted by the United States Citizenship and Immigration Services (USCIS) for fiscal year 2017 shows that roughly 89% of all the I-526 applications and close to 80% of all I-829 applications adjudicated in that year were approved. Those percentages are fairly good. And while many agents in China and elsewhere focus on these approval ratings as if they are some sort of stamp of approval on a project’s viability, the truth is that the USCIS is not approving EB-5 projects based on their viability as projects or the ability of the projects to pay back investors. At the I-526 stage the USCIS is looking at the projects to evaluate if they meet the very broad statutory requirements for approval of the immigrant petition.

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January 31st, 2019|Categories: Financial Services, Research / Analysis|

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