EB-5 Investors Want 4 Things
Our experience with EB-5 investors has confirmed that EB-5 investors have four priorities:
- The Green Card;
- Investment Security;
- A Fair Rate of Return; and
- Return of the $500,000.
For each of these priorities AAOF has structured unique and superior features to provide value to investors.
1. The Green Card
There is only one way to secure permanent residency through the EB-5 Investor Visa Program – the Creation of Jobs.
AAOF will only invest in opportunities that create an abundance of jobs. We are targeting investments that create at least 20 jobs per investor. This is being accomplished through the use of outside capital, such as bank loans, other investment funds such as one of our sister funds, as well as U.S. Government sponsored financing such as New Markets Tax Credits, Renewable Energy Tax Credits, Recovery Zone Bonds and Housing and Urban Development (HUD) financing.
By co-investing with non EB-5 capital sources, AAOF can invest in larger projects that create an abundance of jobs (such as assisted living facilities, large grocery-anchored shopping centers and medical office space). EB-5 investors will also have piece of mind knowing that the projects will be completed because AAOF will not commit to an investment until all the funding necessary to complete it are in place.
Our History of Job Creation
Atlantic American has been successfully investing and creating jobs in Florida for many years. Between 2004 and 2008, on behalf of our U.S. institutional clients, we invested $46.5 million of investor capital in Florida’s TEAs resulting in the creation of almost 4,000 jobs. This would be the equivalent of 42 jobs per $500,000, or one EB-5 investor.
2. Investment Security
Investors do not want to be subject to unnecessary risks that could jeopardize the return of their hard earned money. The key to reducing the risk of losing money is diversification. AAOF’s investment strategy is based on the basic fundamentals of diversification. Not only will AAOF invest in numerous projects (versus making one single investment), but it will invest in different types of projects and businesses, in diverse geographies throughout Florida, and in different, collateralized, secure forms.
For USCIS purposes, each EB-5 investment will be auditable into one specific portfolio investment, however, the investor owns a pro-rata percentage of AAOF which owns the entire portfolio, therefore minimizing the risk of loss of the investment.
AAOF will make secured loans and investments in real estate development projects as well as businesses in diverse industries. This could include businesses engaged in healthcare, manufacturing, distribution, retail, recycling, and business services; as well as real estate development projects such as grocery-anchored shopping centers, assisted living facilities, in-line retail, educational facilities, and office buildings.
Projects will be spread throughout the entire state of Florida, taking advantage of economic trends that take place in specific regions of the state. In addition, investments will take different forms, depending on our analysis of the project’s proposed capital structure, with a preference for senior loans secured by collateral.
3. A Fair Rate of Return
Most Regional Center investment options provide very little upside for the EB-5 investor. Many even “cap” the amount an investor can earn at 4% or even as low as 1%. As professional money managers, we believe this is extremely unfair to the EB-5 investor. AAOF has structured its return on investment more like a traditional investment fund through a profit sharing approach which puts the investor first.
The mangers of the Fund charge a typical 2.5% management fee (only out of profits) which pays for operating and administrative expenses associated with finding, negotiating, structuring and monitoring the investments.
- Investors will then receive up to 5% annually (paid at the end of each calendar quarter, if earned), as a preferred return on investment.
- The General Partner then receives 5% annually to catch up to the investors. (If the investors do not first receive their entire preferred 5%, the General Partner does not receive any profits.)
- Following the catch up by the General Partner, any additional profits are split 50/50 between the investors and the General Partner.
AAOF believes that this approach is more favorable than those of other Regional Center investment returns, aligns the interests of the EB-5 investor and our General Partner and provides for a better opportunity to create profitability for investors.
4. Return of $500,000
One common problem of EB-5 investing through a Regional Center is a timely return of the initial investment capital, also known as an exit strategy. Regional Center investments are typically structured to be “at risk” for five years, but can get held up for much longer, with no clear exit strategy for the EB-5 investor.
Many of the investments that the Fund makes will include a defined maturity date, requiring that loans be repaid in 5 years. In addition, the Fund’s operating agreement includes a “sunset” provision, which requires all investments to begin liquidation after the 5 year “at risk” period. This gives the investor comfort knowing there is a planned mechanism for the return of the original investment. Once the EB-5 investors have received their removal of conditions, (usually in 2.5 to 3 years) the Fund will begin opportunistic sales and refinance of the portfolio to provide liquidity to EB-5 investors.