By Jim Butler and the Global Hospitality Group® Hotel Lawyers | Author of www.HotelLawBlog.com
20 December 2016
On December 9, 2016, President Obama signed the “Continuing Resolution” passed by Congress to extend funding of the federal government until April 28, 2017, by which time it is expected that Congress will have approved a budget for the full fiscal year.
EB-5 Regional Center program also extended to April 28, 2017
As with several prior budget extensions, the Continuing Resolution included an extension of the EB-5 program’s Regional Center provisions, validating expectations of industry experts.
This means that developers who followed our advice to “get in line” with their projects last fall (when some concerns over EB-5 renewal were raised) have either raised their EB-5 capital by now or should have plenty of time to do so before the current extension signed by President Obama runs out next April.
Why NOW may be the best time for developers to start EB-5 financing
Developers who followed our advice last fall have been well served. On August 16, 2016, we published a blog article entitled “Why NOW may be the best time for developers to start EB-5 financing.” We feel the same way today.
In our earlier article, we warned that there is always some uncertainty in predicting what Congress will do. However, all people that we know who are knowledgeable about the EB-5 program and the political environment believe that EB-5 will be renewed and continued in a viable form. Some developers are uncomfortable with the uncertainty created by short-term legislative sunsets on the extensions, and on accepting predictions that Congress will continue the program we have maintained since 1992 — almost 25 years. These developers want to wait until everything has settled down and has more certainty.
We believe the “wait and see” approach is a mistake for many developers — particularly those who are ready to start construction now. Here is why:
- Nominal cost. The cost is relatively nominal to clear certain preliminary hurdles, to evaluate availability of EB-5 financing, identify a regional center funding source, and even negotiate a preliminary term sheet. The small cost of completing these preliminaries early should be greatly outweighed by the benefits.
- Be at the front of the line. If you have a project that is ready to start construction (or very close), you want to be at the head of the wave of new EB-5 projects coming into the pipeline for marketing to immigrant investors. You want to identify and sign up the best regional center you can get to optimize the size, cost, timing and certainty of your EB-5 capital.
- Avoid the traffic jam. The early bird will tie up the best lenders and terms. The top regional centers have good capacity, but we expect their bandwidth to be filled quickly after the final EB-5 legislation is adopted as many hundreds of developers create a massive traffic jam on the road to EB-5 funding.
Given the timing of U.S. holidays and the Chinese New Year, the strategy of starting now on EB-5 financing might mean that you can close your EB-5 funding many months earlier than with the “wait and see strategy.”
What should you do now?
We may not know all the details of how this will turn out, but the odds are overwhelming that the EB-5 program will be continued in a viable form. EB-5 is an important and proven source of new development financing that creates new U.S. jobs.
Developers who want to take advantage of EB-5 funding should get started now (at least with evaluation). We have a lot of practical experience in helping our developer clients raise EB-5 funding. As of now, our JMBM EB-5 Financing group has closed more than $1 billion of EB-5 financing for our clients, and sourced more than $700 million for their projects.
If you would like some help to evaluate whether EB-5 could work for you, or what strategy is best for you, then give us a call. There is no cost for an initial discussion.
Jim Butler, +1-310-201-3526 or jbutler@jmbm.com
David Sudeck, +1-310-201-3518 or dsudeck@jmbm.com
Other articles on EB-5 Financing
To access our rich library of articles on EB-5 financing, go to www.HotelLawyer.com, scroll down the right-hand side under LEARN MORE ABOUT and click on “EB-5 Financing.” For your convenience, here are a few popular EB-5 articles that may be of interest:
JMBM has sourced more than $700 million of EB-5 financing for new development projects
FAQs about EB-5 project financing for new hotel development
Hotel development & EB-5 financing: Why you don’t want to form your own regional center
This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. Why don’t you give us a call (or send an email) and let us know what you’re working on? We would like to see if our experience might help you create value or avoid unnecessary pitfalls. Who’s your hotel lawyer?
Our Perspective. We represent hotel owners, developers and investors. We have helped our clients find business and legal solutions for more than $71 billion of hotel transactions. As of June 30, 2016, we have closed more than $1 billion of EB-5 financing for our clients, and sourced more than $700 million for their projects.
As a client, our unparalleled experience means that you get:
- better, faster, more cost-effective results
- greater certainty of execution while avoiding costly missteps or missed opportunities
- added credibility from our experience and reputation
- greater confidence that you will get the best deal possible
If you would like chat about how we might help you achieve your hotel goals–with EB-5 financing or otherwise– please contact Jim Butler. And of course, there is no charge for our initial discussion.
