By Jim Butler and the Global Hospitality Group® Hotel Lawyers | Authors of www.HotelLawBlog.com
29 July 2017
EB-5 is a proven means of financing for development projects.
EB-5 financing is an important and viable source of construction financing for hotels, hotel enhanced mixed-use, and other development projects. Eight years ago, when JMBM started helping hotel developers with EB-5 financing, many worried about whether this is a legitimate and reliable financing source.
Now, after billions of dollars of development have been funded with EB-5, this type of financing is regarded as mainstream. It is used by many institutional players, including government entities such as port authorities, major hotel brands like Marriott and Hilton, and some of America’s most successful and respected companies, such as Great Wolf Resorts, the Related Companies and Silverstein Properties.
As an active source of EB-5 funding for select developers, JMBM’s Global Hospitality Group® team has been busy too. We caught up with Jim Butler and David Sudeck for an update on recent developments in this area as summarized in the Q & A below.
Q: How much EB-5 financing has JMBM provided to its clients?
By mid-2017, the JMBM Team has closed more than $1.5 billion in EB-5 financing for our clients’ development projects, and we sourced more than half of that amount.
Over the last 8 years, we have worked on more than 100 EB-5 projects, primarily representing developers in securing and closing their EB-5 financing projects all over the country; this includes high profile locations in California, Florida, New York, and Texas, but also in more bread-and-butter locations including Georgia, Nebraska and Maryland.
Q: That is more than $1.5 billion in EB-5 financings closed and more than half of that sourced by JMBM. What do you mean by “sourced”?
The “sourcing” is a process. What we do depends on the client. Typically, we help the client position and structure itself and the project for optimal EB-5 financing — presenting the best profile to get the fastest and most certain funding of the largest amount feasible. It includes identifying and introducing our client to one or more appropriate funding sources, negotiating a term sheet, and taking the deal through to funding.
Q: Who is the ideal client for JMBM in EB-5 financing?
We are looking for quality, not quantity. We only want to work with a small number of top developers — great developers with superior track records and solid projects. We do not accept any engagement to work on an EB-5 project unless we believe there is a very great probability that we can close the deal. We still have a 100% track record of success.
Q: How much money can you help source for a project?
Most of the financings we have arranged to date have been in a sweet spot ranging from $20 million to $125 million. But we are working with lenders who can do some smaller deals–closing one recently in the $10 million range, and we closed one project for more than $450 million.
Of course, there are other critical factors in sizing the EB-5 financing. For example, the total loan-to-cost ratio generally should not be more than 80% to 85%, and the EB-5 loan should not be more than 25% to 35% of total project costs. But there is a big range of projects we work on.
We have closed five EB-5 financings for one client! After the first closing, subsequent financings tend to be much faster and more efficient.
How to get help evaluating and executing on EB-5 financing.
We have a lot of practical experience in helping our developer clients raise EB-5 funding. 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
For more information about EB-5 financing, including the latest updates, go to www.HotelLawBlog.com, scroll down the right-hand side under LEARN MORE ABOUT and click on “EB-5 Financing” where you will find all the articles on the subject.
For your convenience, here are a few popular EB-5 articles that may be of interest:
EB-5 extended without change: President Donald Trump signs bill FAQs: Essentials of EB-5 construction financing for developers EB-5 construction financing term sheet for top developers” JMBM has closed more than $1.5 billion of EB-5 financing for development projects Are hotels still the darling of EB-5 financing? The 5 questions every developer is asking about EB-5 financing Tips to avoid the 6 most common mistakes developers make with EB-5 Why you do NOT want to form your own regional center How JMBM helps developers with EB-5 financing?
This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. Please contact us if you would like to discuss any issues that affect your hotel interests or see how our experience might help you create value and avoid unnecessary pitfalls. Who’s your hotel lawyer?
