Regional Center investment models
There are two different models Regional Centers use to structure their projects and it is important to understand the differences. When an EB5 visas program investor decides to participate in a project through an approved Regional Center, they must take the time to evaluate each regional center and review the legal arrangement.
It is critical to understand that each regional center is different and the value we provide is in helping investors evaluate each as an option. This section highlights the common practices and does not guarantee all regional centers work in these arrangements.
The equity model refers to projects that take ownership in the property or the business itself. When a new project is formed, EB-5 visa investors form a limited partnerhsip with the regional center. The invested funds are used to obtain and develop property to invest in a startup business. Usually these projects involve land and commercial developments.
The investors are limited partners and have ownership shares in the project. The exit strategy for this project is initiated when the majority of partners elect to disolve the partnership. However, if the investors decide not to disolve, the shares can sometimes be sold on the open market to a 3rd party buyer.
The Loan Model gets its name from the fact that the invested funds are loaned to a borrower for development or spending in an EB5 visa project. In this model, investors and the regional center create a limited partnership that loans money to a borrower. This borrower can be a private party or it can also be a public organization or city.
The exit plan under this model is executed when the loan reaches its maturity date. The maturity date is set after five years from initiation and in some instances, repayment can be early if all investors have received their permanent green cards.
Not all agreements are equal
Just like not all EB-5 regional centers are the same, the projects and their agreements can differ substantially. This is why it is critical to review the partnership agreements, exit strategies, and the businesses to make sure it is the right project and a fair agreement.