EB5’s 6.EB5 Risk Warning

The EB5 investment immigration project essentially provides financing channels for high-risk private financing projects that banks refuse to provide loans and American investors refuse to invest. Since no official green card was obtained in the end, only Chinese investors who did not know the inside story participated. No one in Europe and developed countries has participated in this type of project. According to U.S. federal statistics in 2013, 46.8% of projects approved for loans by U.S. banks became insolvent within three years. These EB5 projects that even banks and U.S. investors are unwilling to lend to are unfinished.

The U.S. Federal Immigration and Immigration Service (USCIS) passed a new policy memorandum on May 30, 2013. The biggest impact on EB5 investment immigration includes the following key points. The first is the hidden danger of working location calculation for loan-type EB5 projects. Secondly, a large number of construction jobs are no longer included in the calculation of work location. In addition, the Immigration Bureau has clearly stipulated that EB5 projects that mainly focus on renting or selling real estate cannot meet the work location requirements. Even if investors participating in such projects have obtained a temporary green card (I-526), ??their official green card (I-829) will not be issued in the future. Rejected at final trial.

1. Risks of loan bond projects

The risks of EB-5 bonds and loan projects are far higher than those of ordinary investment projects. For EB5 investors, they face the risk of their green cards being blocked. The double highest risk of rejection and capital triangle debt, the application for formal green card I-829 was rejected for the following reasons:

1. Layers of loans into multi-corner debt, EB5 green card and repayment are not guaranteed:

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EB-5 bonds and loan projects have a unique characteristic, that is, these projects appear to be powerful, with many participants, and are highly deceptive, causing EB5 investors to mistakenly underestimate the green card and be rejected. and the dual highest risks of capital triangle debt. The U.S. Federal Citizenship and Immigration Service (USCIS) has therefore specially regulated it.

The model of this type of loan is to transfer loans layer by layer, and the structure is more complicated than the domestic triangular debt. Since the company that received the investment funds did not directly participate in the project construction, it only on-lended the investment funds to one or more companies. After receiving the loans, these companies then carried out multi-level equity conversions, and each shareholder tried every means to misappropriate the loans. Become your own. In the end, a multi-faceted debt relationship emerged that was unclear and confusing. Whether it is an infrastructure project, building construction, community construction, etc., the specific part of the project that was built with EB-5 investment funds cannot be determined even in court. It will be even more difficult to pursue the money and file a lawsuit.

EB-5 bonds and loan projects are not mortgaged by real estate or other substantial assets. The project party with no creditworthiness only gives investors a guarantee contract as a guarantee. As long as one or several of the companies close down, Investors will be trapped in a typical triangular debt. The collection company and the payment company will blame each other. In addition to the unfinished project, the green card application will not be successful.

2. The Immigration Bureau cannot determine the number of people in the job position, resulting in the failure of the EB5 green card application:

The key indicator of the United States Immigration and Immigration Services (USCIS) when approving the EB5 investor’s green card is that it must be confirmed The investor actually created more than 10 jobs. The immigration law passed by the U.S. Congress has repeatedly emphasized that if the amount of the job position cannot be confirmed, the green card cannot be approved.

The Immigration Bureau is particularly strict in reviewing projects that use bonds and loan project financing. The main reason is that this loan model makes it impossible for the Immigration Bureau to clearly determine which jobs are created by EB5 investor loans. Many project parties use complex methods of substituting money to transfer money, and use complex funds to transfer loans to falsify and pad the job positions produced. This has aroused the high vigilance of the Immigration Bureau. Due to the complex structure of the multi-corner debt model, the Immigration Bureau has to invest a lot of manpower and material resources in analysis and judgment. As a result, all EB5 investors with bridge loans or mezzanine loans face extremely long review times and the final I-829 rejection of the green card.

3. Investors from the United States, Europe and other countries avoid loan projects:

Many American or European participants in loan projects are, without exception, unwilling to make loans without assets. A secured loan because the risk of the loan not being repaid is extremely high. Participants have set many participation terms, such as requiring other funds to be in place before investing, so that they can withdraw unscathed if the project situation changes slightly. EB-5 investors do not have the authority to understand these terms in depth. Once the EB-5 investment funds enter the project, they are often spent first as the project’s early operation and management fees.

As the project progresses, as long as one of the many participants withdraws, the entire project will abort like a domino. The guarantee letter held by EB-5 investors became a piece of paper in the multi-corner debt lawsuit. Since there is no specific asset mortgage, EB-5 investors have no right to require the sale of any assets to repay the loan. This is the reason why EB-5 bond and loan projects have a very high unfinished rate.

4. The job position of loan and bond EB5 projects is calculated as a green card deadlock

Loan EB5 projects attract money through loans, debts and bonds. The model misleads EB5 capital investment. Such projects are extremely risky and are considered unfinished by industry estimates. Only uninformed Chinese EB5 investors can contribute. The company that receives the investment money does not directly participate in the construction of the project, but only sub-lends the investment money to one or more companies. Since loan projects involve funds from different sources, EB5 investors’ funds are only part of the total investment, and there are also layers of on-lending. The complex multi-corner debt model makes it impossible for the Immigration Bureau to accurately identify the source of each job position. , if the job positions generated by other loans are applied to the investor’s green card application calculation, it is a clear violation of Section 203(b) of the U.S. Immigration Act (INA). In particular, it is common that project parties deliberately transfer funds to multiple parties and forge high-value job positions, which has prompted the Immigration Bureau to strictly review loan-type EB5 projects, resulting in investors’ official green card (I-829) approval rate. Very little. At that time, as long as one or several of the companies withdraw or close down, investors will be trapped in a typical triangle debt. The collection company and the payment company put the blame on each other, the project was unfinished, and there was no way to collect the debt. According to the results of the case report released by the Immigration Bureau in October 2013, these cases mainly came from New York and Los Angeles. The Immigration Bureau has begun strict inspection and review of all EB5 loan projects in these two areas. Such EB5 loan projects involve hotels, apartments, etc. The bigger the project, the more serious the problem of calculating the work location. Even if the temporary green card (I-526) has been approved, the transfer to the formal green card (I-829) will be delayed for a long time and eventually rejected. What is serious is that when project parties and intermediaries raise funds, they never disclose the truth to investors.

2. High risks in hotel apartment projects

1. EB5 hotel and apartment projects, the falsely inflated cost by three times resulted in the investor’s green card being revoked:

The primary review criterion for the U.S. Immigration Service (USCIS) to issue an EB5 permanent green card is to determine whether the EB5 investor has actually created 10 jobs.

When the Immigration Bureau investigated EB5-invested hotel and apartment projects in March 2012, it was found that the project parties generally inflated the project costs several times, making tens of millions of dollars, and the remaining construction costs could not be used. Produce enough working space. The project party calculated the economic model by inflating the cost by three times, forged and inflated the number of people in the workplace, and used fraudulent means to meet the Immigration Bureau's requirements for the number of people in the workplace. A completely different set of fake data was used when raising funds from investors. Project parties use a variety of completely different fake data at the same time to meet different review and financing needs.

Due to the extremely serious problem, the U.S. Federal Immigration Service passed a new policy memorandum on May 30, 2013, forming an anti-fraud investigation team specifically for hotel and apartment EB5 projects, and announced that all hotels and apartments Project construction costs and the number of people working at the location are thoroughly investigated and monitored. Once it is verified that there is an inflated project cost, the Immigration Bureau will reject the permanent green card (I-829) application of the EB5 project investor based on the provisions of the Immigration Law for not meeting the number of people in the job position. Green cards (I-526 or I-829) will also be tracked and canceled.

2. Make use of hotels and apartment brands to steal and replace them:

The methods of inflating project costs for such hotel or apartment projects are exactly the same. Those known as Hilton, Marriott, Hyatt, etc. Hotel projects such as Hyatt and Wyndham take advantage of the blind trust of domestic investors in the brand, but actually build only nominal franchise hotels, and they are only economy hotels under the brand, which are equivalent to domestic Motel and Hanting hotels. The level is equivalent to investors spending much more than a five-star hotel to build an economical hotel.

According to the ReedConstructionData industry standard referenced by the Immigration Bureau, the actual cost of luxury apartments in the United States (HardConstructionCost), excluding repairs, is an average of $105 per square foot. The average actual construction cost (HardConstructionCost) of budget hotels without repairs is US$126.5/square foot, and the actual cost (HardConstructionCost) of the highest-end five-star hotels without repairs is US$163/square foot on average. If the cost reported by the project party is higher than the industry standard, the Immigration Bureau will determine that a large amount of investment funds have not been truly invested to create substantial job positions, and the green card application will be rejected because the job position cannot be met.

3. A sunset industry, American apartments and hotels are experiencing a wave of closures:

In American hotels, apartment construction has exceeded demand and is a sunset industry. The overall occupancy rate is less than 45%. At the same time, There was vicious competition in housing prices, and eventually the property became insolvent and went bankrupt and was auctioned at less than half price. HVSGlobal, the authoritative American hotel and residential appraisal group, has released data. Since 2008, local funds in the United States have completely withdrawn from hotel and apartment construction projects. Only EB5 investment funds in the entire market are taking this risk.

Newly built hotels and apartments are bound to be insolvent because:

1) The project (party) will increase the cost (HardConstructionCost) by three times, and investors will have to face it after making money High management fees and tenant rights lawsuits. For example: The average monthly management fee for a 2-bedroom, 1-living room apartment in New York is US$2,600, and the lowest one is US$1,200 per month. It exceeds the average annual management fee of apartments in Beijing, Shanghai and Guangzhou.

2) According to the EB5 investment regulations of the United States Immigration Service (USCIS), every US$500,000 investment must employ at least 10 full-time employees, and the average annual salary of full-time employees in each hotel or apartment in the United States is more than US$40,000, plus With various insurances and benefits, the annual salary expenditure alone for 10 full-time employees exceeds US$400,000. If the company cannot maintain the employment of 10 employees within 5 years, the EB5 investor's green card application will fail.

In other words, based on the above-mentioned high construction costs and staff expenses, the annual room occupancy rate of these hotels or apartments must reach 225% before investors can obtain a green card and retire. When EB5 investors exit after five years, no institution will provide refinancing to pay for the construction costs and expenses that are several times higher than the market price.

4. Other misleading methods of hotel projects:

1) This type of brand-name hotel is not actually an investment by a hotel group, but an individual franchise hotel (Hotel Franchise), and it is only a member of a brand-name hotel group. Downstream brands (economic hotel grades), in other words, you can only operate this kind of hotel at your own risk and be responsible for your own profits and losses. If there is a loss in the project, the hotel group will not bear any debt liability.

2) It is claimed that the hotel occupancy rate will be as high as 70% or more. In fact, competition in the hotel industry in the United States has always been fierce. When the economy was at its best, the average occupancy rate was only about 45%. The average occupancy rate of a considerable number of hotels Even less than 35%.

3) The hotel industry itself is a sunset industry in the United States, but domestic people do not understand the current situation of the hotel industry in the United States. The project side made full use of the Chinese people’s perfect stay experience and favorable impression of multinational brand hotels, as well as their own fantasy of owning shares in brand hotels. In fact, what EB5 investors take is not shares in brand hotels at all, but only shares in some franchise hotels. The project party only paid a high franchise fee to the brand hotel, and once the project was completed, all debts were transferred to the EB-5 investors. So you get the highest cost and worthless shares.

4) Beautify hotel and apartment projects through domestic intermediaries. They will cite many so-called success cases and the so-called 100% success rate, but they will never tell you the fact that the project party was investigated and prosecuted by the US Immigration Service for inflating the cost.

5) Beautify the city center concept of big cities. The real upscale areas in the United States are all in the suburbs, dozens of miles away from the downtown area. The urban centers of major American cities are not the upscale areas that Chinese people imagine. More than 90% of urban centers have extremely high crime rates. They are also the preferred gathering place for homeless people because many municipal relief stations are located here. The budget hotels built in these locations have become the strongholds of criminals. Lawsuits and lawsuits have continued one after another. It is impossible for hotels to recoup their investment in such areas.

5. Hotel apartment projects violate the Immigration Bureau’s taboos:

When the EB-5 permanent green card (I-829) is finalized, the Immigration Bureau is most concerned about whether the project party is in There is fraud in the number of job positions because the original intention of the Immigration Bureau to establish the EB5 immigration program was to create at least 10 American job positions for every $500,000 of EB-5 investment. Therefore, the practice of inflating the cost of hotel projects is a big taboo of the Immigration Bureau, and investors who apply through these projects are also implicated, leaving a permanent bad record with the Immigration Bureau, which will cause endless troubles. Unfortunately, looking at all the hotel and apartment construction projects promoted in the domestic market, almost all of them have inflated project costs, and the consequences are disastrous.

Conclusion:

Since almost all hotel and apartment EB-5 projects use inflated costs, this will inevitably lead to the final failure of the green card application. Moreover, competition in the hotel and apartment industry in the United States is fierce, which is extremely detrimental to investment and immigration.

3. Downtown TEA (Targeted Employment Area) EB5 project risks

The US Immigration Service stipulates that projects that invest US$500,000 to apply for EB5 US investment immigration must work in the TEA area (TargetedEmploymentArea) Location target area), there are two types of TEA areas defined by the Immigration Bureau. The first is suburban areas with less population, and the second is high unemployment areas in large cities. For EB5 hotel, apartment and commercial building projects currently on the market, the project owners have beautified the TEA area in the city center into a so-called "prime area", covering up its huge risks of high crime, high pollution, and high compensation, which ultimately leads to the permanent green card (I- 829) Serious consequences of failed application.

1. The TEA area in the city center is by no means a "prime location"

China's real estate has only been developing for more than ten years, and there is no land left for development within the Fifth Ring Road in Beijing, Shanghai and Guangzhou. Even the city centers of second- and third-tier cities have already run out of land for development. The real estate industry in the United States has matured and developed for more than half a century, and the urban centers of major cities are actually listed as TEA areas waiting to be developed by EB5 investors. Investors can judge for themselves how deep the trap is.

Due to high crime, high pollution, and high unemployment, the inner-city TEA districts are among the worst school districts in the United States. However, many EB5 projects take advantage of the fact that Chinese people are not familiar with the conditions in American urban centers and deliberately place them in these dangerous cities. The central TEA area is confused with the concept of "prime location" and "rich land" in the city center of Beijing, Shanghai and Guangzhou, such as Manhattan in New York, Hollywood in Los Angeles, etc. In fact, anyone can understand with a little analysis that the real prime location is definitely not It is possible to be designated a TEA area with such a high unemployment rate.

2. The high crime rate in the downtown TEA area affects green card applications

The reason why some urban areas in the United States such as New York, San Francisco, Los Angeles, Seattle, Miami and Chicago are listed It is a TEA area because it is an area with high crime rates such as violent gangs and criminal gangs, mainly blacks and the lowest levels of various ethnic groups, robbery, shootings, drugs, and prostitution. The famous "Murder of a Chinese American woman in a water tank at the Cecil Hotel in Los Angeles" is happening in this so-called city center. (Or search: mysterious death of a Chinese American girl in Los Angeles) The article clearly states: "The hotel where she lived, the Cecil Hotel, is located in the center of Los Angeles. The security situation in the area is very poor, and many drug addicts, robbers and homeless people gather here. "Becoming a property owner in these downtown TEA areas will definitely be involved in various criminal cases of drug trafficking and homicide, which will directly affect the official green card (I-829). Background check upon application.

3. The environment in the TEA area in the city center is seriously polluted

EB5 investment projects in the TEA area in the city center cannot recruit local American investors. In addition to the above violent crimes, there is also the problem of heavy industrial pollution. For example, Brooklyn, New York, SODO, Seattle, and Riverside, California near Los Angeles are all famous industrial pollution areas. U.S. law stipulates that residential buildings built in industrial pollution areas must Cleaning is done by agencies with special licenses. This cleanup fee may even exceed the cost of building the building itself, and project parties often avoid talking about it. Investors spend several times the normal construction cost for no reason to build buildings in heavily industrially polluted areas. The gains outweigh the losses. In the future, the potential lawsuits caused by tenants due to environmental damage will be endless.

4. Tenants’ rights lawsuits in the downtown TEA district are expensive

Commercial or civilian tenants of hotels, apartments or commercial buildings in the downtown TEA district continue to be robbed, killed, or raped. Sue the owner. American judges and juries have overwhelmingly sided with disadvantaged groups. In cases involving bodily injury, sexual harassment, or death, compensation awards can easily range from millions to tens of millions of dollars. Therefore, the projects invested in the TEA area in the city center ultimately failed to make ends meet, and the compensation from rights protection lawsuits will inevitably become a bottomless pit of money lost by the projects. Project failure will directly lead to the inability to meet the Immigration Bureau’s requirements for the number of people working in the place, resulting in the final approval of the green card.

Conclusion

Based on the above reasons, properties in TEA areas in the city centers cannot escape debt management and bankruptcy auctions. Therefore, they cannot meet the Immigration Bureau’s requirements for the number of people working in the place. There is no guarantee for investors applying for a green card.

In fact, the real upscale areas in the United States are all in the suburbs, dozens of miles away from the downtown area. Therefore, EB5 investors should be wary of TEA areas located in the so-called "city centers" and "good locations" of big cities when choosing options, especially those projects that are dubbed "prime locations" and "every inch of land is valuable". The project owners will not take the initiative Disclosing the huge hidden dangers, by the time investors discover it, they may have been denied a green card and lost investment. Investors should choose a TEA area with a better school district, and at the same time examine the long-term profit model of the project to ensure a win-win situation for investment and green card.

4. The participation of states, cities, and counties in the EB5 project makes shortcuts a quagmire

Another current misunderstanding about EB5 investment immigration is that it is taken for granted that as long as states, cities, and counties participate It was the most guaranteed project, but in fact it completely backfired. This type of project is often the most complicated to review at all levels and consumes the most funds, resulting in a shortage of job positions and the failure of the final green card review. In fact, the reason is very simple. The projects that state, city, and county governments at all levels in the United States participate in are not for profit, but are mainly public welfare projects. In addition, all funds from state, city, and county governments come from taxpayers, and the first priority for project fund compensation is always taxpayers. In addition, even if states, cities, and counties participate in projects that suffer losses, they will never be able to sell completed municipal properties to mortgage them to investors.

The most important thing is that EB5 investment immigration is based on U.S. federal immigration law. No state, county or county has the right to give investors any priority in green card review. This is already clear in immigration law. . If any department or official makes any investment or green card commitments to investors, it is suspected of illegality and fraud and will be investigated and punished by the FBI. Therefore, in addition to being expensive and unprofitable, the project also has complicated approval procedures, no guarantee of job location calculation, and no collateral for funds. The shortcut to immigration that investors take for granted has actually become a quagmire that they cannot extricate themselves from.

Conclusion

Projects participated by state, city, and county governments are difficult to generate enough jobs due to excessive expenses, and the final review of the official green card (I-829) is likely to be far away. Even rejected. In addition, investors must avoid projects that focus on leasing or selling real estate, including the construction of villas, apartments, shopping malls, shopping malls and other construction-based EB5 projects. After the Immigration Bureau passes the new policy memorandum, these projects The possibility of successful immigration application is extremely slim.

5. EB5 construction work is not included in the calculation of direct work positions

EB5 projects that mainly involve the construction of buildings or infrastructure facilities have been officially included in the rejected list by the Immigration Bureau. The reason is very simple, because the Immigration Bureau has clarified in the new memorandum that construction jobs are temporary jobs. These jobs will disappear soon after the construction period is over and have no durability, so they cannot be counted as jobs directly generated after the investment. , can only be considered for indirect work. Therefore, any project that relies on the construction industry to calculate work location will face the final rejection of the investor’s official green card (I-829).

VI. Green cards for EB5 real estate rental or sale projects are cancelled

The Immigration Bureau’s policy memorandum on May 30, 2013 vetoed EB5 investors’ ability to invest in the construction of villas, apartments, and offices. Buildings, urban renovation, urban infrastructure, shopping malls, shopping malls, warehousing, etc. are the ways to apply for immigration. The nature of this type of project is that once construction is completed, the property is rented or sold to other businesses or individuals, and the Immigration Bureau has ruled that any job positions brought after the rental or sale cannot be included in the calculation of the green card application.

The USCIS has ruled on this: "Even if the EB5 project does not build these properties, those businesses and individuals will purchase or lease other properties and hire employees, so these job opportunities cannot be regarded as generated after the EB5 investment." Construction job positions are not included in the calculation of direct job positions. Therefore, it is no longer possible for this type of EB5 project that relies on leasing or selling real estate to guarantee that each investor will generate 10 jobs. Investors who previously participated in such projects have been immigrated. The Bureau cancels the official green card (I-829) upon final review.

7. Congress proposes EB6 to replace EB5

EB5 investment immigration has caused tens of thousands of lawsuits, and the situation has become seriously out of control. The U.S. Congress will approve the Immigration Service to launch the EB6 investment immigration program before the end of 2015. EB6 investors can set up their own projects, control their own funds, operate their own projects, invest US$250,000, hire 5 full-time employees every year, and can convert to a formal green card after two years.

8. Fictitious employment calculations

EB-5 regional Chinese and project parties forged economic calculation model numbers, fictitiously enlarging the number of employed people by 3 to 5 times, or based on project promotion needs Infinite zoom. The so-called experts in economic calculation models are paid by the project party to complete this report based on false original data provided by the project party. When the Immigration Bureau approves the temporary green card I-526, it mainly verifies the legal source of the EB5 investor's funds. In other words, it only needs to deposit the funds into the project party's account. At this time, the funds have not been operated, how can we judge the economic situation? The calculation model is falsified, and the number of job positions produced by the employer is authentic. However, when approving the official green card I-829, various review departments and experts of the Immigration Bureau revealed these fake documents, resulting in the investor's official green card I-829 being rejected.