China’s migration agents – polarized by EB-5 failures

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Our project managers have spent the last three months visiting more than sixty EB-5 migration agents in China. They find agents are now polarized in two camps of thinking about EB-5 projects. These attitudes we believe are setting the course for how EB-5 projects will sell in the next year as this vast market continues to grow.

Risk Avoidance

A large number of agents have changed their business model. They are now closely examining the downside risk of projects to calculate if they meet investor expectations of a well-structured financial and perform as promised.

Focus is on job creation, EB5 debt and a growing preference for the loan model. Added to this are expectations the project is an internationally recognized brand, in an industry with high seasonal market demand and gives the investor an investment yield that offsets the costs of their participation in the EB-5 program.

What this group looks for:

Job creation at a minimum 1:+15 jobs, direct and indirect (exclusive of induced job creation)
30 – 35% EB5 debt
Banks loans at less than 50%
Developer holds 20 – 30% of assets
If a real estate project the local market can be proven to be stable and growing
Return on investment is greater than 3%
If asset model, the investors are first out
The regional center owner, developer, law firm and related consultants are arm’s length from each other
Investors are not required to use the favorite attorney of the regional center
Immigration attorneys prove they have approved 829’s
Project claims for government approvals, investments and returns can be documented

These agents are interested in the future of EB-5 and see its potential. They are all investment loss with flawed due diligence, failure to meet job creation promises and surprisingly sit on the side of the angels when it comes time to choose a project.

Profit at any Cost

This group continues to increase pre-paid service fee to immigrants (averaging $10,000.00 each now), demand a base commission of $35 – $40,000.00 per investor, lawyer advisory services (at a fee), project participation … you get the idea.

The troublesome aspect of this group is their focus on fees with little notice to investor’s risk or the impact of a project failure on their own reputation. Performance claims continue to be exaggerated, risk understated, PPM’s and business plans (if one is printed) get dusty on the shelf. A high wire act at night in the rain.

This side of the business is looking more like the pre-2008 market implosion as agents treat their participation in EB-5 like a limited run show. Focusing on profit without concern for risk, failure or I-829 denials enhances the odds damage to the program will be memorable in its depth.

Many regional centers buy into this marketing model for the promise of a fast cash return; sidestepping ethical issues and sales omissions.

Ever heard of agents writing contracts with performance guarantees and fee discounts when you don’t get those investor numbers? These business arrangements come at a high price in immigrant disappointments and loss.

When choosing your project’s migration agent, vote on the side of the angels. The work will get done responsibly. Look for the good guys, they are there and willing to work with you.

For more information, contact Kevin Jeffers, GM, Pinnint Ltd., kjeffers@pinnint.com, www.pinnint.com

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