Articles Posted in EB-5 Financing

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The EB-5 Securities Law Roundtable, a group of securities lawyers from several different law firms around the United States, has been working jointly to provide comments to legislation that we expect will be proposed by Congress to improve the integrity of the EB-5 program. The focus of the Roundtable has been to recommend changes that we believe will conform the proposed legislation to existing securities laws, and will clearly define the roles and responsibilities of EB-5 regional centers, sponsors and issuers.

The Roundtable supports efforts by Congress to strengthen the integrity of the EB-5 program by establishing procedures that will assist in detecting and preventing potential fraud in offerings made under the EB-5 program. Lawmakers could do a great service to the many U.S. employees, businesses and investors who benefit from the EB-5 program by aligning the integrity requirements of the EB-5 program with existing U.S. securities law.

The Roundtable issued a press release on August 29, 2016 announcing its analysis and comments on the proposed legislation, a copy of which may be obtained, along with the comments of the Roundtable on the legislation, at the following website:

The comments of the Roundtable do not address immigration policy and eligibility aspects of proposed EB-5 legislation, such as the minimum investment amount, defining targeted employment areas, visa availability, effective dates or length of program authorization. This is because the goal of the Roundtable is to focus on those aspects of the legislation that concern the application of securities laws to the EB-5 program, and the role of each industry participant to assure compliance with those laws.

About the EB-5 Securities Roundtable
The EB-5 Securities Law Roundtable is an informal, independent group of leading EB-5 Securities Attorneys from law firms including Arnstein & Lehr; Baker, Donelson, Bearman, Caldwell & Berkowitz; Homeier Law PC; Jeffer Mangels Butler & Mitchell; Kutak Rock; Phillips Lytle; Sheppard Mullin Richter & Hampton; and Torres Law, organized to facilitate best practices in the offerings of EB-5 securities. The Roundtable is not affiliated with any EB-5 industry organization, regional center, offeror of EB-5 securities or job-creating recipient of EB-5 funds, and it receives no outside financial contributions. The comments of the Roundtable represent consensus views of the individual participants and do not necessarily represent the views of any individual participant, their respective law firms or clients of their law firms. The comments of the Roundtable do not represent legal advice.

Catherine DeBono Holmes, a partner of Jeffer Mangels Butler & Mitchell LLP and chair of its Investment Capital Law Group, is a member of the EB-5 Securities Law Roundtable and a contributor to the comments developed by the Roundtable on the legislation. She regularly represents EB-5 regional centers, issuers of EB-5 securities and developers of projects who receive EB-5 financing. She has written more than 30 articles on topics relating to the EB-5 program, and is designated one of EB5 Investors magazine’s Top 25 Securities Attorneys.

Cathy HolmesCatherine DeBono Holmes is the chair of JMBM’s Investment Capital Law Group, and has practiced law at JMBM for over 30 years. She specializes in EB-5 immigrant investment offerings and hotel and real estate transactions made by Chinese investors in the U.S. Within the Investment Capital Law Group, Cathy focuses on business formations for entrepreneurs, private securities offerings, structuring and offering of private investment funds, and business and regulatory matters for investment bankers, investment advisers, securities broker-dealers and real estate/mortgage brokers. Contact Cathy at or 310.201.3553.


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By: Catherine DeBono Holmes, Esq. and Bernard P. Wolfsdorf, Esq.

The delay in processing EB-5 immigrant visas caused by the increasing waiting line commonly referred to as “retrogression” is causing an increase in demand by parents in China to have their minor children named as the primary applicant on I-526 petitions.

With estimated delays of five to six years for the processing of EB-5 immigrant visas or green cards for applicants subject to the Peoples Republic of China (“PRC”) quota, many parents are concerned their children will “age out” by reaching the age of 21 before their final green card interviews are scheduled. As a result, the children may be ineligible to immigrate as derivative beneficiaries and may be unable to join their parents and younger siblings when immigrating. Since many PRC parents are primarily motivated to obtain green cards under the EB-5 Program for the benefit of their children, these parents are requesting EB-5 investment funds to accept their minor children as investors, so that the child can file the I-526 petition as the principal applicant. Continue reading →

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Catherine DeBono Holmes, Chair of JMBM’s Investment Capital Law Group, will be speaking at the 2015 AILA EB-5 Investors Summit, at the Venetian Resort Hotel Casino in Las Vegas, which takes place August 27-28, 2015.

The conference is focused on “Representing EB-5 Investors & Regional Centers”. Cathy will participate on the panel “Business Considerations for Your Client in Regional Centers: Understanding the Capital Transaction” which will address:

  • Understanding the Deal Structure—The Regional Center, New Commercial Enterprise, and Job Creating Entity
  • Understanding the Capital Stack and Different Sources of Capital
  • Identifying and Managing Investment and Immigration Risk Factors

Questions answered by panelists include:

  • How exactly is the new commercial enterprise investing in the job creating entity? As an equity or preferred equity investor? As a lender making a loan? If so, what kind of loan— first deed of trust, second lien, or mezzanine?
  • When are EB-5 funds made fully available to the JCE and how?
  • What is the relationship of EB-5 funds to all other capital in the JCE and why does it matter?
  • What loan provisions will most influence NCE investment risk and immigration compliance?

Additional faculty for this panel include: David M. Morris (DL), AILA EB-5 Investors Liaison Committee Chair, Washington, DC; Danielle A. Katzir, Real Estate Attorney, Los Angeles; M. Jay Yurow, Business & Real Estate Attorney, Washington, DC.

Click here for the full conference program and registration information

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By Catherine DeBono Holmes, Esq.

On June 23, 2015, the Securities and Exchange Commission (“SEC”) announced that it had entered into an Offer of Settlement with Ireeco, LLC and Ireeco Limited, finding that their activities constituted a violation of Section 15(a)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”) because they acted without registration as a broker-dealer with the SEC.  By entering into an Offer of Settlement, the Ireeco entities waived their rights to an administrative hearing, and without admitting or denying the findings, they consented to the entry of the Order.  The Order requires that the Ireeco entities cease and desist from committing or causing any further violations of Section 15(a), censures the Ireeco entities, and orders further proceedings to determine whether to require disgorgement of ill-gotten gains and/or civil penalties, and if so, the amount of such disgorgement or penalties.

The Order provides several important insights into the SEC’s views of what constitutes marketing activities that require broker-dealer registration in the EB-5 investment market.  We offer our analysis of these issues here.

According to the Order, the SEC found that the following activities violated the Securities Exchange Act:

  • Ireeco LLC was formed in 2006 as a U.S. entity with an office in the U.S., where a small staff of 4 to 5 people worked, including the two principal owners, Stephen Parnell and Andrew Bartlett.  They operated primarily through a website,, which offered to help foreign individuals determine if the EB-5 Visa Program would work for them and to help them find EB-5 regional centers and projects.
  • Ireeco Limited was formed in 2012 as a Hong Kong entity, and replaced Ireeco, LLC as the company that solicited foreign investors for EB-5 investments. It listed a “U.S. Admin Office” address for the company in Greenville, South Carolina, and continued to rely on the same small staff of 4 to 5 people located in the U.S., including Parnell and Bartlett, that operated Ireeco, LLC.
  • In at least 10 instances, potential investors were already residing in the U.S. on some other type of temporary visa when they were solicited by Ireeco, LLC or Ireeco Limited.
  • Ireeco would give each investor one or more EB-5 regional center projects as possible choices, and claimed to perform “due diligence” on each of the regional centers it selected for its customers.
  • Ireeco would give each investor one or more EB-5 regional center projects as possible choices, and claimed to perform “due diligence” on each of the regional centers it selected for its customers.
  • After each investor identified which regional center they wanted to work with, Ireeco would “register” the investors with the regional center. The investors then dealt mostly with the regional center, received offering documents from them, and only occasionally dealt with Ireeco after that.
  • Ireeco LLC and Ireeco Limited had “referral partner agreements” with regional centers, who compensated them for each registered investor who invested funds in an EB-5 offering, which was generally $35,000 per investor paid through the Administrative Fee.

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By Catherine DeBono Holmes, Esq. and Victor T. Shum, Esq.

The proposed Senate Bill reauthorizing the EB-5 Regional Center Program would restrict the types of projects that can be funded with EB-5 financing and amount of funds that can be raised with EB-5 financing.

The Senate Bill, entitled “American Job Creation and Investment Promotion Reform Act of 2015,” which was introduced on June 4, 2015, contains some provisions that would strengthen the oversight of the EB-5 Program, but the Bill also contains some provisions that would effectively disqualify many construction projects seeking to obtain financing through the EB-5 Program, and reduce the amount of EB-5 financing that could be obtained for many other construction projects.  In particular, these provisions would change the ways in which jobs are counted for purposes of determining which projects qualify for EB-5 financing, and how many jobs are credited for each project.  There is no explanation in the Bill or by the Senators proposing these changes as to the reasons why they believe these changes are necessary, or in what way they believe these changes would improve the EB-5 Program.  In fact, we believe these changes are unwise and should be removed from the Bill because it is counter to the original intent of EB-5 program by reducing foreign investment and job growth and by hurting small and medium sized American businesses from accessing much needed capital.

The proposal to allow only 90% of the requirements for job creation to be satisfied through indirect jobs would effectively eliminate EB-5 financing for all construction projects to be completed in two years or less which are not associated with operating businesses following completion.

One of the provisions of the Bill states that up to 90% of the jobs required to be created in order to qualify for EB-5 financing may be created indirectly through investment.  The EB-5 Program currently has no requirement that any portion of the jobs created be direct or indirect jobs, and requires simply that at least 10 new jobs be created for every investor.  If the Bill is passed with this provision, it would mean that at least 10% of the jobs for every EB-5 project must be direct jobs.  It is not clear in the Bill if that means that the entity in which EB-5 investors invest their funds must have direct employees (i.e. W-2 employees), or that the project must include direct effect employees, as calculated by an economic model such as RIMS II or IMPLAN.  We assume it means the latter, because if it meant that the entity in which the EB-5 investors invested must have its own employees, that would be an extremely severe restriction, because most EB-5 investment entities are formed as financing vehicles for specific projects, and are not themselves employers of any employees.

Even if this provision is intended to mean that the project must include direct effect employees from an economic model, it would automatically exclude many construction projects.  This is because EB-5 regulations currently do not allow any construction project that will be completed in under two years to count any direct construction jobs for EB-5 purposes.  Therefore, this provision requiring at least 10% direct employees would automatically exclude any multi-family, condominium, office or other construction project that took under two years to build and was not part of an operating business.  This requirement of at least 10% direct employees could be met by developers of real estate intended to be used for an operating business, such as hotel, restaurant, or assisted living facility, because those projects would have direct employees in their operating phase.  In addition the requirement could be met by a construction project that would take over two years to build, because those projects are allowed to count direct construction jobs.  However, it is unclear why the requirement for at least 10% direct jobs should be required at all, given that its effect would be to automatically shut out of any EB-5 financing construction projects to be completed within two years for multi-family, condominium, office or other types of commercial development. Moreover, since smaller, short-term projects which are completed in less than two years are the most viable types of projects in economically disadvantaged communities, this requirement would appear to be counter to the intent of the EB-5 program of promoting job growth and economic stimulus.

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Hotelier Roadmap to EB-5 Financing for New Hotel Construction, Expansion or Renovation: Ten Steps to a Successful EB-5 Offering

This article was first published in EB5 Investors Magazine.

The EB-5 investor visa program allows non-U.S. persons to invest $500,000 (or $1,000,000) in a business that is expected to create at least 10 new permanent jobs per investor, and to obtain a conditional visa upon review and approval by the United States Citizenship and Immigration Service (“USCIS”).  Hotel projects are one of the best investment categories for EB-5 investors, because they tend to create more operating jobs than many other businesses, they are investments in real estate, which tend to be more stable in value than some other forms of investment that qualify for EB-5 financing, their business model is easy for investors to understand, and they are often operated by or under franchise licenses with hotel brands such as Hilton, Hyatt, Intercontinental, Starwood and Wyndham that are known around the world by potential EB-5 investors.

For those hotel developers seeking to access EB-5 financing, here are our recommended steps on the road to a successful EB-5 financing:

1.  Determine if the project has the necessary characteristics to successfully raise financing through the EB-5 program. The sponsors of EB-5 investment offerings are always looking for good new projects, but the market is competitive, and to be successful, a project will need to have some key markers that demonstrate the project will be attractive to EB-5 investors. It is not necessary that all of these elements exist immediately, but the more of them that do exist when a developer first approaches potential EB-5 sponsors, the better the developer’s chances will be of attracting the most experienced and successful EB-5 sponsors:

  • Project preliminary work —  The developer should have completed a significant amount of the preliminary project work, such as obtaining a hotel market feasibility study, preparing preliminary plans and budgets for the project, obtaining franchise approval or a hotel management agreement or letter of intent, acquiring the property and determining zoning and permit requirements.
  • Developer with Financial Strength and Track Record – The most successful EB-5 projects are those with experienced and financially strong developers.  EB-5 sponsors and investors alike want projects run by strong companies with a history of success in developing similar projects.
  • Developer Equity Commitment – EB-5 sponsors and investors favor projects where the developer has a financial commitment of its own equity invested in the project – 20% equity or more is expected.  There are some EB-5 projects where the developer has less than 20% equity in a project, but these are often more difficult to sell to investors unless there are other counterbalancing factors.
  • Commitments to Fund Entire Project Cost– EB-5 investors know that the success of a development will often depend on the developer’s ability to obtain a senior loan or other financing in addition to EB-5 capital, and having a committed senior loan or other financing shows that other lenders or investors have underwritten the project and determined that it has the potential to succeed.  If a developer does not have committed capital, it may help to show that the developer is actively seeking this financing and has obtained some indications of interest.

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The Basic Rules of Website Advertising for EB-5 Securities Offerings

By Catherine DeBono Holmes, Esq. and Victor T. Shum, Esq.

EB-5 securities issuers, sponsors and others who market EB-5 securities often want to use websites to provide information to potential investors regarding their past and current EB-5 projects.  When using these websites, it is important to understand the U.S. securities laws that apply to internet marketing of securities within and outside the U.S.  The purpose of this article is to provide a brief explanation of these securities laws and guidelines to consider when using websites to identify or market EB-5 securities offerings.

  • Using websites to advertise EB-5 offerings is considered a form of “general solicitation” under U.S. securities laws, unless guidelines to restrict access to non-U.S. persons are followed.  Since 1995, the Securities and Exchange Commission (“SEC”) has held the position that posting offering materials on a website in a way that can be accessed by any viewer is a general advertisement or general solicitation, unless some restrictive access measures are implemented to allow access only to permitted persons.  In 1998, the SEC issued an interpretation on the use of internet websites to offer or advertise securities outside the U.S., providing guidance on specific measures that can be taken to retain the Regulation S exemption for offerings made to non-U.S. persons outside the U.S., and concurrently retain the right to make an offering under Regulation D to persons located in the U.S. at the time of the offering.  The guidelines provided in this article are derived in part from that SEC release.


  • If an EB-5 securities issuer intends to accept any U.S. investor, it is necessary to meet the requirements of Regulation D, including the restrictions on use of websites to advertise the offering.  Although EB-5 securities offerings are generally offered to investors outside the United States, it is not unusual that some investors making an EB-5 investment will be located in the United States at the time they receive information about an EB-5 offering, or they receive or sign EB-5 offering documents.  Such investors may be international students attending university in the U.S. or other temporary U.S. visa holders.  All of those types of persons are considered “U.S. Persons” under Regulation S, and issuers are not qualified to rely on the Regulation S exemption with respect to EB-5 securities sold to those U.S. Persons.  For that reason, most EB-5 offerings rely on SEC Regulation S for investors who are outside the U.S. when they are solicited, or they receive or sign offering documents, or on SEC Regulation D for sales to U.S. Persons.  When an issuer of EB-5 securities intends to rely on Regulation D to accept some investors who are “U.S. Persons,” the issuer and its agents must take care to assure that all websites used to promote the EB-5 offering – including those of the issuer and those of all of the agents promoting the offering – will meet the requirements of Regulation D.


  • Regulation D now has two options: use general solicitation with verification of “accredited investor” status for all U.S. Person investors or use no general solicitation for U.S. Person investors.   In July 2013, the SEC implemented aspects of the Jumpstart Our Business Startups Act (JOBS Act) and amended Regulation D under Rule 506(c) to allow the use of general solicitation for investors who are U.S. Persons, if the issuer requires verification of every U.S. Person investor’s status as an “accredited investor,” by requiring that investors submit copies of their tax returns, bank statements or other recognized means of verification.  However, the SEC also allows issuers to follow the old Regulation D requirements under Rule 506(b), which do not require verification of accredited investor status from U.S. Person investors, as long as no general solicitation is used for the offering. This means that if an EB-5 securities issuer wants to use general solicitation with no restriction, including no restrictions on websites offering the securities, it can do that, as long as it required every U.S. Person investor to provide one of the recognized means of verification of their status as an “accredited investor.”

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OS ANGELES – Catherine De Bono Holmes, Chair of the Investment Capital Law Group at Jeffer Mangels Butler & Mitchell LLP and publisher of the Investment Law Blog, will participate on a panel at the IIUSA 8th annual EB-5 Regional Economic Development Advocacy Conference in Washington D.C. on April 14th.  The topic of her panel is “EB-5 & Securities Law: Compliance in Today’s Market” and her co-panelists include Michael Homeier of Homeier & Law P.C., Ozzie Torres of Torres Law P.A. and Lili Wang of New City Advisors.

“I am honored to be speaking at this conference, which draws international investment and economic development professionals from around the world,” said Holmes. “The EB-5 program has made a contribution to the economic development of the U.S. by creating jobs and providing needed capital for developers and business owners. This conference provides an important platform to discuss the myriad issues that make the EB-5 program a success.”

“Guest of Honor” speakers at the conference include Michael Chertnoff, former Secretary of Homeland Security; C. Joshua Felker, Assistant Director, Enforcement Division of the SEC;  Congressman Darryll Issa (R-CA); Senator Ron Johnson (R-WI); Congresswoman Zoe Lofgren (D-CA); Maria Odman, Ombudsmen, Citizen and Immigration Services; Charles Oppenheim, Chief, Visa Controls Office, U.S. Department of State; Peggy Philbin, Deputy Executive Director, U.S. Department of Commerce; James Wrona, VP and Associate General Counsel of FINRA.

About the IIUSA Conference
The IIUSA 8th annual EB-5 Regional Economic Development Advocacy Conference, sponsored by Invest in the USA takes place from April 12-14 at the Hyatt Regency Hotel in Washington, D.C.  Click here for more information.


Cathy HolmesCatherine DeBono Holmes is the chair of JMBM’s Investment Capital Law Group, and has practiced law at JMBM for over 30 years. She specializes in EB-5 immigrant investment offerings and hotel and real estate transactions made by Chinese investors in the U.S. Within the Investment Capital Law Group, Cathy focuses on business formations for entrepreneurs, private securities offerings, structuring and offering of private investment funds, and business and regulatory matters for investment bankers, investment advisers, securities broker-dealers and real estate/mortgage brokers. Contact Cathy at or 310.201.3553.





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By Catherine DeBono Holmes and Bruce Baltin

This article was first published in the Winter 2015 edition of EB5 Investors magazine.     

For EB-5 financing of hotel projects, proving that new jobs will be created requires evidence that there is a market demand for an additional hotel in the local market. The basic requirement for any EB-5 financing is to show that a project will create at least 10 new jobs per EB-5 investor. For new hotel projects that use EB-5 financing, it is necessary to show that the new hotel is not merely taking jobs from existing hotels in the area, but actually creating new jobs. That requires evidence that there is enough guest demand in a local market to allow a new hotel to open without causing existing hotels in the area to lose occupancy. If the project owner can demonstrate that the demand for hotel rooms already exists, it can show that opening a new hotel will create new jobs, without taking away the jobs of the existing hotels in the area. How can a project owner demonstrate that this demand for new hotel rooms exists?

Hotel valuation experts have developed a method to determine market demand in a local market that can be used for EB-5 financing. Hotel consultants such as PKF and HVS have developed standards for determining what they consider the natural optimum average occupancy rate for each local market, which we will call the “optimum occupancy rate.” The optimum occupancy rate refers to the percentage of occupancy that will maximize the profitability of the hotel, based on the market conditions in that local market rate. If the average occupancy is 80 percent but the optimum occupancy rate is 70 percent, hotel consultants conclude that there is a demand for hotel rooms that is not being met, because more people are staying in existing hotels in the market than the rate that would allow maximum profitability for all hotels in the market. This article explains how hotel consultants set the optimum occupancy rate for each local market, and why an average occupancy rate in excess of the optimum occupancy rate indicates a demand for additional hotels.

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JMBM and AAEB5 Announce New Publication on EB-5 Financing and U.S. Securities Laws

Jeffer Mangels Butler & Mitchell LLP (JMBM) and Advantage America EB5 Group are pleased to announce the publication of Regional Centers & Sponsors and U.S. Securities Laws: How to evaluate broker-dealer, investment company and investment adviser registration requirements.

“When it comes to the EB-5 investment market, the SEC provides clear guidance in some areas and very little in others,” said co-author Catherine DeBono Holmes, Chair of  JMBM’s Investment Capital Law Group. “The information in this publication covers the complex compliance issues associated with EB-5 offerings.”

Written in response to hundreds of queries received from EB-5 professionals and developers, the articles in the 30-page booklet were first published as a four-part series on the Investment Law Blog.

“Regional Centers and project sponsors are right to be concerned with complying with U.S. securities laws,” said co-author Victor T. Shum, CEO of Advantage America EB-5 Group. “Violations come with penalties that can jeopardize both the project and its investors, so the EB-5 investment must be structured properly.”

Holmes and Shum each have significant experience as securities counsel on a wide range of investments – both public and private – and have many years of experience in the EB-5 arena, representing numerous clients on projects funded in part through EB-5 financing.

Click here to download a copy of the booklet on EB-5 Financing and U.S. Securities Laws.