01/11/2024
EB-5 Financing- It's a Quiet Source of Money. How EB-5 Capital Works:
According to an insightful article on Hotel News Now by Bryan Wroten, financing for hotel and project development has gained popularity, yet many developers are still navigating the intricacies of the process. The program, in existence since 1990, has successfully raised over $30 billion for various projects like hotels, restaurants, events, casinos, and more across the U.S. Developers are enticed by its appeal as a tax-free funding source that stimulates the economy and generates employment.
EB-5 capital can be utilized for projects of varying scales, ranging from a $400 million Marriott hotel https://lnkd.in/gvbA7wpm to the $1 billion Hudson Yards project in New York City or even a Dunkin' Donuts franchise. Positioned within the capital stack, EB-5 can step in to bridge financing gaps for developers. It functions as a senior loan, secured by the company's assets, similar to a traditional senior lender's lien on the holding company. In deals involving another senior lender, EB-5 funding typically takes a subordinate position. It can function as mezzanine financing or be treated as equity.
Developers need intermediary groups, agents, and on-the-ground representatives in different countries to navigate securities regulations and ensure compliance. These entities require compensation, usually ranging from 4% to 7% in debt scenarios, depending on negotiations. In equity situations, returns may be slightly higher, ranging from 5% to 8% for the cost of capital. For a 7% loan cost, 50 basis points or 2 points are allocated to EB-5 investors, 1% to the affiliated manager or partner, and the remainder to the broker securing the capital. Despite the added expenses, EB-5 capital typically offers costs below market rates. So, if you're looking for a reliable funding option, consider EB-5 funding. Check us out! https://lnkd.in/ekAbhAhu
