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COVID-19 Highlights the Importance of Due Diligence in Selecting an EB-5 Project

Hardly anywhere on the planet has been left unaffected by the COVID-19 pandemic, and unfortunately, the United States has not emerged unscathed, either. Millions have lost their jobs, numerous companies have gone out of business, and countless livelihoods have been lost. Industries across the country have endured financial hardship, resulting in furloughs, loan defaults, and more. EB-5 investors have had their lives in the United States delayed due to worldwide closures of U.S. embassies and consulates.

Given that the majority of countries shut their borders and requested—in some cases, demanded—that their populace stay home, industries such as hospitality, travel, and tourism have borne the brunt of the pandemic’s financial impact. Even as countries open up domestically, many touristic businesses continue to suffer without the revenue of foreign tourists, crippling their organizations. Hotels, tourist attractions, and other travel-related enterprises are suffering, including EB-5 projects in these industries. The COVID-19 pandemic has been an unforeseen disaster, and those who made an EB5 investment in the hospitality sector are paying the price.

Of course, it’s not only the tourism industry that’s hurting in the COVID-19 era—countless types of businesses have suffered economic hardships throughout these trying times. The struggling economy only serves to highlight the importance for EB-5 investors to conduct thorough due diligence on EB-5 projects, project developers, and regional centers before committing to ensure they’re investing in a strong enterprise that can withstand economic uncertainty.

What to Look For in an EB-5 Project Developer and Regional Center

These tips come too late for those who have already made an EB-5 investment in a project that has fallen victim to the COVID-19 pandemic, but it’s important for prospective EB-5 investors to exercise vigilance going forward—even after the pandemic. The pandemic has proven anything can happen, so it’s crucial to be prepared for the unexpected.

In conducting due diligence, it’s important to consider two factors: financial risk and immigration risk. Most EB-5 investors are primarily interested in gaining U.S. permanent resident status for themselves and their immediate family, so they place more value on low immigration risk and are willing to incur higher financial risk. However, if earning a lucrative gain on your EB5 investment is important to you, be sure to consider the financial risk of any prospective EB-5 project as well.

When evaluating a project developer or EB-5 regional center to determine whether you should invest your $1.8 million—or $900,000 for targeted employment area (TEA) projects—you should keep various factors in mind. Your job is to figure out whether the entity is financially strong enough to carry itself through economic hardship—such as a once-in-a-century global pandemic. Verify that the entity has access to additional cash equity infusion and does not rely solely on EB-5 investors. Another important question to consider is whether the project developer or regional center has ever defaulted on a loan.

Also vital is a strong management team of seasoned professionals with the long-term picture in mind and a track record of previous EB-5 successes. Without strong leaders backed up by years of experience heading the charge, any organization is at risk of failure, especially during uncertain times. EB-5 experts such as those at EB5 Affiliate Network (EB5AN), who boast extensive experience in finances, project development real estate, the EB-5 program, and more, can help a project navigate unstable economic cycles and achieve long-term success.

EB5AN and Kolter: The Ideal EB-5 Team

EB5AN is one of the leading EB-5 networks, offering consultancy services and operating a many EB-5 regional centers across the country, offering coverage in more than 20 states. As serial EB-5 regional center founders, the professionals on the executive team are extensively experienced in the EB-5 program and have already helped thousands of foreign nationals attain U.S. green cards for themselves and their family members through an EB-5 investment.

Despite the challenges presented by the COVID-19 pandemic, EB5AN’s many EB-5 regional centers and the projects they oversee with the Kolter Group have continued to function properly, with EB5AN reporting that as of April 15, 2020, all projects continue to make their debt service payments as required. Though the pandemic has revealed many poorly equipped EB-5 project developers and regional centers, EB5AN and the Kolter Group are not among them—they have demonstrated financial and managerial strength and resilience and have kept their EB-5 investors’ dreams of a life of freedom in the United States alive.

EB5AN and Kolter Group represent the ideal EB-5 team—strong, resilient organizations comprised of experienced professionals with the business know-how to thrive even in economic hardship and the EB-5 expertise to safeguard investors and their EB-5 applications even throughout times of difficulty. EB-5 investment post-pandemic should be more straightforward, but always be prepared for the worst—anything could happen at any time, and meticulous due diligence can help protect your investments in the United States.