Comment: No EB5 1.8 Million Market

We have talked to almost a dozen projects that have been attempting to raise EB-5 capital at the $1.8 Million level. Some of these projects were egged on by foreign agents who claimed that their investors would invest only in glitzy urban projects. However, the November 20th EB5 regulation has changed the market--the price differential $900k is a game changer. The failure rate of getting EB-5 investors at the 1.8 Million level has been 100%. To our knowledge there has not been a single wire at 1.8 Million level to a Regional Center project.

Will a market for 1.8 Million projects ever exist? And if so what will be the size of this market? We have two pieces of evidence to help answer these questions:

1) An anecdotal pattern is emerging that even when investors are enthusiastic about a $1.8 Million investment, at some point they learn that they can get exactly the same Green Card for $900K. The difference between the two amounts is so significant that a last minute jump by investors to a $900K project is intuitive and easy to understand.

2) More importantly, there already exists significant historical data which points the way to the ultimate disposition of this question. The numbers for EB-5 investments of $1 million over almost 30 years pre-new-reg are available. During this entire period when EB-5 investment amounts were $500K and $1 million, $1 million investments accounted only for 1% to 2% of all EB5 investments. Over half of these 1million investments were direct investments by investors in their own businesses. So, pre-November 2019, $1 Million investments accounted for less than 1% of all EB-5 RC investments.

Based on both points above, we can expect at most 1% to 2% of investments at the $1.8 Million level (assuming twice to four times the percentage as 30 year average when the differential was smaller, to account for the "glitz" factor). So we are looking at at most 10 to 20 wires per year at $1.8 Million. If a modest size project needs to raise $18 Million in EB5 investment with 10 investors they would need to get 50%-100% market share of the $1.8 Million market, which seems far-fetched.

If you are contemplating a $1.8 Million level EB-5 project, it would have to be the top 1-2 projects for the year, with:
1. A solid capital stack without much leverage and not dependent on successfully raising EB5 capital
2. Attractive in the Covid era with a business unaffected by Covid.
3. A solid distribution network that has generated 50+ investors consistently over the last 3 years from at least 2 different countries
4. No investor lawsuits on past projects

Even with these 4 formidable strengths a project would only have a 25% chance of completing their raise at the $1.8 Million level. While hope springs eternal, one must consider market reality over hope. So we strongly recommend thinking long and hard before committing to a $1.8 Million level project.

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Focus: Overseas Online

ILW has years of event experience all over the world. We have networks of agents in the following countries:

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ILW will set up an online event exclusively for one issuer at a time, this event will be an interactive two-way communication with multiple agents in the country of choice for that issuer. ILW will provide interpreter services, emceeing and consultation to make your presentation culturally impactful and effective in engaging agents for your project.The world after coronavirus is radically different, and it may last a lot longer than any of us would like. However, the world does not stop due to a virus-our online meetings allow you to continue your EB5 raise in spite of the coronavirus. Engage ILW now. Call us at 212-545-0818 to find out how we can help you, or email us at webmaster@ilw.com or online.


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