EB-5 Investment Due Diligence: Questions Investors Should Ask Before Committing Capital

Project and enterprise structure

• What exactly is the new commercial enterprise, and what is its relationship to the underlying project?
• Who are the sponsor, the developer, the manager and, where applicable, the regional center — and what is each one's role?
• Is investor capital pooled, and how is it deployed into the project?
• What governance rights do investors hold, and what decisions can be taken without them?
• How is investor capital segregated, escrowed or released, and on what conditions?

Job creation methodology

Job creation is central to the programme, and it is where investment questions and immigration questions meet.

• How is job creation being counted, and by whom?
• What assumptions does the economic analysis rest on, and what happens to the count if construction is delayed or scaled back?
• What is the cushion between the jobs projected and the jobs required across all investors in the offering?
• How and when will job creation be evidenced for petition purposes?

These questions should be reviewed with immigration counsel; USCIS publishes the programme's requirements and the forms through which they are evidenced.

Capital stack and financial position

• What is the total capitalisation, and what portion is EB-5 capital?
• Where does the EB-5 tranche sit relative to senior debt, mezzanine debt and developer equity?
• How much sponsor equity is actually at risk, and in what form?
• What happens if the offering does not fill — does the project still proceed, and how?
• What are the sources and conditions of the remaining capital, and are those commitments binding?

Offering documents

The offering documents govern. Marketing materials do not.

• Read the private placement memorandum, the operating or partnership agreement, and the subscription documents in full, with counsel.
• Compare every claim made verbally or in a brochure against what the documents actually commit the sponsor to.
• Understand the risk factors section rather than skimming it; it is often the most informative part of the document.
• Confirm how the offering is being made and under which exemption, and what that means for investor eligibility and information rights.

Timelines and assumptions

• What is the construction and delivery schedule, and what has this sponsor's delivery record been on comparable projects?
• What processing timelines are being assumed, and are they presented as estimates rather than commitments?
• What is the anticipated duration of the investment, and what governs an extension?
• How are investors informed if assumptions change?

Petition processing times are determined by USCIS and are outside the control of any sponsor or adviser. Treat any presented timeline as an estimate.

Exit and return of capital

• What is the contemplated repayment source — refinancing, sale, cash flow — and how realistic is it under stress?
• What is the priority of investor capital on exit?
• What happens to an investor's position if they exit the immigration process, or if a petition is denied?
• Is any return or repayment guaranteed? Understand why a guarantee can be inconsistent with programme requirements that capital remain at risk.

Fees, conflicts and parties

• What are all the fees — administrative, management, sponsor, intermediary — and who receives them?
• Is anyone presenting the offering being compensated for the referral, and is that disclosed?
• What related-party relationships exist between the enterprise, the developer, the contractor and the manager?
• What is the litigation, regulatory and delivery history of the principals?

The advisers you should have

• Qualified U.S. immigration counsel, independent of the sponsor, for everything petition-related.
• An investment or securities professional to review the offering on its financial merits.
• A cross-border tax adviser covering your home country and the United States.
• Where real estate is the underlying asset, a professional who can assess that asset independently of the offering narrative.

Independence matters more than convenience. Advisers introduced by the sponsor may be perfectly competent, but at least one voice in the room should have no interest in the transaction closing.