Wohali Utah: A Compelling Rural EB-5 Project

Wohali Utah is a 428-residence golf community development located just north of Park City, Utah. It offers some of the best features of any EB-5 project on the market today.

Overview of the Wohali Utah EB-5 Project

Rural TEA Designation. The project is located in a rural targeted employment area (TEA). Rural TEA designation qualifies EB-5 foreign investors for a reduced minimum investment of $800,000, priority processing of Form I-526E, and access to the largest reserved EB-5 visa category, taken from 20% of the total EB-5 visa supply.

Significant Job Creation. Construction is already underway. Out of the 990 jobs required for Wohali Utah’s foreign investors, more than 300 positions have already been created as of August 2022.

Developer Guaranties and Loan Security. The developer has provided EB-5 investors with a job creation guaranty and an approval refund guaranty for Form I-526E. The EB-5 loan is secured by mortgages on thousands of acres of land and a 100% equity pledge from the development entity.

Independent EB-5 Oversight. Wohali Utah’s regional center sponsor and the general partner of the EB-5 investment fund are 100% independent from and unaffiliated with the developer. Independent third-party oversight of EB-5 projects avoids conflicts of interest and reduces risk for EB-5 investors.

A Low-Risk EB-5 Loan Structure. The EB-5 loan is structured in individual $800,000 tranches for each investor. The loan term is five years for each individual investor, and this period will not change based on United States Citizenship and Immigration Services (USCIS) processing times or on the time that other EB-5 investments are made in the project.

As a result, EB-5 investors in the Wohali Utah project can expect a prompt repayment of their capital after the clearly defined investment period.

These features make Wohali Utah a best-in-class offering that, as far as we are aware, is unlike any EB-5 commercial enterprise available today. Below, we examine each of these topics in greater detail.

Understanding Rural TEA Designation

To qualify for TEA designation, an EB-5 commercial enterprise must be located in either a rural area or in an area with high unemployment compared to the national average unemployment rate. (Some public infrastructure projects also qualify for the benefits of TEA status.)

A rural EB-5 project cannot have a population greater than 20,000 or border a municipality with more than 20,000 people, and it cannot be located in a metropolitan statistical area (MSA). Rural TEA designation must be supported by the most recent 10-year U.S. census data.

EB-5 projects in rural areas offer significant benefits for foreign investors. Investors in rural TEA projects can invest at the reduced amount of $800,000 and are eligible for reserved EB-5 visas, which may allow foreign investors to complete the EB-5 immigration process more quickly. Investors in rural area projects also benefit from faster processing for Form I-526E, the first application in the EB-5 immigration process.

Still, due to their locations, rural EB-5 investment projects may carry different risks compared to those of urban projects. Rural areas have fewer people, which typically means less economic activity. Therefore, it is critical to identify a rural EB-5 project with strong economic fundamentals and understand both the immigration and financial risks involved.

Comparing Risks in Different Types of Rural EB-5 Projects

All EB-5 investments carry a level of risk for EB-5 investors, but some projects are riskier than others. Prospective EB-5 investors should carefully research projects to understand each project’s specific risk profile. Rural projects can potentially carry more risk than comparable projects in heavily populated areas, but not necessarily so. Additionally, certain types of rural projects may carry more risk than others.

Hospitality, manufacturing, and master-planned community developments are three of the more popular types of rural EB-5 projects.

Risks in EB-5 Hospitality Projects

In rural areas, hotels and other businesses in the hospitality industry are dependent on consumer travel and spending. In turn, travel and spending are substantially affected by changes in the economy. Consumers are less likely to travel during a weak economy. If they do, they are more likely to stay at less expensive hotels near their destinations or tourist attractions.

Rural hotel and hospitality projects run the risk of insufficient market absorption. For many rural projects, comparable market data is not available or is limited, meaning that the addition of a hotel or business to the market will have an unknown impact on the local economy. Rural hospitality projects are reliant on travel, and they may simply fail to attract the traffic needed to turn a profit. This uncertainty creates a greater financial risk for EB-5 investors.

Since hotels require a full-time staff to operate, scaling back operations may not be an option. When faced with a choice between operating at a loss or shutting down, many rural hospitality projects choose to fire their employees and shut down. For EB-5 investors, such a choice would have catastrophic consequences: their immigrant petitions could be denied, and they may lose all of their investment capital.

Hospitality projects often have a larger scale and require significant upfront spending years before revenues are made. EB-5 foreign investors in hospitality projects face greater financial risk and, if development is delayed, greater immigration risk.

Risks in EB-5 Manufacturing Projects

The United States Department of Agriculture recently found that rural manufacturing employment has been on the decline. From 2001 to 2015, total U.S. employment grew almost 7%, but manufacturing jobs went down by 21%. In other words, the rural manufacturing sector became a smaller portion of the overall economy. During that period, two separate recessions caused many rural manufacturing plants to shut down permanently.

Since rural manufacturing plants are designed to be profitable when running at full capacity, they may not have the option of scaling back production if the economy declines. When faced with a choice between operating at a loss or shutting down, many rural plants have opted to close. The increased vulnerability of rural plants to economic downturns makes rural manufacturing EB-5 projects risky for foreign investors.

The time and cost required to develop a manufacturing plant are considerable compared to the development of master-planned communities; manufacturing facilities require massive spending over a period of years before profits can be realized. Increases in costs may create a need for additional equity or investment, which could take time to obtain. Supply-chain issues during construction can also delay development.

These factors may result in long investment timelines for EB-5 investors, greater risk that their capital will not be repaid, and potential delays in development that may affect job creation.

Risks in EB-5 Master-Planned Community Projects

Like manufacturing and hospitality projects, master-planned community projects in rural areas can be vulnerable to economic downturns. If the local housing market is depressed, construction activities may not proceed as expected. This could impact EB-5 job creation.

Unlike manufacturing and hospitality projects, however, the development process for master-planned communities is carried out in several small stages; each house in a master-planned community represents only a small part of the overall project.

Homes and lots are often sold prior to building, so spending and earning typically happen at the same time. Since short-term investment cash flows are tied to revenue cash flows, this dynamic reduces financial risk. In addition, the pace of home construction can be adjusted to match the pace of the current economic cycle.

While cost increases in the construction of a manufacturing plant or hotel will be absorbed by the developer, cost increases for houses are typically absorbed by homebuyers. These factors reduce financial risk for investors and help prevent development delays that might impact job creation and the timely return of EB-5 investment capital.

Benefits of Selecting a Rural EB-5 Project

While rural EB5 investment projects may carry more risk than similar urban projects, the benefits offered by rural projects can make the added risk worthwhile.

For example, the lower investment amount of $800,000 mitigates the greater financial risk of rural projects by reducing the amount of capital at risk.

In addition, obtaining a reserved EB-5 visa through a rural TEA project is particularly beneficial for investors from countries experiencing visa retrogression. (Countries whose volume of EB-5 visa applicants exceeds the available visa supply are considered to be in visa retrogression.) Investors who obtain a reserved EB-5 visa avoid the delays associated with limited visa availability. They can often immigrate to the United States years earlier than would otherwise be possible, effectively skipping the waiting line ahead of other EB-5 visa applicants.

The EB-5 Reform and Integrity Act of 2022 reserves 20% of the total number of EB-5 visas for rural TEA investors and their families. This represents the largest supply of reserved visas, since investors in high-unemployment TEAs and infrastructure projects are entitled to only 10% and 2%, respectively.

Moreover, priority processing of Form I-526E results in faster adjudication times for rural TEA investors and a reduced waiting time before receiving U.S. Green Cards.

Evaluating Rural EB-5 Projects

Some basic research can help investors avoid high-risk EB-5 projects.

EB-5 investors can take steps to safeguard their EB-5 investments by vetting developers to ensure they have a proven track record. Investors should confirm that the development team has adequate experience and has been vetted and backed by an institutional lender.

Another important consideration is how much equity the developer has invested in the project and whether the developer is trying to recapitalize or replace their equity with EB-5 investment capital. If a developer can use EB-5 capital to pay back their equity, then the risk to the developer is reduced, while the risk to the EB-5 investors is increased. EB-5 investors should avoid projects that use EB-5 investment capital to pay back developer equity.

The type of commercial enterprise and its location should also be considered. For example, rural hotel projects in locations with minimal traffic and tourism are inherently riskier than urban hotel projects in major travel and tourist destinations. EB-5 investors should carefully research each project and its market to better understand the project’s viability.

A project’s regional center sponsor should also be led by knowledgeable, experienced industry professionals independent from the developer. A reliable regional center sponsor is especially important, as the EB-5 program is currently in a state of flux: the EB-5 Reform and Integrity Act of 2022 changed regional center compliance and reporting requirements and modified how rural TEAs work. At the same time, USCIS has yet to issue guidance on how these changes will be implemented.

Now, more than ever, projects with inexperienced regional centers with no proven track record in the EB-5 industry are significantly risky.

Wohali Utah Is a Best-in-Class Rural EB-5 Project

Wohali Utah is a unique rural EB5 project, offering unparalleled features that limit both immigration and financial risk for its investors. An experienced development team, proven market fundamentals, an independent regional center, a secured EB-5 loan with mortgages on thousands of acres of land, and several other features make Wohali Utah one of the most compelling rural EB-5 projects on the market today.

Experienced Development Team

Wohali Utah is led by an experienced development team with a personal connection to the Utah backcountry.

Wohali Utah’s principal David Boyden has family roots on the land going back generations. His ancestors were the first to settle the land as homesteaders in the 1800s. In addition, Boyden is an acclaimed golf course designer whose Dunes Course at Diamanté Cabo San Lucas received accolades from GOLF Magazine and Golf Digest, including being named the top new international course of 2011. Boyden designed Wohali Utah’s 18-hole championship golf course to take full advantage of the development’s truly unique scenic mountain views.

John Kaiser, the principal overseeing construction, is devoted to building communities known for their quality. He has more than 30 years of experience constructing spectacular homes and a reputation for using the finest materials, outstanding craftsmanship, and custom designs. Kaiser is intimately involved with all aspects of the Wohali Utah development, from design to construction.

Strong Financials

The developer group has already invested more than $25 million in equity and is committed to completing the project. The developer equity cannot be paid back using EB-5 investment capital, so the developer has a vested interest in the project’s success. Builder’s Capital, one of the leading private lenders for residential construction developments in the United States, has vetted the project and backed it with a $50 million revolving senior loan.
Development of Wohali Utah is not dependent on EB-5 investment, and there is no minimum EB-5 capital raise.

Proven Single-Family Home Market

The single-family home market around Park City, Utah, is highly active, and all but six of the Wohali Utah’s Phase 1 lots have already sold. Many rural EB-5 projects have no real market comparables—that is, no hard data to support their viability. Wohali Utah, on the other hand, has more than 20 years of market-comparable data that demonstrate proven demand for new single-family homes. While other similar single-family home communities are being developed in the area, demand continues to exceed supply.

An Experienced, Independent Regional Center

EB5AN serves as Wohali Utah’s regional center sponsor. The regional center is totally independent from the developer, which means that the regional center is focused on meeting the needs of the EB-5 investors without conflicts of interest. EB5AN is an experienced EB-5 regional centers operator that has facilitated more than $1 billion of investment under the EB-5 program, and its total project development costs exceed $4.1 billion.

EB5AN’s world-class, low-risk investment offerings have served more than 2,000 immigrant investors from more than 60 countries. EB5AN is one of a select few EB-5 firms with no lawsuits, fines, or loss of EB-5 capital.

Significant Job Creation

Each EB-5 investor must demonstrate that his or her investment has resulted in the creation of at least 10 new, full-time, qualifying jobs for U.S. workers. Projects sponsored by a regional center can count both direct jobs on their payroll and indirect employment resulting from the project’s construction expenditures and revenue creation.

As mentioned previously, Wohali Utah has already created more than 300 EB-5-eligible jobs from the development of the project.

Only 990 new jobs need to be created to support the maximum number of EB-5 investors. The Wohali Utah project, however, is expected to create 4,396 qualifying jobs for EB-5 investors—roughly 44 jobs per investor. Therefore, investors in the commercial enterprise will enjoy an ample job creation cushion and higher chances of successful immigration.

A Low-Risk Loan Structure

Typically, EB-5 investments are pooled into a single loan with the same repayment timeline for all investors. In contrast, the EB-5 loan for the Wohali Utah project is structured in individual tranches for each investor, and the term of each tranche is five years. This means that the first EB-5 investor in the Wohali Utah project will be the first EB-5 investor to be repaid by the project.

Unlike most other EB-5 projects, the start date of the five-year loan term is not dependent on a minimum number of EB-5 investors, the timing of USCIS approvals, or any other conditions. Since Wohali Utah will repay its EB-5 investors in staggered, $800,000 tranches, investors will enjoy increased safety and a shorter repayment timeline.

Additional Features that Mitigate EB-5 Investors’ Risk

As added layers of security, EB-5 investors in Wohali Utah will receive job creation and Form I-526E approval refund guaranties. This arrangement provides investors with an accelerated repayment of funds if USCIS denies their visa applications. The EB-5 loan is secured by mortgages on thousands of acres of land and a 100% equity pledge from the development entity.

Wohali Utah: A Unique, Low-Risk EB-5 Project

No EB-5 project can fully mitigate all risks to its investors. Financial and immigration risks are simply a part of the EB-5 program. Some projects, however, significantly reduce investors’ risk and represent much safer options.

Wohali Utah offers several unique features that mitigate both financial and immigration risks and provide unparalleled safety to its investors.

For more information on the Wohali Utah project or other rural area projects, please schedule a one-on-one call with EB5AN or send an email to info@EB5AN.com.

Prospective investors are also invited to register for the Wohali Utah project webinar on Thursday, August 25, 2022, to learn more about EB5AN and the Wohali Utah project.