Interviewer:
So, how do you locate a good investment opportunity in a rural area?
Sam:
That’s a great question, and I’d agree with you that generally, because there’s less economic activity in rural areas due to lower population and farther away from urban centers, it really makes it that much more difficult to find high-quality rural EB-5 projects. Because of that, we’ve really tried to focus on residential. That’s an area of the economy that we’re very familiar with, that we’ve been successfully investing in over the last 15 years across different geographies.
Interviewer:
All residential, in these 15 years? Only residential?
Sam:
Essentially, yes.
Interviewer:
Okay.
Sam:
For-sale residential housing, and it’s generally mostly focused on the trend that there’s a housing shortage in the U.S. and particularly in the Southeast United States. There’s a lot of movement from senior citizens, 55 years and older. And that trend has really been accelerated by COVID. During COVID, we saw a lot of people working from home wanting a larger home because they were staying at home [for] more time and they got tired of living in larger cities with higher costs of living. And so that trend, general migration trend away from the Northeast, away from the West Coast, the California Bay area in particular, shifting people to the Southeast: so Florida, Georgia, Tennessee, [and] North and South Carolina, where there’s lower taxes, better weather, you can get a larger house for the same amount of money, a newer house. There’s been a big trend of people moving to those areas. And so, we’ve been trying to focus our investing activities to take advantage of that migration trend.
Sam:
There’s a few reasons why the Twin Lakes rural EB-5 project is really a compelling opportunity for investors. The first one I’ll talk about is the developer. The Kolter Group, they’re one of the largest, most experienced developers in the Southeast United States. They’ve done more than $24 billion of in-process and realized development over the last 25+ years, 20,000+ in-process developed homes. The Twin Lakes project is one of their Cresswind active adult communities.
Sam:
We’ve worked with Kolter for more than 10 years now on 15 other successful EB-5 projects, including other home projects like the Twin Lakes project. All the past projects have gone perfectly: all jobs created, all funds repaid or invested in good standing, and the Kolter Group specializes in single-family homes, like the Twin Lakes project.
Sam:
The project’s been under construction for over four years at this point, over 550 of the homes out of 1,300 homes have already been sold, [with] over 400 homes already built. So, there’s hundreds and hundreds of buyers who have already moved to the Twin Lakes project and are already living there. All the amenities are already completed. The clubhouse, the pickleball courts, tennis courts, pool, gym—all of that’s already built, and now the developer is just continuing to build and sell individual homes.
So, [regarding] a lot of the risk associated with the business plan or an investment plan, the real primary question is: Can you successfully build and sell homes at this location, at this price point? That’s really the question.
And if the answer is yes, you can, then the project’s going to create a lot of jobs, it’s going to make money, it’s going to be profitable, and everything’s going to go well for both Kolter and for all of the EB-5 investors. And the 550+ homes that have already been sold at that price point is clear proof that that is possible and the company’s already profitable.
And as a result, we’ve had a lot of interest in the EB-5 aspect of the project because it’s very, very rare to find a rural EB-5 project where it’s already profitable, the funds needed to complete construction are there, and you have all the jobs needed for investors to get the permanent Green Card already in place. That’s very, very difficult to find, particularly in a rural area.
Sam:
By nature, we’re only selling to seniors, older people who are looking to retire and scale back. And so, the vast majority of those people are wealthier, right? The wealthiest segment of the U.S. population is 55 years and older. And it makes sense, because those people have been working for 30, 40 years and they’ve saved up money, they’ve inherited money, and now they want to retire. And these houses are fairly reasonably priced. They’re not millions of dollars. [The] average price goes maybe about $500,000 depending on what lot, how big of a home, how many bedrooms you want. It’s all customizable. But generally, about 70% of the buyers in the project so far, of those 400+ homes that have already been closed and are now owned by buyers—about 70% of those transactions were all cash.
Interviewer:
All cash, no loan.
Sam:
These buyers do not need mortgages generally. So, they’re not first-time homebuyers. In almost all cases, they’re 55 years and older. This is a second, third, fourth home in their life that they’ve purchased. So, they generally aren’t buying with a mortgage. Number one, they don’t need a mortgage, so the interest rate isn’t really applicable. And then second, if we just look at the home sales, the project was the number one home-selling community in the whole state of Georgia for this segment, active adult communities in 2022. They sold more homes than any other developer in the whole state. And so far in 2023, the sales on average per month have actually been higher in 2023 than in 2022. So even though interest rates have continued to go up over the last year, sales have actually gone up, which doesn’t really make sense.
But I think it’s because the reality is there’s just a lot of demand from senior citizens for this type of community. And now that all the amenities are done, the pool’s done, the gym’s done, they’re having activities every week. It’s much more attractive to buyers this year with all those amenities being open.
Sam:
And the second your home is done, you can access all the amenities. Whereas a year or two ago, all that stuff was under construction. And so, you could buy a home, but you couldn’t go to the clubhouse, you couldn’t use the pickleball [courts], play tennis. But now all that’s done, so it’s a lot more attractive. And even though interest rates are higher, most people aren’t dependent on a mortgage. And so, it’s not really that applicable.
We think it’s because of that. Also, the fact that the majority of the homes are being built here, it’s not speculation. So, when Kolter starts to build a home, they have the buyer identified, the buyer’s picked out the house, put down a cash (non-refundable deposit), and then Kolter is starting a construction of the home, and about a year later the home’s done. But if they don’t have that buyer there putting down the deposit, they’re not really starting construction.
So, they’re never in a position where they’re building all these homes and then hoping, praying, “I hope we can sell this later.” No, they’ve got the buyer, they put down a deposit, and then they’re starting construction.
So, they’re not really in a position where a lot of other EB-5 projects, let’s say, like a big tower or one big building where you have to finish the building before you can actually sell anything. That’s a lot riskier for investors because you can’t adjust the speed of the construction to meet the demand.
Sam:
With this project [Twin Lakes Georgia], as sales increase, as you get more and more buyers demanding homes, you can speed up construction and just build more homes one by one. But if there’s a recession or home sales slow down, it’s very easy: just build less [fewer] homes. And so it’s very easy to match supply and demand.
Sam:
And that’s another reason why we really like these single-family home projects in rural areas: because you’ve got that flexibility to speed up or slow down to match the economic reality.
Interviewer:
Okay. The fifth question is about the job creation now. So, how many jobs have been created?
Sam:
In total, we expect the project to create almost 7,000 EB-5-eligible jobs. Remember that job creation comes from capital expenditure. So, as Kolter spends funds on windows, cement, roofing materials, wood—that expenditure directly translates into EB-5-eligible jobs. It’s a simple math formula. Money spent times the job multiplier equals jobs created. Because Kolter’s already spent more than $200 million on construction costs so far, that has created more than 2,000 EB-5 eligible jobs. And so those jobs have already been created, and so we’re able to assign, allocate those jobs to EB-5 investors in the project. And as a result of that, [for] every investor who joins the project now, we have more than the 10 jobs needed for the investor to successfully complete the EB-5 Green Card process already. So, investors know that when they join day one, they already have more than the 10 jobs they need to successfully obtain the permanent Green Card later in the investment process.
Interviewer:
Sounds very good. Already got the jobs. It’s amazing.
