The EB-5 program continues to offer investors one of the best, most direct paths to U.S. Green Cards. Approval times for rural I-526E petitions are historically fast. And for investors already in the United States, concurrent filing often means quick authorizations for work and travel, too.
Whether you want to immigrate to the United States for professional, academic, or family reasons, pursuing an EB-5 visa is a long-term investment in your future. The primary goal, of course, is immigration. But every EB-5 investor hopes to at least recover the money they invest—if not earn returns on that investment.
But repayment is not guaranteed. The likelihood that an EB-5 investor will be repaid in a timely manner, or at all, largely depends on the financial viability success of the EB-5 project and the collateral of the EB-5 loan. Even if a project performs well and generates revenue, the terms of the EB-5 investment could be unfavorable to EB-5 investors. The EB-5 investment fund might rank low in repayment priority—possibly at the very bottom. Or repayment could require certain conditions to be met. And if a project does not perform as well as expected, the terms of the EB-5 investment can be especially important.
Before you invest in an EB-5 project, you should make sure it offers favorable investment terms that make it more likely you will be repaid. Taking the time to research these key terms will help you receive a full, timely repayment and may protect you from losing part of your investment—or even the entire $800,000.
For EB-5 investors, one of the strongest indicators of a project’s financial safety is a senior, secured EB-5 loan. If the loan is in the senior position, the developer will have to repay the EB-5 investment fund before it can repay other lenders in the project. As a result, a senior loan can mitigate much of the financial risk for EB-5 investors.
But not every senior loan offers real security—or is even truly senior.
For instance, an EB-5 project might claim to have a senior loan, but in reality, the loan’s senior position could be contingent on sales or other events. If sales requirements are not met or events do not occur, the loan may never become senior. The terms of the EB-5 loan may also permit the developer to take on more debt or issue liens ahead of the EB-5 loan, which can lower the EB-5 loan’s repayment priority. Or the EB-5 loan might not be properly recorded, in which case it is actually unsecured.
What does this mean for EB-5 investors?
When choosing an EB-5 project, look for a senior loan that is not contingent on sales milestones or future events. The loan should not permit other debts or liens that impact its seniority. And the EB-5 loan should already be recorded in the public record as a deed of trust or first priority lien.
The Bay Creek rural EB-5 project features a secured senior loan that is truly senior. The EB-5 loan has already been recorded as a first-lien deed of trust. Equally important, there are no hidden criteria or future performance milestones that must be achieved for the EB-5 loan to remain senior.
In this post, we explore why investing in a project with an EB-5 senior loan can be a highly effective way to lower your financial risk—and why it is crucial to find out whether a senior loan has any contingencies. Then, we will examine EB5AN’s Bay Creek rural EB-5 project and its senior loan structure.
EB-5 Senior Loans Can Reduce Risk
How to Identify a Secure EB-5 Senior Loan
A Secure Senior Loan: Introducing the Bay Creek Rural EB-5 ProjectBefore Investing, Examine an EB-5 Project’s Senior Loan TermsFurther Reading
Further Reading
Learn More About the Bay Creek Rural EB-5 Project
EB-5 Senior Loans Can Reduce Risk
To understand how an EB-5 senior loan can benefit investors, let’s review how repayment works in a typical real estate capital structure.
A real estate development’s debt and equity sources are arranged in layers based on repayment priority. These layers are commonly referred to as the “capital stack.” At the top of the stack is the senior loan, which holds priority rights on the project’s cash flows and a first lien on its collateral. Because a senior loan is secured by the strongest claim on the project, it carries the least risk of loss.
Mezzanine debt occupies the position in the capital stack just below the senior loan. As a result, mezzanine debt is higher risk than senior debt—but it is still ahead of equity in the stack. Equity investors are at the bottom of the capital stack. They absorb any losses first, but they only receive returns after all debt obligations are met.
When a project earns revenues from sales, rental income, etc., the money is distributed according to the stack. Normally, the developer must first pay down the interest and principal due under the senior loan before funds flow to mezzanine lenders. Only after these debt obligations are paid do the equity investors receive profits.
This structured sequence of repayment means that the higher a source of financing is in the stack, the lower its risk of loss. Senior lenders face the smallest shortfall if a project underperforms since they are repaid first and typically from the broadest pool of assets. Senior lenders also enjoy priority status in legal enforcement.
For EB-5 investors who want to protect their capital, a senior loan offers the greatest protection since it is repaid before other financing sources.
How to Identify a Secure EB-5 Senior Loan
Because senior loans can do so much to protect EB-5 investor funds, projects with senior loans are easier to market. Unfortunately, some projects seek to gain a marketing advantage by claiming that they have senior loans when, in truth, their loans only have the potential to be senior. It is important for EB-5 investors to be aware of these so-called “senior loans,” know how to identify them, and avoid them.
Senior Loans to Avoid
If a loan’s senior status depends on future events—like meeting certain sales figures, achieving certain leasing thresholds, or obtaining additional equity contributions from the developer—then “senior” may be more promise than protection.
Until these conditions are met, such a loan will typically be lower in the stack than the other sources of capital. If the required sales do not take place or the developer fails to meet performance triggers, the “senior” loan could be subordinated to mezzanine debt—or even to equity financing.
Before investing in projects that claim to have an EB-5 senior loan, EB-5 investors should ask in writing if the loan has any performance-based provisions and when and how it becomes senior in the stack.
Even when a loan is recorded as senior from the outset, its position can be eroded if the loan agreement allows for new more senior liens. Some senior loans, for instance, have carve-outs that allow the developers to take on more debt or issue vendor liens for construction work.
Without firm restrictions on new senior liens, a senior lender risks being pushed down the stack by future financing. EB-5 investors should avoid any project that claims to have an EB-5 senior loan but allows the developer to grant other creditors equal or superior claims under the terms of the loan.
EB-5 investors should also avoid projects where the EB-5 senior loan is not yet recorded. In such cases, the loan lacks a deed of trust or mortgage in the public land records. Without a recorded lien, the lender has no perfected security interest in the collateral, which means later creditors could receive seniority.
If the EB-5 “senior” loan is not recorded and the EB-5 project has a shortfall of capital, the loan may be treated as unsecured. To secure its rights, the EB-5 investment fund—which is the lender—may have to resort to lengthy, expensive litigation. Such proceedings often recover little.
For EB-5 investors looking for a secure senior loan arrangement, checking all these documents thoroughly is not negotiable.
What to Look for in an EB-5 Senior Loan
When a senior loan is not tied to sales or project milestones, its seniority is fixed from day one. No “if-then” triggers means that the loan will stay at the top of the capital stack regardless of whether all EB-5 funds come in at once or trickle in more slowly. Even if unit sales stall or the project fails to perform as expected, that senior claim cannot be pushed aside because it is not based on any performance conditions.
A senior loan that has a recorded deed of trust or mortgage locks in its first-lien status. As soon as it is filed in the land records, every future lender or buyer sees that this debt has first priority on the property. No matter how much additional capital flows into the project, the recorded senior mortgage cannot be pushed down to a lower position in the stack.
If an EB-5 project has no other debt, the senior loan is even more secure. With no second mortgages or vendor liens to negotiate, every dollar of rental income, sales revenues, or refinancing proceeds goes straight to the senior lender first. A clean structure like this offers EB-5 investors real peace of mind about investing their capital.
A Secure Senior Loan: Introducing the Bay Creek Rural EB-5 Project
EB5AN’s Bay Creek rural EB-5 project is a 1,720-acre waterfront community tucked between the Chesapeake Bay and the Atlantic Ocean on Virginia’s Eastern Shore. Its rolling dunes and maritime forests form a unique backdrop for this world-class resort community. The project features a soon-to-open Beach Club, an expanded racket sports complex, and an upgraded Life Center fitness facility. In partnership with Troon, the global leader in club management, Bay Creek will deliver golf, tennis, and wellness experiences on par with the finest coastal retreats.
New home sites are being released in collaboration with renowned local builders, ensuring each residence reflects both the area’s rich heritage and modern standards for sustainability and luxury.
EB-5 investors will benefit from the Bay Creek project’s rural status, which grants priority processing from USCIS. Investors in EB5AN’s other rural projects are receiving I-526E approvals in as little as 6 months, setting them up to quickly obtain their initial U.S. Green Cards.
And EB-5 applicants on H-1B and similar visas can receive work and travel documents in as little as 30 days through concurrent filing.
The Bay Creek project is expected to create approximately 1,331 EB-5 jobs, more than enough to meet the minimum requirement. As EB5AN managing partner Mike Schoenfeld puts it, “Bay Creek is more than a development—it’s a legacy in the making. We’re here to honor its history, invest in its future, and build something that truly reflects the spirit of the Eastern Shore.”
The EB-5 senior loan for Bay Creek carries genuine top-priority status from the moment of closing. Bay Creek’s loan has no “if-then” triggers. From day one, the EB-5 loan has seniority—even if homes take longer to sell or development schedules shift.
To cement that priority, the EB-5 senior loan has been recorded as a deed of trust. This public filing perfects the EB-5 lenders’ security interest, alerting all future creditors or buyers that the EB-5 debt has priority rights to the Bay Creek property.
Finally, Bay Creek carries no additional debt on its balance sheet. No second mortgages. This means there is a much greater chance for senior EB-5 loan tranches ($800,000 each) to be repaid to individual EB-5 investors on time as they are due.
Learn More About the Bay Creek Rural EB-5 Project
Before Investing, Examine an EB-5 Project’s Senior Loan Terms
Choosing an EB-5 project with a senior loan that is truly senior—one that is senior from day one, recorded as a deed of trust or mortgage, and free of any other liens—is an effective way to protect your $800,000 investment. Bay Creek’s EB-5 senior loan meets these standards.
Bay Creek’s senior loan is designed to ensure the EB-5 investment fund remains at the very top of the repayment stack and will not be subordinated by future financing sources. By investing in an EB-5 project with these high standards of investor safety, you give yourself the gift of peace of mind as you embark on your EB-5 journey.
For more information about Bay Creek, schedule a free consultation with EB5AN.
Further Reading
- Virtual Tour of Bay Creek—Explore Bay Creek’s world-class amenities and home sites.
- Bay Creek—Our Story
- Rural EB-5 Processing Times Are Faster Than Ever—A Rural Investment Remains the Quickest Path to a U.S. Green Card
- Latest I-526E Adjudication Data: Rural Approvals Surge While Urban Petitions Remain Pending in Queue
