{"id":79021,"date":"2023-08-08T04:15:55","date_gmt":"2023-08-08T04:15:55","guid":{"rendered":"https:\/\/eb5visainvestments.com\/wordpress\/?p=79021"},"modified":"2024-01-25T05:40:48","modified_gmt":"2024-01-25T05:40:48","slug":"understanding-the-risks-of-eb-5-projects-promising-high-returns-eb-5-diligence-with-investment-banker-siddharth-agarwal","status":"publish","type":"post","link":"https:\/\/eb5visainvestments.com\/vi\/understanding-the-risks-of-eb-5-projects-promising-high-returns-eb-5-diligence-with-investment-banker-siddharth-agarwal\/","title":{"rendered":"Understanding the Risks of EB-5 Projects Promising High Returns: EB-5 Diligence With Investment Banker Siddharth Agarwal"},"content":{"rendered":"<h3 style=\"text-align: center;\">Hear Siddharth Agarwal, a Bay Area Resident and EB-5 Investor,<br \/>\nExplain the Risks of EB-5 Projects Promising High Returns<\/h3>\n<div class=\"full-interview\"><iframe src=\"https:\/\/www.youtube.com\/embed\/j9VR0R7wREM?rel=0;&amp;autoplay=1&amp;mute=1&amp;loop=1&amp;\" width=\"100%\" height=\"678\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/div>\n<p>&nbsp;<\/p>\n<p><strong>Siddharth<\/strong>:<br \/>\nNow, the most important thing, which I find investors do not understand in the case of EB-5 is, whenever you are being offered a certain rate of return on a project, always think about the cost of capital that the builder of the project or the <a href=\"https:\/\/eb5visainvestments.com\/2023\/04\/18\/benefits-of-the-eb-5-program-for-project-developers-and-investors\/\" target=\"_blank\" rel=\"noopener\">developer of the project<\/a> is incurring. There is a wide gap between the return that the EB-5 investor is going to see on a project versus the cost of capital that the developer of that project is going to incur. Why do I say that? I say that because, for example, there&#8217;s an EB-5 project somewhere in California, in a university town where there is student housing being built, and the builder is offering a 4% rate of interest annually to EB-5 investors.<\/p>\n<p>Now, the industry standard for high-quality projects in EB-5 is usually a 0.25% or 0.5% rate of interest. Now, if that 4% rate of interest is being offered to the EB-5 investor, investors need to keep in mind that the EB-5 agency or the facilitator, the regional center, is also making a significant return on the capital that is being invested. That return on capital being invested is going straight to the regional center, after which another 4% is going to the EB-5 investor. Which means, let&#8217;s say the industry standard, and then investors <a href=\"https:\/\/eb5visainvestments.com\/2023\/07\/02\/eb-5-investment-transparency-a-guide-to-understanding-risks-and-identifying-red-flags\/\" target=\"_blank\" rel=\"noopener\">should read all the documentation that is provided by the regional center<\/a>. I think it&#8217;s extremely important to read the memorandum. They should read the debt agreement, the <a href=\"https:\/\/eb5visainvestments.com\/2022\/07\/15\/intercreditor-agreements-and-their-role-in-eb-5-projects\/\" target=\"_blank\" rel=\"noopener\">senior loan agreement<\/a> that any project has. I have come across projects where investors have not been provided the loan documents associated with the loan that the senior lender has made to a particular project.<\/p>\n<p>I have, by God&#8217;s grace, been able to help those investors stay away from such projects, because I want to make sure that I know how my capital is going to be treated based on not only the agreement that I have with the builder or the developer. I also want to know how the person above me in the capital stack is going to get treated in the case of a default or a project failure, because that is going to determine to a significant extent as to how I&#8217;m going to get treated eventually in a court of law.<\/p>\n<p>Without getting too much into the legal ramifications of how these things work, because that&#8217;s a completely different topic on its own: the key thing that people need to understand is the developer is taking this pool of money raised through <a href=\"https:\/\/eb5visainvestments.com\/regional-centers\/\" target=\"_blank\" rel=\"noopener\">EB-5 through the regional center<\/a>.<\/p>\n<p>The regional center is the GP here because it is facilitating this investment into a project is going to earn a certain rate of return. If you read the memorandum, that rate of return or that rate of interest will be mentioned, around 5%, let&#8217;s say. On top of that, a builder or developer is offering an additional 4% to the EB-5 investor. What does that mean? It means that the total cost of capital for the developer in a project taking money from EB-5 investors is 9% just for that capital part of the capital stack\u2014which should tell you how risky that project is. The more risk a project has, the higher the rate of return. And you should also contrast this with the fact that EB-5 investors are probably the most powerless class of investors in the U.S.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Hear Siddharth Agarwal, a Bay Area Resident and EB-5 Investor, Explain the Risks of EB-5 Projects Promising High Returns &nbsp; Siddharth: Now, the most important thing, which I find investors do not understand in the case of EB-5 is, whenever you are being offered a certain rate of return on a project, always think about [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":91188,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"about-us":[],"eb-5-program-page":[],"class_list":["post-79021","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/posts\/79021","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/comments?post=79021"}],"version-history":[{"count":0,"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/posts\/79021\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/media\/91188"}],"wp:attachment":[{"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/media?parent=79021"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/categories?post=79021"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/tags?post=79021"},{"taxonomy":"about-us","embeddable":true,"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/about-us?post=79021"},{"taxonomy":"eb-5-program-page","embeddable":true,"href":"https:\/\/eb5visainvestments.com\/vi\/wp-json\/wp\/v2\/eb-5-program-page?post=79021"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}