Do you dare to invest in the EB-5 project of Billion Group?
822025/2/7
Is the EB-5 project operated by Billion Group really worth investing in?
Will you invest in an EB-5 project that looks flawless and has billions of assets behind it? The developer has a strong background, behind which is the Jewish family on Wall Street. The names are all real estate success stories and charitable donation stories. Does that sound attractive? However, after in-depth analysis, you may find that this project has perfectly stepped on the' invisible pit' of every EB-5 investment. What the hell is going on? Let's take a look.
1. Let's look at the project background first.
The operation logic of this project is as follows: the group company sells the real estate to its subsidiary company B through its subsidiary company A, and then company B acts as JCE to raise funds from EB-5 investors.
It looks tall, but the problem is that this kind of related party transaction is to circulate funds within the group, while the risks borne by investors are infinitely magnified.
After Company A made a profit of $10 million, it transferred the property to Company B, and Company B undertook the bridge construction loan of Company A.. The property is fully rented, but the details of the lease contract have not been disclosed, which is directly related to the repayment ability and refinancing potential of the project. 、
2. Capital structure
The total investment of the project is USD 80 million, including:
1) Senior bank loan: USD 40 million (however, whether the loan is approved or not has not been determined).
2)EB-5 loan: USD 36 million.
3) The developer's own funds: only $4 million.
Do you see any problems? Let's continue to look at PPM and find these problems:
If the bank loan cannot be approved, the project will not be able to proceed with the green card, and the investor's funds may have to wait for a refund.
Even if the loan is approved, the bank may restrict the equity mortgage, which will cause EB-5 funds to become pure loans without collateral.
More dangerously, developers may raise funds again in the future, and the repayment priority of subsequent creditors will be higher than that of EB-5 investors.
3. Look at the repayment collateral: there is almost no actual guarantee.
EB-5 has a loan of $36 million, but only 4 million shares are used as collateral. Moreover, other creditor's rights have higher priority than EB-5 funds. This means that if something goes wrong,
EB-5 investors basically have no protection.
There is also a tougher clause, which is to give the manager transitional authorization. In the future, the manager can revise the loan contract according to the project financing needs without the consent of EB-5 investors! !
4. Look at the trading structure: you will find that the conflict of interest is very obvious.
The fund manager, JCE (the developer), the developer group and the construction bridge loan provider of this project all belong to the same group company. In other words, fund managers and developers are' left-handed and right-handed'. If there is no strong contract to protect investors, investors will basically lose their ability to independently monitor projects.
5. Look at the loan term again: Is it reasonable to repay in six years?
The initial term of the project loan is 3 years, but there are three extensions, each for 1 year, which can be extended to 6 years in total. The deferred interest is very low and the initiative is on JCE's side. There is a question here: the project has been completed, and EB-5 funds are only used to replace the developer's bridge funds, so why do you still need a six-year repayment period?
6. Let's look at the reinvestment agreement carefully.
There is a knowledge point here. There are two possibilities for general project reinvestment, that is, both JCE and NCE may reinvest.
This PPM makes it very clear that the reinvestment clause allows NCE to continue reinvesting after the initial 3-year loan expires and during the 6-year extension period, and the reinvestment does not require the consent of investors, and there is no collateral guarantee.
In other words, managers can freely decide to use funds for investments of any nature and risk.
7. Let's finally look at profitability:
According to the financial statements provided by the developer, I can tell you directly that there is almost no possibility of repayment for this project before 2030.
All the positive cash flows of the project are paid to the fund company manager as management fees.
The best result may be repayment through refinancing in 2031, but it depends on whether the tenant can renew the lease stably.
Lao Guo finally summed it up: The developer of this project is really strong, but what's it to you?
1. First of all, related party transactions are actually to circulate funds within their group, and the interests of investors are hardly guaranteed.
2. Secondly, there is a serious shortage of collateral, and the priority of creditor's rights is still extremely low, so EB-5 funds are forced to bear the greatest risk.
3. Finally, the profitability is weak and the reinvestment clause lacks transparency.
The advantage of this project is that the group company is very good. But in such a project, are you really willing to take risks?
Will you invest in an EB-5 project that looks flawless and has billions of assets behind it? The developer has a strong background, behind which is the Jewish family on Wall Street. The names are all real estate success stories and charitable donation stories. Does that sound attractive? However, after in-depth analysis, you may find that this project has perfectly stepped on the' invisible pit' of every EB-5 investment. What the hell is going on? Let's take a look.
1. Let's look at the project background first.
The operation logic of this project is as follows: the group company sells the real estate to its subsidiary company B through its subsidiary company A, and then company B acts as JCE to raise funds from EB-5 investors.
It looks tall, but the problem is that this kind of related party transaction is to circulate funds within the group, while the risks borne by investors are infinitely magnified.
After Company A made a profit of $10 million, it transferred the property to Company B, and Company B undertook the bridge construction loan of Company A.. The property is fully rented, but the details of the lease contract have not been disclosed, which is directly related to the repayment ability and refinancing potential of the project. 、
2. Capital structure
The total investment of the project is USD 80 million, including:
1) Senior bank loan: USD 40 million (however, whether the loan is approved or not has not been determined).
2)EB-5 loan: USD 36 million.
3) The developer's own funds: only $4 million.
Do you see any problems? Let's continue to look at PPM and find these problems:
If the bank loan cannot be approved, the project will not be able to proceed with the green card, and the investor's funds may have to wait for a refund.
Even if the loan is approved, the bank may restrict the equity mortgage, which will cause EB-5 funds to become pure loans without collateral.
More dangerously, developers may raise funds again in the future, and the repayment priority of subsequent creditors will be higher than that of EB-5 investors.
3. Look at the repayment collateral: there is almost no actual guarantee.
EB-5 has a loan of $36 million, but only 4 million shares are used as collateral. Moreover, other creditor's rights have higher priority than EB-5 funds. This means that if something goes wrong,
EB-5 investors basically have no protection.
There is also a tougher clause, which is to give the manager transitional authorization. In the future, the manager can revise the loan contract according to the project financing needs without the consent of EB-5 investors! !
4. Look at the trading structure: you will find that the conflict of interest is very obvious.
The fund manager, JCE (the developer), the developer group and the construction bridge loan provider of this project all belong to the same group company. In other words, fund managers and developers are' left-handed and right-handed'. If there is no strong contract to protect investors, investors will basically lose their ability to independently monitor projects.
5. Look at the loan term again: Is it reasonable to repay in six years?
The initial term of the project loan is 3 years, but there are three extensions, each for 1 year, which can be extended to 6 years in total. The deferred interest is very low and the initiative is on JCE's side. There is a question here: the project has been completed, and EB-5 funds are only used to replace the developer's bridge funds, so why do you still need a six-year repayment period?
6. Let's look at the reinvestment agreement carefully.
There is a knowledge point here. There are two possibilities for general project reinvestment, that is, both JCE and NCE may reinvest.
This PPM makes it very clear that the reinvestment clause allows NCE to continue reinvesting after the initial 3-year loan expires and during the 6-year extension period, and the reinvestment does not require the consent of investors, and there is no collateral guarantee.
In other words, managers can freely decide to use funds for investments of any nature and risk.
7. Let's finally look at profitability:
According to the financial statements provided by the developer, I can tell you directly that there is almost no possibility of repayment for this project before 2030.
All the positive cash flows of the project are paid to the fund company manager as management fees.
The best result may be repayment through refinancing in 2031, but it depends on whether the tenant can renew the lease stably.
Lao Guo finally summed it up: The developer of this project is really strong, but what's it to you?
1. First of all, related party transactions are actually to circulate funds within their group, and the interests of investors are hardly guaranteed.
2. Secondly, there is a serious shortage of collateral, and the priority of creditor's rights is still extremely low, so EB-5 funds are forced to bear the greatest risk.
3. Finally, the profitability is weak and the reinvestment clause lacks transparency.
The advantage of this project is that the group company is very good. But in such a project, are you really willing to take risks?
