Money and structure
Developer equity
Also called sponsor equity, skin in the game.
Developer equity is the project sponsor's own money in a deal, normally the most subordinate position in the capital stack: repaid only after the lenders and after the EB-5 capital, and first to absorb a loss. It is a project finance term rather than an immigration one, and no EB-5 rule sets a minimum for it.
What it decides
Nothing in 8 U.S.C. 1153(b)(5) or 8 CFR 204.6 sets a minimum for the sponsor's own contribution, and no USCIS form collects it, so this is a diligence question rather than a filing requirement. Form I-956F, which a regional center files with USCIS for each investment offering, carries only two figures from the stack: total estimated cost of the project at Part 5, Item 6, and the aggregate amount of project costs funded by EB-5 capital at Part 5, Item 8. It asks for no other source of capital, so no loan balance can be read off it, and it is filed with USCIS rather than handed to investors. Do not treat total cost less EB-5 capital less the senior and mezzanine loans as the sponsor's equity. That remainder also holds third party preferred equity, land or buildings contributed at appraised value, deferred developer and contractor fees, grants, tax credit equity, public money and bridge financing. Work instead from the sources and uses table in the comprehensive business plan and the private placement memorandum, both required with the same application under 8 U.S.C. 1153(b)(5)(F)(i)(I) and (IV), and ask how much of the sponsor's line is cash already spent rather than value credited. Two related party questions sit on the same form. Part 6, Item 4 requires disclosure of any conflicts of interest among the regional center, the NCE, the JCE, or the principals, attorneys or individuals responsible for recruitment or promotion, tracking 8 U.S.C. 1153(b)(5)(F)(i)(IV)(bb). Part 4, Item 13 asks whether the job creating entity is an affiliated JCE, meaning one controlled, managed or owned by any of the people involved with the regional center or the new commercial enterprise, a term defined at 8 U.S.C. 1153(b)(5)(D)(i).
Where this is explained properly
Pages here that go into developer equity rather than mentioning it.
Related terms
- Capital stackThe capital stack is the ranking of a project's funding sources by priority of claim, from senior debt, which is paid first and absorbs losses last, down through mezzanine debt and preferred equity to common equity, which is paid last and absorbs the first losses. It is a finance term rather than an EB-5 one: nothing in the EB-5 statute or regulations fixes where a project's EB-5 money must rank.
- Senior debtSenior debt is the borrowing that ranks first in a project's capital stack, normally secured by a first lien on the project assets, and it is paid ahead of every junior claim, an EB-5 loan included, out of project cash flow and out of the collateral if the borrower defaults.
- Mezzanine debtMezzanine debt is a loan ranking below the senior lender and above every equity holder, and in a regional center loan model it is a common position for the loan the new commercial enterprise makes to the job creating entity. It describes that loan, not the investor's own stake, which has to be equity in the new commercial enterprise rather than debt.
- Loan modelThe loan model is the regional center structure in which the new commercial enterprise lends the pooled investor capital to a separate job creating entity, most often a company the project developer controls, instead of taking an ownership stake in it.
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