EB5 Investors Magazine Volume 5, Issue 2 | Page 113

A CLOSER LOOK AT THE LAW who have not received their temporary residency status. Once this status is obtained, then the issue of materiality should no longer be an issue. Corporate Issues: The limited partnership and operating agreement needs to address how decisions are made when things do not go as planned. The general partner/ manager of the NCE would need to become very proactive in managing the workout process and trying to salvage the investment for the investors. The applicable agreement needs to be reviewed to determine if the adequate authority to take action, or investor consent may otherwise be required. The voting provisions of the entity document needs to be carefully reviewed or drafted to determine the voting percentage required to approve major decisions. Investor Consent: Investor consent may be required or appropriate to material changes in the project or the NCE’s proceedings to fund the EB-5 capital to the project once it has been released from escrow. The general partner or managers shall not want to take an undue risk of making an ultimate decision and being held responsible without investor consent. developer not obtaining the projected brand for a hotel, the loss of a key tenant in a commercial transaction that impacts the revenue potential, significant cost increases or a change in financing terms for any senior indebtedness. The potential for an SEC investigation of the regional center, the developer and/or their principals. ROLES THE VARIOUS PLAYERS HAVE IN THE EB-5 PROCESS In connection with these issues, it is important to review the roles of the various players in the process and engage the appropriate professionals who can execute on a plan to salvage the project from both standpoints. Immigration Attorney: Due to the sensitive immigration issues involving “Matter of Ho” compliance and the creation of jobs, especially given the status of the delay in investors obtaining visas from China, the issue of materiality must be taken into account. If there is a potential material change in the project prior to investors receiving their visas, this could negate the ability to proceed with the immigration process for those investors Legal Protections: For a loan model, the issue is the ability of the NCE lender to take legal action to protect its interest of the NCE under the applicable loan documents. Has the developer/borrower defaulted under the loan agreement by failing to achieve certain targeted results? Has the senior lender declared a default under the senior loan or is the developer otherwise in non-compliance with the provisions of the senior loan? Is there an inter-creditor agreement and what restrictions or protections does it provide? Is there a developer- principal guaranty of completion that can be enforced? Do such principals have the ability to actually perform? FINANCIAL ISSUES AND RESTRUCTURING In a troubled project, there are financial issues that need to be addressed. Is there a shortage of capital to complete the project or operate the business and what opportunities exist to salvage the investment.? Experienced regional centers or general partners/ managers may have the capacity of obtaining outside capital and work out a deal for the NCE lender/equity provider to bridge finance what capital is required to complete the project. This can include even taking over operations based upon either an adverse action against the developer or a EB5INVESTORS.COM 112