EB5 Investors Magazine Volume 2 Issue 1 | Page 34

Continued from page 31 How it all began Ekins and McCarthy’s partnership dates back to a friendship developed as undergraduates. The two remained in touch as careers and education took them in different directions, even internationally, before their professional paths crossed again: McCarthy worked with the Governor of Washington in the Executive Policy Office, and Ekins was managing family trusts in commercial real estate. Then, in their mid-to-late 30s, the two started American Dream Fund, and the company opened its first regional center in Los Angeles in 2009. More regional centers quickly followed—one in Las Vegas in 2010, another in Portland in 2011, and the most recent in Orlando in 2012. Like many in the EB-5 industry, their paths to careers in EB-5 were not entirely linear, though their previous professional experiences have contributed to the success of ADF. Ekins originally pursued a career in international business; he previously lived in China and Taiwan, operating manufacturing facilities and managing international exports. McCarthy earned graduate degrees in both engineering and law and, following a career in government, relocated to southern California, where he co-founded McAdam & McCarthy. It was their combination of McCarthy’s legal prowess and EB-5 knowledge, and Ekins’s experience living in Asia and working in real estate, which led them to EB-5 success. Perfectly poised for EB-5, Ekins and McCarthy embraced the opportunity to use the program to help fund one of the biggest projects in the industry to date. A key strategy in the SLS deal was conducting due diligence beyond the minimum required for I-526 petitions. ADF used 3rd party verification to do their own economic reports, and ensure that the project was EB-5 appropriate. This was necessary not only to gauge the probability of the project’s EB-5 and financial success, but also to market the project to foreign investors, who want to make sure the project is right for them before signing away such a large investment. However, Ekins and McCarthy also acknowledge that they do not have to perform due diligence all on their own. By working with the trusted brand names of Stockbridge and JP Morgan on the SLS project, they can also rely on the due diligence of other players. These big names are not only just as invested in the SLS’s potential success, but also have a lot of practice conducting due diligence and can be trusted as a reliable source. ADF was initially attracted to the project because of Stockbridge’s involvement with retirement funds. Ekins and McCarthy felt that this showed a mutual understanding of these investments as having a defining effect on people’s lives. Ekins and McCarthy say that they “do lose sleep over the idea that someone is entrusting [them] with their immigration status.” Stockbridge’s history with retirement funds signaled to Ekins and McCarthy that the group knew how to handle accounts motivated by more than just profit, and ADF felt they had a strong commitment to the EB-5 investor. This not only gave ADF confidence in the project, but they also knew that it would make it more marketable to investors. Heading up the SLS EB-5 raise ADF’s involvement in the SLS hotel began when Stockbridge approached the duo with the project and an interest in using EB-5 funds. Stockbridge had researched the EB-5 program, was interested in using the financing method, and wanted to find the appropriate team to head the EB-5 raise. The company was looking for the regional center that would best represent the project and be able to manage the raise on the EB-5 side. Ekins and McCarthy agreed to this particular project only after thorough due diligence, and a background check of Stockbridge’s long track record, financial resources, credibility, and history of similar projects. After a long dialogue, ADF worked with Stockbridge to structure the project to be EB-5 friendly, which meant setting up a loan model that did not require EB-5 investors to be involved in the day-to-day matters of the business. EB-5 investors provided capital flow to the project by investing in a special purpose entity (SPE) set up by ADF to loan funds to the SLS project. As such, investors are able to fulfill the program requirements with minimal actual involvement in the business. While EB-5 funds make up about 35 percent of the total investment in the project, this structure is indicative of a wider trend to view EB-5 investments in real world business terms—as just one part of a successful capital stack. EB-5 funds work in concert with other loaning parties and private equity brought in by the owners of the project. 32 George Ekins (left), and Joe McCarthy (right). Although the project was backed by reputable sponsors, Ekins and McCarthy nonetheless encountered difficulties marketing the project abroad in the wake of the controversy surrounding A Chicago Convention Center. Potential EB-5 investors became understandably cautious of the program, which made it much more difficult for ADF to get these investments. However, because the project was built on a strong foundation with reputable players, and had been adequately vetted for EB-5 compatibility, ADF was able to bring in over 600 interested investors. Because they had conducted due diligence, they were able to ensure, from the very beginning, that they were choosing a project that would be attractive to investors. E B 5 I n v e s to r s M ag a z i n e