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EB-5 Sanctioned Private Placement Offerings - Transaction Structures
The typical transaction is structured as a limited
partnership. There are two (2) general partners in the deal. The
developer (or owner/operator of the project, as the case may be) is the
operating general partner. An entity nominated by Rainmaker Marketing
Corporation is the financial general partner. The limited partners are
these general partner entities and the foreign nationals who are investing their
money pursuant to the EB-5 requirements. Only the limited partnership
structure can be used as the language of the EB-5 program is clear that
limited partnership participation counts as active business
management. If you do not want the foreign nationals as active
partners in your hair all the time then we have to do this as a private
placement offering for a limited partnership.
The typical transaction is a five-year deal. At the end of
the fifth year, the owner/operator refinances the deal and buys out the
financial general partner's interest and the limited partner interests.
The foreign nationals receive 110% of their investment basis (meaning an imputed
2.00% per annum interest rate on their money, but that interest payout has to be
structured to happen over the 5-year operating period to ensure there are no
compliance issues) and they exit the transaction.
The financial general partner receives:
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20% of the limited partner ownership
interests. |
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20% of the cash flow after payment to
the capital contributing limited partners mandatory distributions are
satisfied. |
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2% per annum management and
administration fee (computed on EBITDA). |
The financial general partner's interest is valued based upon the
income-approach for the property, capitalizing the projected forward 12-month
EBITDA cash flows using a capitalization rate equal to 175% of the current NYSE
Prime Rate as of the date of valuation, or 8.5%, whichever is higher. This
program approach leaves the vast majority of the upside future profits of
the transaction in your hands if you play ball and follow the rules.
For the purposes of the transaction, cash flows are assumed to be
all excess cash proceeds generated from operating activities and non-operating
activities of the partnership. Significant other terms and conditions may
apply based upon the transaction, current capital market conditions and risk
factors that are unique to the transaction in terms of their potential impact in
our sole judgment.
All terms and conditions of joint-venture participation programs
and opportunities are subject to change or termination with or without prior
notice.
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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