29 Apr Job Creation as it Relates to EB-5
We often refer to the “capital stack” when we discuss the different sources of money needed to fund a project. Sources can include common equity, preferred equity, senior debt and mezzanine debt among others. When discussing an EB-5 project’s capital stack, it is important to recognize that not all stacks are equal even when the total project cost is the same. It is critical to understand how the composition of the capital stack impacts the number of jobs allocated to each EB-5 investor and the “safety cushion” in each case.
For example, let’s look at a single project with 2 potential capital stacks and discover how they vary in jobs per investor.
The Project:
Project Cost: $100,400,000
Total Jobs Created: 600 jobs
No TEA
Capital Stack Option #1
$50,000,000 in Developer Common Equity
$50,400,000 in EB-5 Debt
This means that there are 48 investors in the Project and 12 jobs are allocated to each investor.
Capital Stack Option #2
$29,500,000 Developer Common Equity
$60,000,000 in Senior Debt
$10,500,000 EB-5 Preferred Equity
This means that there are 10 investors in the Project and 60 jobs are allocated to each investor.
In the second scenario the EB-5 investors have the benefit of all the jobs being divided among a smaller number of investors so that the job count per investor is much larger and there is a bigger cushion in the event the developer can complete the project under budget.