Direct Pooled EB-5 Projects from a Developer's Prospective – Episode 14

EB5 Direct Pooled Projects

Direct Pooled EB-5 Projects from a Developer's Prospective – Episode 14

There are more than Region Centers – discussing Direct Pooled projects.

Individual investment and Regional Centers are not the only options available to EB-5 investors. Direct Pooled project offer investors a project that can be completed faster and with more flexibility. Join us for a discussion with Brandi Robinson on the Direct Pooled projection option.

While individual investments or Regional Center are the more popular option for EB-5 participants, they are not the only options available to investors. A Direct Pooled project is another option that offers investors a chance to invest, particularly in industries that need a large number of direct jobs created – such as transportation of supermarkets. Direct Pooled projects can also move forward more quickly because they do not have to wait for a new Regional Center to be formed; an investor may be drawn to participate in a Direct Pool project in order to avoid extra costs that can be associated with Regional Centers. Special guest Brandi Robinson, Chief of Staff at NuRide Transportation Group in New York City, shares her experience with Direct Pool projects and discusses the benefits of the projects.
The primary differences between a Direct Pooled project a Regional Centers are:

  • Different job creation structure – direct job creation (Direct Pooled) vs both direct & indirect (Regional Center)
  • Faster processing times
  • Project set-up costs are less
  • Fewer investors needed

Challenges for Direct Pooled projects include changing how investors view the project possibilities and also getting agents to advocate for the program.
The biggest disadvantages of the programs focus on employees, primarily the cost of documenting W-2 employees and I-9 audits.
The corporate structure and job creation are major challenges of the projects.
Although they are faster to start, Direct Pooled project quickly outgrow the model and adopt a Regional Center model. In order to accommodate growth, projects can change to a Region Center model which would include both direct and indirect job creation. Also, as jobs become more complicated and involved, it becomes difficult to have direct job creation.
It is very common for a project to move from a Direct Pool to a Region Center model.
Brandi discussed the advantages of the NuRide Transportation project:

  • Very transparent and easy to verify
  • All information is available on the Taxi and Limousine Commission (TLC) website
  • The project has generated revenue from the beginning

Literature, seminars and site tours are offered to marketers and investors so they can better understand the project. Mona and Brandi discuss typical marketing problems experienced by Direct Pools, primarily:

  • Making sure the corporate structure in understood
  • Explaining how the returns work

Direct Pooled projects do not have the same type of that Regional Center do. As a result, it is recommended that they have third oversight of financials to ensure that all SEC regulations are met and to limit chances of fraud. The NuRide Transportation project uses NES Financial, which employs an investor notification system to limit changes of fraud.
Most EB-5 projects are involved in real estate in some way. Mark and Brandi discuss some of the challenges associated with being involved other industries. What challenges a new developer be facing when trying to develop an offering that is not real estate.
It is harder to sell non-real estate projects; a project needs to be promoted so investor overcome some of the barriers associated with a new industry. A new developer would need to focus on the value to the customer but more importantly, the value of the project to the community as a whole.
Direct Pooled projects are a part of the original EB-5 program and are expected to remain a strong part of the EB-5 program. Also, the projects provide an opportunity to businesses that would normally been able to because of restrictions from banks or other financial considerations.