20 Aug EB-5 Investment Opportunities: Spotlight on Senior Housing Facilities, Part 1

This post is part of e-Council Inc.’s new “Spotlight” series, in which we feature successful EB-5 projects across different industries and business types; some of the spotlighted businesses may be our clients whereas others are not, but all have one theme in common:  SUCCESS using EB-5 capital.

Senior housing providers are finding creative ways to pay for construction and development costs at a time when the industry is booming and competition is heating up.[1] In large part, U.S. demographics are driving industry growth: the number of seniors is expected to rise at an annualized rate of 3.2% between 2015 and 2020. [2] Seniors are also living longer[3] and demanding better amenities to suit their individualized needs. According to Andrew Carle, founding Director of the Senior Housing Administration program at George Mason University, an entity in which students are taught how to manage senior living properties, “The population is aging, and more consumers can demand more choices.” In an effort to capture this market, senior living providers are looking to build new and more attractive facilities with better amenities across the country.[4]

EB-5 capital, in particular, has become an appealing source of funding for senior housing developers. Since many senior housing projects are new developments located in targeted employment areas (TEAs),[5] and are also likely to create numerous jobs, they can be a good fit for the EB-5 program. According to a report published by Senior Housing News, an industry news source, senior housing developers and owners can utilize the EB-5 program for nearly all aspects of senior housing, including independent living, assisted living facilities, memory care, and skilled nursing. As a result, many senior living developers have already leveraged EB-5 funding to finance 30 to 50% of the development budget.[6] Numerous EB-5 senior living facilities across the U.S. are currently in the works, all at different stages of development and funding. (We will review a few of these exciting projects in our next post.)

One attraction of including EB-5 funds in a project’s capital stack is that it can help developers cut costs. For instance, Jimmy Taylor, the COO of Omega Communities—a developer of assisted living facilities—says that the EB-5 program provides fairly low-cost capital for new projects when compared to traditional loans. This is because EB-5 investors are often willing to accept a very modest return on their investment, amounting to just ½-2% in  many cases, in exchange for securing their ultimate goal of a Green Card and a reasonable expectation that they will receive their money back. As a result, Omega Communities is leveraging EB-5 funds to open senior residential communities across the Southeastern U.S.

Another advantage to using EB-5 funding is that it can be more beneficial for a project’s financial health when compared to utilizing other types of loans. Says Taylor, “If we invest certain equity dollars, or bring in an investor to invest on a short-term basis, we will then go and raise EB-5 funding to take out that higher cost or short-term bridge financing. EB-5 has created a new bridge loan industry.” In other words, EB-5 funds offer developers more flexibility in how money is used:  EB-5 funds can be included in the initial capital stack or they can be used to repay loans with higher interest rates. To take a concrete example, Taylor estimates that following the strategy of providing debt and equity on a short-term basis and then replacing it with EB-5 funds has allowed Omega Communities to realize cost savings of approximately $300,000 to $500,000.[7]

Senior housing developers interested in the EB-5 program should speak to an EB-5 specialist and attend EB-5 workshops to determine whether their project might be a good fit for the program. As suggested by Clem G. Turner, an attorney at Homeier & Law, P.C. with EB-5 expertise, “My best advice for someone looking to enter the EB-5 space with a senior development project is to work with those who have worked with clients previously and been successful. Put a good team together because it’s almost impossible to do research and navigate the maze alone. You need to work with those of us who are aware of the pitfalls and can better navigate you through.”[8]

e-Council Inc. is an experienced, full-service company with a long track record of successfully guiding its clients through the complex EB-5 process. e-Council Inc.’s team includes attorneys, researchers, and other professionals who specialize in providing due diligence services that will equip senior housing developers with the information needed to assess the viability and feasibility of opening a new senior living facility, as well as the likelihood that the project will pass USCIS scrutiny. Senior housing developers seeking EB-5 capital should conduct a thorough due diligence assessment at the outset of the venture to determine whether the particular project is marketable to investors and consumers, financially feasible, and EB-5 ready. Conducting an in-depth due diligence assessment prior to the development of a business plan can save developers and business owners much time and money.  e-Council Inc. assists senior living developers to assess whether the prospective project(s) are suitable for the EB-5 program i.e.: whether they “pass muster”.

If the business passes muster, e-Council Inc. can create a Matter of Ho-compliant business plan and provide a wide range of complementary services designed to support the EB-5 application. Working with e-Council Inc. to complete all of your EB-5 documents minimizes the need for outside services from unrelated sources; all of our diverse service providers have been fully vetted and are immediately available.

Stayed tuned for next week’s post, where we will survey a range of senior housing developers and facilities, providing concrete examples of the financial benefits resulting from EB-5 financing.

To inquire about our wide range EB-5 services such as our comprehensive project assessment and due diligence services as well as our best-in-class Matter of Ho-compliant business plans, please contact us at info@ecouncilinc.com.

e-Council Inc.’s website, newsletter and other forms of communication contain general information about legal matters. The information is not legal advice, and should not be treated as such. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider. If you have any specific questions about any legal matter you should consult your attorney or other professional legal services provider.

[1] http://seniorhousingnews.com/2014/05/04/eb-5-funding-booms-for-senior-living-development

[2] IBISWorld, “Physical Therapy Rehabilitation Centers in the US,  April 2015”

[3] http://www.aoa.gov/Aging_Statistics/Profile/2011/docs/2011profile.pdf

[4] http://www.bankrate.com/finance/retirement/latest-trends-assisted-living-facilities-1.aspx

[5] A TEA is either a “high unemployment area” in an urban setting (i.e. part of a Metropolitan Statistical Area, or MSA) that has an unemployment rate of at least 150 percent of the national average or a “rural area.”

[6] http://cdn2.hubspot.net/hub/440119/file-2295662992-pdf/SHN_REPORT_TEXT_W-ChartsV3.pdf.pdf?t=1439293199118&_hsenc=p2ANqtz-8ORmhylvBl4YM4DYp0Q278q4GT0QDtm8KDBomQr56RR9PbQAvtmcd2q_1PKDeWUoko2iuw9xbS4wMgGlfeb5v7sXPzXQ&_hsmi=15446906

[7] http://innovation.seniorhousingnews.com/developers-get-creative-to-fund-the-next-generation-of-senior-living/

[8] http://cdn2.hubspot.net/hub/440119/file-2295662992-pdf/SHN_REPORT_TEXT_W-ChartsV3.pdf.pdf?t=1439293199118&_hsenc=p2ANqtz-8ORmhylvBl4YM4DYp0Q278q4GT0QDtm8KDBomQr56RR9PbQAvtmcd2q_1PKDeWUoko2iuw9xbS4wMgGlfeb5v7sXPzXQ&_hsmi=15446906