Welcome back to our special series on Southeast Regional Center, LLC (“SRC”).  In today’s article, we discuss observations of failed projects over the years, particularly those projects that were funded prior to the Reform and Integrity Act of 2022.

Every project is different, and there are some factors outside of our control including general economic conditions, geopolitics, war, and consumer preferences, to cite just a few examples.

But there are many things that can and should be controlled by so-called “professionals” that act as developers or sponsors in the EB-5 marketplace.

At SRC, we are extremely passionate about putting our investors first.  We are transparent about each project, our role in it, the expectations of investors related to fees and management, and detailed up-to-date reporting at the project level and at the Regional Center level.  

We will provide more detail regarding those efforts in a later article in this series. First, let us take a look at projects that may not have been managed as well as they should and could have been managed.

Failed Project Trends

Near the end of 2023, SRC decided to gather as much information as possible about projects that have suffered from financial failure, immigration failure, or both.  Our intention was to study the past, because we know that history sometimes repeats itself.  At SRC, we are dedicated to studying the mistakes made by others so that we may do better in protecting our investors from as many risks as possible!

The data we have gathered goes back to 2013, but please note this disclaimer:  This data is not all-inclusive of all projects in that timeframe, and we are not allowed to specifically identify projects.  Also, the discussion points presented here are the opinions of SRC and should not be taken as fact.

With that being said, here are some of the trends we are noticing:

• Many of the recently failed, or failing, projects involve real estate as the primary investment asset and/or collateral for the EB-5 investment. Many of these real estate projects involve hotels, resorts or other hospitality-related assets

• Many projects have no other downside protection aside from the underlying business or commercial real estate.  In other words, the Developer did not provide repayment guarantees beyond transferring or selling the assets that the EB-5 investors helped finance

• Most of the recently failed projects depended on local “demand” generators for their financial success.  This is especially true for hotels, shopping malls and other tourist attractions

• Joon Georgia’s manufacturing facility serves an established and growing global demand for Hyundai’s electric vehicles.  Hyundai sells its EVs around the world, not just in one country much less one region, state or city.

• A large number of recently failed or failing projects suffer from unfair or even illegal treatment of investors’ rights, including many instances of financial fraud, embezzlement, or failure to properly process the immigration paperwork for investors (even total neglect to submit paperwork.

• Southeast Regional Center has a stellar reputation with its previous and existing investors, with no instances of any “bad actor” behaviors such as those listed above. 

More to Come

Our next article will describe how proper due diligence can help investors avoid some of these types of failures.  In order to qualify under the EB-5 Program, investment must always involve risk of loss.  But investors have the power to pursue and account for information about any project that is a candidate for their EB-5 investment, which is exactly what we encourage here at Southeast Regional Center, LLC.

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The information provided here is not investment, tax or legal advice. You should consult with a licensed professional for advice concerning your specific situation. 

This article is educational and informational, and items including policy, program structures, financial models, feasibility studies, and other documentation may change without notification. 

Information prepared on electronic media such as PowerPoint, websites, blogs, WeChat, or other methods of delivery are often truncated and summarized to improve readability; details of any financial, tax or legal nature should only be addressed with a trusted licensed professional.