We’re providing twenty seven factors for assessing EB-5 project risk. Today the factor is market demand.
Lenders and financiers usually determine the future prospects for a market to see if societal shifts or other issues could impact future market demand.
Take for example the video rental business that enjoyed success for many years. Going to a video store was in vogue for several decades. However, most of those businesses are gone or bankrupt now because technology (video on demand) obsoleted their business model. If you had purchased a video business (and the building), you would likely be unable to refinance the building or sell the business now… as a video store. If that business and building been financed via EB-5 years ago when times were good, the EB-5 investor would now be stuck.
Understanding long term market trends for a project can be very important in the selection process. Recently, market forecasters have predicted a substantial decline in the future demand for retail space, as retailers move to on-line, direct from manufacturer, shipments. Therefore, macro market changes can dramatically reduce the refinance (or sale) opportunity for a project (thereby trapping EB-5 investor funds) if the project is in a declining market.
The link to the table (below) shows how assessment #2 (out of 27) is scored using the EB-5 Project Scoring Index.
Thanks for reading, and if you have any questions, please contact us.
Greg Wing, Managing Partner of Education Fund of America