EB-5 Mezzanine Financing: A Real World Example

EB-5 mezzanine loan term sheets rarely become public. However, when The Carlton Group, LTD (“Carlton”) filed a lawsuit on March 15, 2016, to collect a fee for arranging an $175 Million EB-5 mezzanine loan made by an affiliate of the U.S. Immigration Fund, LLC (“USIF”), the Term Sheet was filed as Exhibit C to the complaint. The status of Carlton as one of the most prominent NYC brokers and USIF as owner-operator of one of the largest and most successful group of regional centers in the United States makes the Term Sheet especially noteworthy.3 This article examines the terms and conditions of that Term Sheet.

Our “Roadmap to the Use of EB-5 Capital” paper includes a sample Mezzanine Loan structure and sample loan terms. The Roadmap points out that the world of EB-5 capital is very secretive. USCIS is not transparent. FOIA requests for loan documents and other offering materials result in heavily redacted documents. Similarly, developers and regional centers refuse to share their “secret sauce.”

Thus, the sample terms contained in the Roadmap were based on our exhaustive review of websites, including those of overseas migration agents who solicit potential immigrant investors. We did not view any real world examples of mezzanine loan documents or term sheets because documents were not readily available on the internet or in form books.

However, the Term Sheet to fund the construction of the 275 unit luxury condominium project known as 125 Greenwich Street (the “Property” or the “Project”) in the Financial District of Manhattan sheds light on the terms and conditions of EB-5 mezzanine loans for large-scale projects. The defendants listed in the complaint include developers Michael Shvo and Davide Bizzi, and their respective entities controlled by each of them. The developer and owner of the Property is VS 125 LLC (“Developer”).

We emphasize that the Term Sheet in the form attached to the complaint is not executed. Further, even if it were executed, by its terms, the Term Sheet states that it is for discussion purposes only and does not constitute a loan commitment.6 However, as discussed below, many of the provisions were designed to take effect upon the execution of the Term Sheet.7