By Mona Shah, Esq. and Rebecca S. Singh, Esq.
While the financial world continues to reel from Signature Bank’s catastrophic failure, EB-5 projects, regional centers, and investors dependent on the institution for all things EB-5 are finding it difficult to identify proper homes for their money with a bank that understands the nuances of the program. To address this issue, some are thinking out of the box for alternate solutions—leading to the bespoke specialty services of smaller establishments such as Metropolitan Commercial Bank (“MCB”), whose EB-5 expertise is informed by the savvy of Signature veterans with sizable credentials in the space.
As those who regularly deal with EB-5 projects can affirm, banking in EB-5 projects and transactions can be a huge issue. From the initial deposit of EB-5 funds to the later steps involving escrow management, releases, and I-829 records, the process can be mystifying to a team with little knowledge of EB-5 … and that can be a significant detriment.
“This is a window for smaller banks with particular expertise in and knowledge of the sector. It’s a nimbler, more ‘inside’ alternative to the corporate giant.”
If there is one thing the industry has learned over the course of the last few years, however, it is to trust the experts. “Large banks with a diverse array of services and thousands of employees may not always provide the requisite personalized attention to investors’ needs during the EB-5 process,” said David Hirson, Esq., Managing Partner, of David Hirson & Partners, LLP, and Co-Founder of Gravitas Strategies and Compliance, LLC. “This is a window for smaller banks with particular expertise in and knowledge of the sector. It’s a nimbler, more ‘inside’ alternative to the corporate giant—offering a comprehensive, customized approach to handling risk while navigating the complex, ever-changing world of EB-5.”
In that light, having an entrepreneurial financial institution on one’s side is a major asset in this environment. One such entity is New York City-based MCB, whose community-focused approach to clients’ wealth sustainment has been a benchmark for such service since 1999. (Listen to the most recent episode of Mona Shah & Associates Global’s podcast EB-5 Investment Voice, for exclusive insights on this issue from former Signature Bank executives.)
What stands out about MCB is not only its entrepreneurial spirit, but also its dedication to comprehending the ins and outs of the industries they support. Robert Sloposky, the bank’s Senior Vice President and Group Head, EB5 Division, said in the podcast that he “read page one to page last of the EB-5 legislation and marked it up and understood it soup to nuts.” This kind of participatory, annotative reading of legislation is important to anyone’s understanding of EB-5, but it is all the more critical when it comes to managing funds, especially as EB-5 is a niche area that is constantly changing. Therefore, recognizing the nuances is essential.
“[I] read page one to page last of the EB-5 legislation and marked it up and understood it soup to nuts.”
Sloposky’s expertise has been critical in numerous situations, given the vicissitudes of the EB-5 program. For example, he was instrumental in reforming banking requirements some years ago that allowed minors to be investors in EB-5 projects.
MCB also has a leg up on the competition with regard to speculation in cryptocurrency, which the bank does not do. Sloposky noted that MCB will not be dealing with the “red flag” of crypto, calling the category “volatile,” and noting that using crypto as collateral on a loan can lead to a “toxic situation.” As such, the bank has maintained solvency throughout the years: According to MCB, the institution garnered $256 million in revenue in 2022, up 41.5% from $181 million the previous year; meanwhile, net interest income rose 46.0% to $229.2 million.
Such responsible financial management could be a boon to investors seeking safety in smaller staffing numbers and potentially bigger returns on their investments. April Feely, FVP, Group Director, EB-5 Division of MCB, is optimistic about the future of the institution. “We do have the ability to work with foreign nationals from 41 different countries so far, which we can assume that that list will grow,” she said during the podcast, alluding to the speed and efficiency necessary to emerge with an approved petition.
Also crucial to the EB-5 process is a thorough knowledge of offering documents. “The complexity behind them is very important,” said James Sozomenou, Group Director, First Vice President, EB-5 Division, in the podcast. “We spend a lot of time educating ourselves.” This due diligence is integral to the processes involved in EB-5, particularly when it comes to the infamous private placement memorandums (“PPMs”).
The ultimate goal, of course, is to do what is best for clients. Specifically, it is “to make sure that we are a piece of the puzzle that is getting this project moving right,” added Sozomenou. “We never want to be an issue or a problem … and I think we’ve done that [in] a flawless manner over the years.” That confidence is certain to put practitioners at ease.
We do expect to continue to see the team at industry events both nationally and internationally. As this entrepreneurial program continues to evolve, so will the institutions that support it.
For a sector that desperately needs welcome news on viable EB-5-focused banking options, MCB’s words come at the right time indeed.
Aaron Muller and Simon Butler contributed to this article.