The Mastroianni scheme to have investors take loans to finance their EB-5 loans gets Trump administration blessing (for Kushner project). What could go wrong?

So immigrant investors seeking green cards under the EB-5 investor visa program are supposed to have $800,000 available--when Atlantic Yards was raising low-cost EB-5 funding, it was $500,000--to plunk down for five to seven years before (maybe) getting their money back.

In reality, according to leading investment packager Nicholas Mastroianni II, founder of the U.S. Immigration Fund (USIF, which raised money for the second and third Atlantic Yards EB-5 rounds, currently facing foreclosure),  investors "cobble together their savings from family or friends, according to the Real Deal's summary.

Enter new financing

In April, I noted an emerging tactic to make fundraising easier. The program for an investment immigration trade show in India quoted his son, Nicholas Mastroianni III as saying that USIF projects now "provide investors access to the Opportunity Fund Lender EB-5 financing program," which helps investors finance part of their development.

From IREX Residency & Citizenship Conclave

The website for Opportunity Fund Lender does not identify the players, but the claim of "a team of experts bringing over 15 years of experience in EB-5" likely correlates with the USIF. 

As of April, it was offering "limited time introductory rates as low as 4.95% and loan amounts up to $400,000," or half the required investment. Now it's offering $300,000 at 5.95%, in a two-year term, then one-year extensions at a "minimal extension fee."

That, the firm states, is "significantly lower than the prevailing market rates of 9% to 11%!" As stated:

Since the return on investment in EB-5 is negligible for investors, there is a huge opportunity cost of investing the entire $800K with a lock in period of 3-5 years. At Opportunity Fund Lender, our loan program helps investors to instead invest their money in avenues that can help them achieve greater returns thereby making a more financially sound decision.

The devil, of course, is in the details with the USIF. 

Consider: the EB-5 investors are taking out loans to finance loans coming back to developers, adding risk. What kind of collateral are they putting up? How are the contracts written to protect and/or advantage the USIF?

First success

In what real-estate maven Hiten Samtani of The Promote called an "extraordinary development... The Trump administration has given its blessing to an EB-5 petition tied to a Kushner Cos. megaproject in Jersey City, one that uses a new structure devised by EB-5 regional center bigwig US Immigration Fund (Nick Mastroianni). "

Well, given that the Mastroianni II gave $500,000 to Trump's inaugural committee, it's a reasonable bet that his company's schemes--er, innovations--don't get ignored.

The press release

The June 5 press release, U.S. Immigration Fund Achieves Landmark EB-5 Milestone with USCIS Approval of I-526E Petition Utilizing Proprietary Loan Structure, stated in part:

NEW YORK--U.S. Immigration Fund (USIF), a leading EB-5 Regional Center facilitating U.S. permanent residency for global families through $800K job creating real estate investments, is proud to announce a significant achievement: the approval of its first I-526E petition utilizing the firm’s proprietary EB-5 investor financing loan structure. The petition approval—granted for the 1 Journal Square (1JS) project, a mixed-use multifamily development in the heart of Jersey City’s vibrant Journal Square—reinforces the viability of USIF’s innovative financing model and its compliance with the requirements of U.S. Citizenship and Immigration Services (USCIS).

This milestone affirms that USIF’s loan-based investment option offers a compliant and reliable path to permanent U.S. residency for EB-5 investors. 

Note that the USIF has apparently started harvesting clients in India, not China, as the investor cited is "Amitesh K." whose EB-5 petition was supported by his father, Amit K.

The developer demurs

The Real Deal quoted Kushner Companies’ CEO Laurent Morali as saying that the EB-5 financing "actually a very, very small piece of our capital stack."

That may be an attempt to distance the project from 2017 criticism of Jared Kushner's family invoking White House connections to further their EB-5 fundraising for this project.