| CMB & Investment Related Issues
1. Where is the investment situated?
The investments will be situated in San Bernardino, Riverside and Sacramento Counties of California, USA and are associated with the former military bases located in these counties. This is the geographic scope of the CMB federally designated Regional Center. CMB’s first rounds of investments were focused on the former Norton Air Force in San Bernardino County. CMB is currently authorized to raise capital for infrastructure improvements at the former George AFB in Victorville, California, San Bernardino County and the former McClellan AFB in Sacrament County. The other bases that are slated for future investments are: the former March AFB in Riverside County, and the former Mather AFB and Sacramento Army Depot in Sacramento County. CMB will coordinate the investments with the state redevelopment agencies associated with each of these former bases.
2. How is the investment structured?
The Limited Partnership is managed by the general partner of the Limited Partnership, CMB Export LLC. The general partner is responsible for and initiating managing the investments of the partnership. The general partner is also responsible for the day to day business operations of the partnership as well working to ensure that the Regional Center meets all related laws and regulation pertaining to the EB-5 program. The Limited Partners/ Foreign National EB-5 Investors receive 80% of the profit from the Partnership business activities while the General Partner is entitled to 20%.
3. What is a Limited Partnership?
The limited partnership is formed by filing a charter with a state government and consists of a general partner and one or more limited partners. The charter details the rights and powers of the limited and general partners, percentages of ownership, and distributions of profits. The general partner manages the business. The limited partners are passive investors liable only for the amount of their investment.
This is best explained through an overview of the various entities available to investors.
A corporation, formed by filing a charter with a state government, is owned by shareholders. The corporation is taxed on its income. The shareholders are only taxed on dividends paid to them by the corporation. Shareholders do not pay tax on the corporation's income. The shareholders only risk the cost of their investment in the corporation, they bare no responsibility for the general affairs of the corporation.
A partnership is comprised of two or more people or entities coming together for an enterprise, without any particular state charter. The partnership does not pay tax, but passes through all items of income and loss to the partners. The partners pay tax on partnership earnings. Each partner, unlike a corporate shareholder, undertakes responsibility for the entire operations of the partnership. If the partnership were to be sued and judged liable, each partner bares full responsibility for the damages. A corporate shareholder has no such direct liability.
A limited partnership combines corporate limited liability with partnership taxation. The limited partnership, formed by filing a charter with a state government, consists of a general partner and one or more limited partners. The charter details the rights and powers of the limited and general partners, percentages of ownership, and distributions of profits. The general partner manages the business. As in a corporation, the limited partners are passive investors liable only for the value of their investment. As in a general partnership, limited partnership income is taxed at the partner level, not at the entity level.
A limited liability company is a corporation that passes through income and loss to the shareholders but offers shareholders the same limited liability as a limited partner or corporate shareholder. You could say a limited liability company is a corporate version of a limited partnership.
4. What are my risks?
As in any investment there is a risk of total loss. This lack of debt eliminates much of the risk of total loss. There remain matters much beyond the promoters control such acts of god, war, and market fluctuations in income and or real estate values. All investors are provided the opportunity to visit the project sites, meet with management, be provided with documents as required to enable review of the investment, and are provided with references to permit independent verification of the information contained in the investment prospectus.
5. Must I invest the full $500,000 before you will apply for my green card?
YES: Although the regulations permit escrow arrangements, other investment companies place EB-5 investors’ funds directly into the project; however for investor protection, the Investors funds are placed in an escrow account pending petition approval. In this case the funds may only be released to the project upon approval of EB5 Investor immigration petition.
6. How safe is my investment?
CMB believes it is a safe as possible given the legal requirement that the investments are truly “at-risk”. This is why CMB choose loans to government agencies as part of its investment portfolio.
7. Why is a promoter used for this EB-5 program?
CMB uses promoters or finders from time to time to assist it in locating prospective EB-5 investors.
8. If I wish to visit the military bases/CMB investment project sites, is this possible?
Yes, CMB can arrange such visits on a case by case basis provided enough notice is given to schedule a visit.
9. Is the EB5 Green Card 'guaranteed' by participating in this investment program?
A Green Card cannot be "guaranteed" however your $500k is held in a "Bank Escrow Account" and refunded in full in the unlikely event of a denial of your I-526 petition. No one can ever guarantee the outcome of a visa application or petition, it is solely up to USCIS to adjudicate. The key is to have a well prepared petition by competent, legal counsel experienced in EB-5 visa matters, to create the best opportunity for success. No money is released from the bank escrow account to the project until your I-526 Petition is approved.
10. If my I-526 petition for my 'Green Card' is denied, do I get my $500,000 back?
Yes
11. Does the Administration fee include unbiased legal counsel to represent me for my application to USCIS?
No, CMB believes that it is important for you to have independent legal counsel representing your interests. As a result while we may recommend a lawyer who can competently handle EB-5 applications, you will ultimately choose the attorney who will represent you.
12. How extensive is the paperwork/application process, will I receive help?
You will be provided with detailed schedule of requirements and list of documents. You will be assisted throughout the entire application process.
13. Am I still required to hire an immigration attorney?
Yes - it is important for you to have independent legal counsel representing your interests. The EB-5 application process is complicated and many technical requirements must be met.
14. What are the fees if any?
CMB requires an $30,000 syndication fee at the time the subscription is entered into.
15. US Tax Matters and Considerations
The United States charges income tax on all US Citizens and Permanent residents alike, and based upon worldwide income. Foreign Investors should consider the tax implications and review matters with their professional advisors of becoming a US Permanent Resident before making any investment.
16. Pre-immigration Tax Planning
Before you become a resident of the United States you may wish to consider reducing or eliminating some of the United States income, gift and estate tax consequences which would be applicable to you once you become a United States taxpayer. These objectives may be accomplished through utilizing some common planning techniques such as:
• making gifts
• accelerating income and gains
• deferring deductions and losses
• creating, amending and/or revoking wills and trusts
• creating and/or reorganizing entities
17. Who should invest?
EB-5 investors include people from all walks of life; professionals, business people, persons wanting to facilitate a child's education, and retirees. Because the EB-5 visa permits employment in the US, many EB-5 investors become involved in charity or part time work. Simply put, the EB-5 visa gives you the flexibility to do what you want in the USA. If you don't want to actively manage your business, you should consider EB-5. If you have a US citizen parent or child over 21 years of age, you should consider family class visa categories. If you have exceptional skills or are famous you may qualify for a green card based on your skills or fame. If you want to manage your own business, consider L-1, E-2, international manager visa categories. If your goal is to have a green card and not to actively manage a business, it is most often cheaper to utilize the EB-5 category rather than to start and maintain a business.
18. How is my limited partner interest protected?
The Certificate of Limited Partnership must be recorded with the State of California as a public record. The Certificate refers to a Schedule A of the limited partnership agreement, which lists the names and percentage interests of the limited partners. Investors are protected by California Revised Limited Partnership Act and the Uniform Commercial Code. Funds are typically invested with governmental agencies and thus part of the public record.
19. Is my investment guaranteed?
No. The law requires an "at risk" investment without guarantees or redemption rights.
20. What are my risks?
As in any investment there is a risk of total loss. Like everybody we risk the deleterious effects of acts of god, war, financial distress of state and local governments and market fluctuations. We urge all investors to visit us, check our references and to independently verify the information contained in our prospectus.
21. How does the bank "escrow" account protect me against the risk of losing my money?
The initial cash deposit from the investor is placed in a legal, interest-bearing Escrow Bank Account. When an Escrow Bank Account is established, the funds continue to belong to the investor; however, they arc committed to be placed into the investment upon petition approval. The attorney or bank has an agreement with the investor that requires the funds to be released from the account only when the petition is approved by the USCIS.
22. What are CMB's fees?
CMB charges an annual fee of 4.0% of each investors’ initial capital contribution paid to the General Partner, CMB Export LLC, to meet ongoing expenses and obligations of the partnership. The General Partner is also entitled to 20% of the profits derived by the Partnership while 80% of said profits and/or gain is distributed to the Limited Partners on a pro-rata basis.
23. Is CMB Export LLC currently a qualified Regional Center; and if so, what are the advantages of investing with a federally designated regional center like CMB Export LLC?
Yes, CMB was designated as a Regional Center by the Federal Government in 1996. The advantages of investing with a regional center are:
- Facilitates the pooling of capital of multiple EB-5 investors
- Investors can take credit for jobs created directly as well as indirectly from their investment in the Regional Center. Indirect job creation may be demonstrated using any reasonable approved methodology.
- Congress gave the USCIS discretion to give priority to EB-5 applications filed in conjunction with a Regional Center.
- The regional center handles the day to day management of the investments.
24. What is meant by qualifying investment "capital?"
The regulations define capital as cash, equipment, inventory, other tangible property, cash equivalents and indebtedness secured by assets owned by the alien entrepreneur. A debt will qualify as capital only when the alien entrepreneur is primarily and personally liable for the indebtedness. The regulations permit indebtedness secured by the alien's own assets to count as "capital." This rule allows bank loans and therefore provides greater flexibility for the investor who may have assets that are being used for other personal and business purposes and are not immediately available for investment in an immigration program. The bank loan also broadens the number of investors eligible for the EB-5 program. The Investment Visa Program meets all investment capital requirements through the use of initial cash investments complemented by a bank loan secured by the assets of the investor. For this reason, the investor in this Program must demonstrate to the bank a total net worth of at least US$500,000 that will meet the standard requirements of the bank for financing. This may include real estate or other real property, ownership of business assets, cash, stocks, bonds and other assets located inside or outside the United States or in the country of origin.
25. When may the investor exit the investment?
The duration of the Limited Partnership is 6 to 10 years. Once all the investments are liquidated the respective capital accounts and share retained earnings and capital gain will be distributed to each limited partner.
26. What investment enterprises qualify under the regulation?
Under the regulations, there are three types of qualifying investments for investor visa purposes: the new commercial enterprise, the expansion of an existing business, or the rehabilitation of a troubled business. They are defined as follows:
- The "new commercial enterprise" is either the creation of an original business, or the subsequent or simultaneous restructuring of an existing business such that a new commercial enterprise results;
- The "expansion of an existing business" may qualify through the investment of the requisite dollar amount such that a 40% increase in either net worth or the number of employees results; or
- The "troubled business" investment requires the requisite dollar amount in a business which has been in existence for at least two years, and for a period of 12 to 24 months prior to the filing of the petition, has demonstrated at least a loss of profit equal to 20% of the business net worth.
A qualifying investment may utilize any one of these three types of business enterprises. However, most recently, investors have successfully utilized either the "new business" or "troubled business" situation, which qualifies for special, advantageous treatment by the regulations in terms of the job creation requirements. Prior investments have included restaurant chains, nursing homes, national hotel franchises, manufacturing companies and transportation companies. Our affiliate constantly looks for the best investments for immigrant investor clients. The current focus is on new businesses that are involved in export trade, affiliated with a Federally Designated Regional Pilot Center and utilize "indirect employment" requirements under the law.
27. What are the obligations of the investor to participate in the investment?
Under the regulations, the investor must be "active" in the management of the investment. The investor must engage in the management of the new commercial enterprise, either through day-to-day managerial control or through policy formulation. However, the regulations do specifically allow that an investor will qualify as a "limited partner" as defined in the Revised Uniform Limited Partnership Act. The Investment Visa Program meets all the regulatory requirements by enrolling the investor in the investment as a limited partner. This passive role allows the investor to continue to engage in his or her own business without needing to participate in the investment operations. Additionally, this allows the investor to live where he or she pleases, and gives him or her the option to enter and exit the United States without any obligation to manage the investment. Most importantly, the limited partner, like the corporate shareholder is only liable to the enterprise to the extent of the agreed-upon investment. This business structure protects the investor.
28. What is an "escrow" account, and when does the investor transfer the money to this account?
An Escrow Bank Account is a legal, interest-bearing account established in a bank to hold the initial deposit in trust until the completion of visa processing. This type of account is commonly used in the sales of real estate, businesses and personal property. The Investment Visa Program has established an Escrow Bank Account for the purpose of safely holding an investor's funds until such time as the visa has been approved by the overseas consulate or an office of the USCIS in the United States. Escrow accounts have been established at several leading banks both in the United States and overseas. Under the agreements entered into with the servicing affiliate, the investor's money is not authorized to be released from the Escrow Bank Account by the bank until the visa has been approved. This process was created to protect the investor.
29. What is meant by "net assets"?
An investor's net assets, or net worth, can be determined from a simple calculation: the combined value of all things owned, minus the combined value of all liabilities (debts). The assets may be from any legal source, anywhere in the world:
- cash;
- gifts and inheritances;
- the net cash value of life insurance;
- the value of personal property such as jewelry, art and antiques;
- the proceeds from the sale of a business or real property (real estate);
- the value of real property, including the family home and any additional homes;
- the value of securities such as stocks and bonds, including stock in a family business.
(Naturally, funds that come from such sources as smuggling or the sale of illegal drugs are not allowable.)
Verification of assets and the sources of those assets will be required. It will not be necessary to document or reveal all assets, but only enough to meet the requirements of the USCIS and the Program -- an absolute minimum of US$530,000. The easiest proof of net worth, of course, is a bank account with actual cash.
30. Why are the loans to the government agencies at a 5-6% rate?
Government bodies have access to low cost capital. They can issue bonds, receive grants, and have other avenues for low cost funding. We must be competitive with our rates.
31. Once I put my money in CMB what do I receive for my investment?
Each investor who is admitted to the CMB Limited Partnership is given a certificate of Limited Partnership Ownership. They become a limited partner with all the rights granted by the Limited Partnership Agreement and Subscription Agreement and are protected by the California Uniform Commercial Code and other relevant California Laws.
32. When I send my funds to CMB and I am waiting for my I-526 Petition, how do I know my funds are safe?
The funds are put into an escrow account whereby neither the Partnership nor the investor has access to them. The funds cannot be released unless the terms of the escrow are met. The terms specifically state that the I-526 Petition must be approved or both parties must sign off on disbursement; otherwise, the funds cannot be released.
33. Will CMB help me with filing my immigration petition?
No. CMB requires all investors to secure their own legal counsel to file the paperwork and complete the applications for an EB-5 investor visa. CMB is the business side of this complex process. CMB will provide documents in support of the investor’s I-526 and I-829 Petitions with the attorney of the investor’s choice. An EB-5 investor must retain his or her own immigration counsel to assist in the initial I-529 petition or application. However, CMB will assist your counsel in providing information on the investment and the regional center. CMB will provide supporting documentation including a comprehensive business plan.
34. Why do you believe CMB is a superior program to other Regional Centers?
Because CMB has three clearly established goals:
- Qualify the investor for a permanent visa under EB-5 rules.
Working with the highly trained and experienced professionals who developed a program with the greatest likelihood of success from an immigration law and financial perspective.
- Return the original investment capital to the investor.
Clear exit strategy. Excellent track record. Very secure and verifiable investment involving government agencies with revenue generating authority.
- Secure a return on investment for our investors.
Government agency loan program provides predictable return on investment.
And further, our competition is dependant on a particular investment project, be it rehabilitation of warehouses, growing almond trees and grapes, the operation of dairy farms, loans to a particular business, etc. What if that business fails? What are the methodologies for proving that new jobs were created? Are jobs moved into existing businesses considered new? Do American workers harvest grapes and agricultural products? CMB has multiple projects and most involve infrastructure improvements. Those improvements will always be proven to produce jobs by the use of the US Department of Commerce's RIMS II economic models or the IMPLAN Input Output Model. In summary, CMB has simple proven methods to prove job creation. CMB has multiple projects to spread the risk to ensure that failure of one project to produce the entire number of required jobs does not result in failure to create enough jobs for the investor’s proof of jobs as required by the EB-5 investment program. The current CMB Limited Partnership will present the total of all projects direct and indirect employment. Furthermore, CMB has the ability to multiply the job creating effects of its investment dollars by providing the seed funds or matching funds for Federal and State Grants.
35. What are the risks associated with the business investment regarding the removal of the conditions from the conditional visa (the I-829 Petition) twenty months after the I-526 Petition approval?
The I-829 Petition (condition removal) will ask for each regional center to provide proof of jobs and prove the investor has indeed maintained the investment. Proving that the investor is still fully invested is simple as long as the investment funds are in the Partnership. Proving job creation is where CMB has a very distinct advantage over its competition. CMB investments will consist of low interest loans to a government agency. The agency will have several projects (see Current Project link). Each project will contribute to the job count, however several projects will use our clients' investment funds as “seed money” (or required matching funds) for a much larger sum of money (Federal and State grants as well as private capital) for a particular project. Utilizing this investment strategy CMB is multiplying the effects of our investments, and thus multiplying the effects of our job creation.
We expect that this leveraging of our original capital will produce an excess of the ten jobs per investor as required by the EB-5 program. The strength of CMB is partnering with the government agencies who also have the focus of creating jobs in their respective communities.
36. What is the likelihood of the investor getting the basic return of his/her original investment?
The investor’s original capital is invested by the Partnership via a low interest loan to a government agency. We cannot say the funds are 100% safe. What we can say is that the chance of a government agency going bankrupt is highly unlikely, thus the loss of the investment funds are also highly unlikely. Our competition investment centers on the investor buying property or buildings that in many cases the Regional Center or related parties own. In all investment models the management of the business and basic premise for the investment must be sound or the risk is multiplied. We believe the CMB investment structure has the lowest risk of the existing operating Regional Centers.
37. What is the likelihood of the investor realizing a profit in this investment?
CMB restricts its day to day expenses to 4% per year of the investor’s original investment (this does not include extraordinary expenses). What this cap on day to day expenses provides is up to a 1-1 1/2% return per year based upon a 5 % loan model. This is not a high return; however, look at it another way. The Partnership only has to return 4% per year to retain the original capital account of each investor. With much of our competition, the General Partner or a related party sells to the investor the very land, building, etc. that the investor must eventually sell to realize a profit. Yearly expenses must be looked at as there are many programs that have complicated distributions of rents, profits, etc. Projections for return on investments have several universal principles, and one is that high risk should relate to high return, and low risk should relate to a lower return. The investor should look at CMB and its competitors very closely when any projections of return on investments are stated. In summary we believe CMB has a simple, straightforward strategy to obtain a return for our investors while exposing our investors’ funds to minimal risk.
38. What is the exit strategy of the investment?
In other words, how and when can investors receive their money back and terminate their investments? The exit strategy for our investments is again straightforward and simple. When all of the public sector loans have been paid back the investors, as limited partners, vote to dissolve the Partnership and disburse the funds to all investors according to their capital accounts. The public sector loans will have a six year duration, thus once the last loan is made, the Partnership may vote to terminate six years from that date. Our competitions’ exit strategies are to sell the buildings or land (hopefully at a profit) and then to dissolve the Partnership. It sounds simple, but the fact is that every $500,000 qualified investment must be in a rural or high unemployment area, so the question becomes: Are high unemployment areas hotbeds for selling real estate? In summary CMB investments run their course six years from the last public sector investment loan and the Partnership has the return of its investment. There is nothing to sell.
39. What if the investment is lost? Will the investor also lose his/her visa?
In the very unlikely event that CMB is not paid by the government agency, the infrastructure improvements will remain. Jobs will be created and proof of jobs will remain the same. Our competition, should they suffer the same fate and face bankruptcy, the jobs are lost and so may be the removal of conditions on the visas for their investors. Therefore, CMB has another advantage even in the very worst of situations.
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