ACG IMMLAW Presentation April 11, 2013

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ACG's Managing Director, Alexander Aginsky, presented on the topic of direct investments in EB-5 to an audience of immigration attorneys members of IMMLAW in Vancouver, BC.

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ACG IMMLAW Presentation April 11, 2013

  1. 1. Direct Investments: The Less TraveledRoad for EB-5 InvestorsIMMLAW Meeting – Vancouver, BCApril 6th, 2013
  2. 2. Presentation Outline EB-5 today New markets Alternatives to EB-5 Regional Centers EB-5: the ACG way Implications for legal professionals April 6th, 2013 www.aginskyconsulting.com 2
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  4. 4. EB-5 Today – Why?Why EB-5?Key Drivers: Political instability Corrupt institutions Crime and violence Impediments to free enterprise Economic instability/ volatility April 6th, 2013 www.aginskyconsulting.com 4
  5. 5. EB-5 Today – Visas Issued Direct Regional 2012 % of Total % of Total Total Investment Center China 205 2.7% 5,926 77.6% 6,131 South Korea 22 0.3% 425 5.6% 447 Venezuela 7 0.1% 102 1.3% 109 Total All Countries 323 4.2% 7,318 95.8% 7,641 Direct Regional 2011 % of Total % of Total Total Investment Center China 207 6.0% 2,323 67.1% 2,530 South Korea 36 1.0% 218 6.3% 254 Iran 12 0.3% 105 3.0% 117 Total All Countries 382 11.0% 3,081 89.0% 3,463 Direct Regional 2010 % of Total % of Total Total Investment Center China 214 11.4% 652 34.6% 866 South Korea 92 4.9% 203 10.8% 295 UK 23 1.2% 112 5.9% 135 Total All Countries 563 29.9% 1,322 70.1% 1,885 April 6th, 2013 www.aginskyconsulting.com 5
  6. 6. EB-5 Today - Regional Centers Influx of players due to low barriers to entry:  2300% increase in the number of RCs over the past 5 years Fraud and SEC compliance issues:  Particularlyin China, there is a growing sense of distrust towards Regional Centers, in light of the recent IRCTC scandal Increased USCIS scrutiny:  I-924acceptance dropped from 68% to 36% in 2012  The tenant occupancy issue April 6th, 2013 www.aginskyconsulting.com 6
  7. 7. EB-5 Today – China: Pitfalls & Challenges The top producing country of EB-5 investors  Accounted for 80% of applications during FY2012 Expected to experience quota limitations in FY2013  Current volume not sustainable as applications from other countries increase  Extended waiting periods could discourage Chinese investors from participating in the EB-5 program Intensified competition  All active Regional Centers market in China Lack of transparency and misrepresentation of facts Brokers’ commissions in this market have nearly doubled April 6th, 2013 www.aginskyconsulting.com 7
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  9. 9. New Markets - Russia Similar to China Presents an untapped opportunity Moscow is the billionaire capital of the world By2020, Russia is expected to surpass Germany as the largest European economy April 6th, 2013 www.aginskyconsulting.com 9
  10. 10. New Markets – Latin America Venezuela became the 3rd largest producer of EB-5 investors in 2012. Mexico: due to its proximity to the U.S. and its increasingly violent internal conflicts, there will be an increase in the number of HNWIs from Mexico taking advantage of the EB-5 program. Braziland others are expected to follow in the coming years as their economies continue to mature and a new generation of millionaires emerges. April 6th, 2013 www.aginskyconsulting.com 10
  11. 11. New Markets - India Second fastest growing economy among BRICs after China. Among emerging markets in 2020, India is likely to have the highest per capita wealth among millionaires with $4.25 million - placing it ahead of the U.S. April 6th, 2013 www.aginskyconsulting.com 11
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  13. 13. Investor Options (Alternatives to RCs)  Competing immigrant-investor programs overseas  Other Visa Categories (L-1, E-2)  EB-5 Direct Investment April 6th, 2013 www.aginskyconsulting.com 13
  14. 14. Alternatives - Competing Immigrant investorPrograms Canada  Principalinvestment guaranteed by the government  Financing options make it significantly cheaper United Kingdom  Popular destination  Can invest 75% in government bonds (safer) St. Kitts  Simple and quick process  Relatively inexpensive  Ease of travel Belgium, Monaco, Latvia, Australia, New Zealand, Bulgaria, Cyprus, Dominica. April 6th, 2013 www.aginskyconsulting.com 14
  15. 15. Alternatives - Other U.S. Immigration Options E-2  More suited for active entrepreneurs  Limited to nations that have investment treaties with the U.S. (excludes Brazil, China, Russia, Venezuela) L-1  For executives of multinationals  Active employment mandatory Longer and riskier road to a Green Card April 6th, 2013 www.aginskyconsulting.com 15
  16. 16. Alternatives - Direct Investment April 6th, 2013 www.aginskyconsulting.com 16
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  18. 18. ACG EB-5 Service Offering: A One-Stop Shop New Entity Investment Exit Strategy Formation and Execution Opportunity Identification Immigration Legal Support Due (if necessary) Diligence Matter of ACG Negotiations Ho Business and Deal Plan Structuring Post Acquisition Corporate Business Legal Support Management Escrow/Closing April 6th, 2013 www.aginskyconsulting.com 18
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  20. 20. Phase I: Information Gathering & ClientInterviewsClient: Boris IvanovACG Collected information Financial information verification Boris Ivanov’s Investment Criteria Investment objectives: Green card, safe investment, returns Investment size: ~$1,500,000 April 6th, 2013 www.aginskyconsulting.com 20
  21. 21. Phase I: Information Gathering & ClientInterviews Boris Ivanov’s Investment Criteria (continued) Risk profile: Conservative Timeline Green card as soon as possible Exit within 3-4 years of investment Any other specific criteria: Majority control of the investment Phase I Timeline: 1-2 weeks April 6th, 2013 www.aginskyconsulting.com 21
  22. 22. Phase II: New Entity Formation “NewCo LLC”  Boris Ivanov owns 100% membership stake in NewCo LLC  Boris Ivanov hired ACG as a Manager for NewCo LLC Phase II Timeline: 1 week April 6th, 2013 www.aginskyconsulting.com 22
  23. 23. Phase III and IV  Phase III: Market monitoring & long list  Provided Boris Ivanov with a customized list of available deals  ACG Dealbook  Phase IV: Short list  Worked with Boris Ivanov to narrow down to 1 or 2 deals that will work best for him Phase III & IV Timeline: 3-4 weeks April 6th, 2013 www.aginskyconsulting.com 23
  24. 24. Selected Deal: Commercial JanitorialService Company• Total investment size: $1,500,000• Expected umber of new jobs: 24• Projected ROI: 26.5%• Expected Exit: 3-4 years April 6th, 2013 www.aginskyconsulting.com 24
  25. 25. Company Overview Founded in 1995 Services include janitorial services, floor care, supply sales, related services to commercial customers Markets: Oregon, Washington, and Arizona Clients include the likes of AT&T, Parr Lumber, Union Pacific Railroad, Leading Regional Property Management Firms Multiple awards won April 6th, 2013 www.aginskyconsulting.com 25
  26. 26. Financial Summary 2010 2011 2012 2013*Revenue $1,906,939.00 $1,636,755.00 $1,707,474.00 $1,939,514.00Cash Flow $387,767.00 $365,385.00 $377,684.00 $398,362.00Net Cash Margin 20.3% 22.3% 22.1% 20.5%ROI 25.9% 24.4% 25.2% 26.6% *2013 forecasts are based on existing customer contracts April 6th, 2013 www.aginskyconsulting.com 26
  27. 27. Current Employment Structure Owner Total Employees: 12 Business Manager (1) Operations Office Manager (1) Secretary (1) Janitorial Staff (9) April 6th, 2013 www.aginskyconsulting.com 27
  28. 28. Phase V: Due Diligence ACG verified all the claims made by the company Financial, legal, personnel, and business due diligence Deliverable to Boris Ivanov: Due diligence reportPhase V Timeline: 4-6 weeks April 6th, 2013 www.aginskyconsulting.com 28
  29. 29. Phase VI: Negotiations and Closing ACG negotiated and structured the deal for NewCo LLC  Reduced price by 23% ACG worked with the corporate lawyers to draft and finalize all the contracts for the transaction Immigration attorney contract review Escrow/ClosingPhase VI Timeline: 2-4 weeks April 6th, 2013 www.aginskyconsulting.com 29
  30. 30. Phase VII: Ongoing Management ACG oversees the day-to-day operations Key strategic decisions Hiring and firing Quarterly reports to investor April 6th, 2013 www.aginskyconsulting.com 30
  31. 31. Post Closing: EB-5 Application ACG role  Drafted a “Matter of Ho” compliant business plan for NewCo LLC  ACG worked with the client’s immigration attorney or recommends an immigration attorney if the client does not have one  Assisted with I-526 application EB-5 Application Timeline: 4-6 weeks April 6th, 2013 www.aginskyconsulting.com 31
  32. 32. New Job Creation (post acquisition) Business plan outlined growth strategy and job creation time table  All senior hires were made first  Salesmen (4 new hires)  1099 conversion (9 conversions)  New janitorial staff for new accounts acquired (12 new hires) Initial hires were funded by working capital reserves and existing cash flow April 6th, 2013 www.aginskyconsulting.com 32
  33. 33. Organizational Transformation Pre - Acquisition Post - Acquisition EB-5 Owner  Pre-acquisition # of Investor(s) employees: 12  Post-acquisition # of Business employees: 36 ACG Manager (1)  New jobs created: 24 OversightOperations Office SeniorManager (1) Secretary (1) Management (2) Janitorial Staff (9) Sales Force Janitorial Staff (4) (30) April 6th, 2013 www.aginskyconsulting.com 33
  34. 34. Exit Strategy and Execution Apply for I-829 (condition removal)  ACG will work with Boris Ivanov and the immigration attorney to file the application Boris Ivanov decides to sell NewCo LLC after receiving approval of the I-829 Exit strategy execution (Phase VIII)  ACG will prepare the offering documents to place NewCo LLC in the market  ACG will work with interested buyers through the entire selling process Exit Timeline: 2-4 months April 6th, 2013 www.aginskyconsulting.com 34
  35. 35. Summarized Process and Timeline Phase I. Information gathering and client interviews Phase II. New entity formation Phase III. Market monitoring and long list Phase IV. Selection process – short list Phase V. Due diligence Phase VI. Negotiations and contract signing PROJECT TIMELINE OF PHASES I-VI: 11-17 weeks EXIT: 2-4 months after approval of I-829 April 6th, 2013 www.aginskyconsulting.com 35
  36. 36. Comparative Analysis: RC vs. DIMetrics Direct Investment Regional CenterBusiness Control 100% control No controlNumber of Options Virtually unlimited Very limited Passive/Active/Hybrid Passive onlyInvolvement Level (options) (no options)Transparency Full LimitedBrokerage/ Admin fee 4% to 6% 5% to 10%Liquidity Liquid IlliquidBusiness Expansion Optional Not an optionReturns 12% to 30% 0% to 1.5%Risk Low High April 6th, 2013 www.aginskyconsulting.com 36
  37. 37. Advantages of Direct Investment –Lower Risk  Reduced risk  Business track-record  Existing cash-flow  Direct job creation, easy to demonstrate  Ability to bridge any job creation deficit with existing cash-flow  Perfect alignment of stakeholders’ interests  No leverage required April 6th, 2013 www.aginskyconsulting.com 37
  38. 38. Direct Investment April 6th, 2013 www.aginskyconsulting.com 38
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  40. 40. Direct Investments – A New Tool forImmigration Professionals To capture new clientele and capitalize on this emerging opportunity:  Know of EB-5 investments taking place outside Regional Centers  Understand the process and structure of these transactions  Establish strategic partnerships with professionals:  That can identify/create opportunities that meet your clients’ needs  That have networks in the emerging economies likely to provide the next wave of EB-5 investors April 6th, 2013 www.aginskyconsulting.com 40
  41. 41. Closing remarks  The EB-5 landscape is quickly changing:  New opportunities are opening up outside China  Emergence of a more a robust and dynamic alternative to Regional Centers  As service providers, we must adapt and be at the forefront of the industry to better assist clients  The underutilized direct-investment route will be key in maintaining the EB-5 program’s momentum April 6th, 2013 www.aginskyconsulting.com 41
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  44. 44. ContactsAlexander AginskyManaging DirectorAginsky Consulting Groupa.aginsky@aginskyconsulting.comcell. (Russia): +7-965-121-9945 411 NW Park Ave., Suite 402cell. (USA): +1-206-356-8777 Portland, OR 97209office: +1-503-546-4049 ext. 100 (USA)www.aginskyconsulting.comApril 6th, 2013 www.aginskyconsulting.com 44

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