Recently, Matt Gordon, Managing Director of E3 Investment Group, spoke with EB-5 Investment Report about their Scalable Direct EB-5 Model, a creative business alternative for direct EB-5 investors.
Matt Gordon calls his Scalable Direct Model, the “non-regional center” and although it is in its infancy, he is confident investors will respond. He explains, “It’s a direct EB-5 investment but each individual investor is in their own separate, legal entity and what we do is coordinate and we manage them so that way we essentially scale them as if they’re one large enterprise.”
A light bulb went off in Matt’s head when he started to investigate the regulations of the EB-5 program. Being a corporate attorney he was akin to operating companies and through educating himself on EB-5, he discovered that there were legislative pathways allowing creative structures on the direct side of the program. Unlike regional center EB-5, direct EB-5 doesn’t rely on indirect or induced jobs that require economic studies to conclude how the jobs are counted. Instead, like the name implies, jobs are counted directly. Basically, the number of W2 employees are what count.
Matt emphasizes that he did not get into this to compete with regional centers, instead, he’s utilizing this model to address the unmet demands for investors who did not want to invest in typical EB-5 projects like hotels or assisted living facilities. He adds, “There are some investors who didn’t want day to day management requirements, who wanted something else and the market wasn’t meeting that demand.”
He also addressed the myth that with direct EB-5, investors have to be hands-on as an active manager. He explains that there are ways of satisfying the requirement by setting up a corporation for example with the investor on the board of directors.
E3 Investment Group’s model isn’t suitable for all EB-5 projects. Matt found that the best fit is labor intensive industries like trucking, so that’s where they started. He says the way they set up a trucking company is the same in or outside of the EB-5 program. “Trucks are a great asset, they’re there, so if something goes wrong, it’s easy to sell a fleet of trucks.”
And if something does go wrong, the Scalable Direct Model is structured to help protect the investors. He says, “If something happens then it’s very easy to take that entity and separate it from the rest of the group because it really is already separate….we say [to our investors] if things aren’t going well and you want to liquidate, you have the right to kick us out.”
Matt is excited to announce his first I-526 application for his trucking project and he is confident he will have a significant number of investors following suit. They began marketing six months ago. “We are building momentum,” he says.
Matt is blazing a new path and welcomes others to “copy” his model, pointing out that this model is really just returning to the original roots of the EB-5 program.