IIFL: Suresh Rajan, CEO, LCR Capital Partners

Prior to launching LCR Capital Partners (LCR), Suresh served as President and Chief Executive Officer of Java Nova LLC, a private equity funded franchisee of Dunkin Donuts. An experienced QSR operator, Suresh’s focus was on real estate selection, market development, finance and human resources.

Suresh previously spearheaded the efforts of SPD Ventures in the development of Quiznos Sub franchises in New York, Massachusetts and Connecticut. Suresh evaluated trade area development opportunities in those states and negotiated the development contracts with Quiznos Sub corporate.

Suresh managed the stem to stern development of SPD Ventures’ Quiznos Sub efforts and in doing so established numerous national sales and development records for that brand. Before entering the QSR sector, Suresh had an extensive career in management consulting and politics. As a McKinsey & Company consultant, Suresh worked primarily in the areas of strategy development, principal investing/mergers and acquisitions, warehousing & distribution and ecommerce.

Suresh served a variety of clients that were leaders in the media, telecom, pulp & paper, petroleum and optical industries. He was the first Executive Director of Washington, D.C. – based John Quincy Adams Society and served as a policy advisor for several members of Congress. Suresh served as a negotiator on several international trade agreements (including GATT and NAFTA), recruited candidates to run for political office and assisted in the development of their congressional campaigns, and helped develop legislation affecting the banking, telecom, and healthcare industries. He received a B.A. in Political Science and International Relations from the University of Southern California and a Master in Business Administration in General Management from Harvard Business School.

Suresh Rajan, CEO, LCR Capital Partners in conversation with Anil Mascarenhas, IIFL, says, “India is already the world’s fourth largest EB-5 investor market, yet significantly lags behind global leader China.”

Brief us about the EB-5 Program and Regional Centers.
LCR Capital Partners is a partner-owned investment firm that deploys EB-5 investments as growth capital in the well-established U.S. franchise industry, primarily in the quick service restaurant (QSR) and hospitality sectors. We are a firm founded by first generation U.S. immigrants, with a mission to provide the best investment immigration products to the market.

The EB-5 program was created in the early 1990’s and ever since has helped thousands of immigrant investors from all over the world have received green card permanent U.S. residency. Administered by the United States Citizenship and Immigration Services (USCIS), the EB-5 program approves and designates Regional Centers, such as the LCR Overseas Regional Center, to attract foreign investment into the U.S. thereby creating hundreds of thousands of American jobs enabling international investors and their immediate families to obtain U.S. green card within 18 months of their investment.

What’s the business model of LCR Capital Partners? 
LCR’s business model is to deploy and manage our investors’ capital in proven, new American businesses with strong track records of success and high job generation. Strong QSR franchise brands [such as Dunkin’ Donuts, for example] are ideally suited for our EB-5 investors as they have long, proven histories of operating success and are one of the most efficient converters of capital into jobs.

LCR is a partner-owned investment firm. We believe the firm’s outlook is bright, particularly given the tremendous growth opportunity which exists around the world to bring this reliable and proven immigration method to communities in India, Brazil, South Africa and elsewhere.

How did the idea of incepting the firm germinate? What were the common threads that brought you and your co-founders together at Harvard Business School?
Founded in 2012 by first-generation U.S. immigrants, such as myself, who met at Harvard Business School in the mid 1990’s, our firm is led by immigrants from a diverse group of countries including India, El Salvador, the UK, Brazil, Japan, Mexico and the Dominican Republic.  I met my co-founder Rogelio Caceres, our CMO, on the very first day on campus and Joe Haggenmiller, our COO was also a classmate and we all graduated together in 1997.

The senior management team at LCR [5 of which have Harvard MBAs] developed a broad, multi-functional expertise in a variety of fields after graduation and established distinguished track records while serving at many of the world’s premier organizations including McKinsey, Goldman Sachs, UBS, Wasserstein Perella, Credit Suisse, BlackRock and the U.S. Congress.

As a firm with many first generation immigrants, LCR has taken a client- centered approach to designing its EB-5 franchise finance funds to meet the needs of, and mitigating the risks to, our investors.

What are your growth plans? How are they being funded?
With offices in Westport, Miami, Sao Paulo, Shanghai, Cape Town and now Mumbai, LCR has rapidly expanded its presence around the world.  We are surprised, rather delighted, to find a general lack of awareness around the EB-5 investment visa as a proven option to obtain U.S. green card and residency in most of the new markets including India.

India is already the 4th largest EB-5 investor market in the world [111 EB-5 visas were issued to Indian citizens in 2015] and yet it significantly lags the global leader, China [where over 8,100 Chinese citizens obtain green cards via EB-5].

LCR believes represents the single biggest new investor market opportunity globally and is working assiduously to introduce ourselves and our premier EB-5 products to the Indian community around the country [as well as living in the U.S. on temporary visas such as F1 or H-1B]

What makes the QSR (quick service restaurant) sector a better choice than the real estate sector for an EB-5 investment?
We believe that the QSR sector is a superior choice to that of traditional real estate projects [many of which are speculative in nature] for four key reasons:

Strong job creation:  QSR franchises are one of the highest job-creating industries in the United States. In fact, 1-in-8 Americans work in the franchise industry and it accounted for 10% of all new U.S. job creations last year.

Conservative investment structure:  LCR places our investors in diversified fund-like structures, where the risk of lack of repayment of principal is diversified across multiple senior-secured, 5 year new Dunkin’ Donuts store development loans, rather than placing all of our investors into a single real estate project.

Proven, top quality brands:  Our investors prefer proven business models (i.e. QSR franchises) that are structured conservatively and minimize risk, rather brand new real estate developments.  Dunkin’ Donuts, for example has 60+ year operating history, over 11,000 stores around the world and a 4.5 billion USD market capitalization.

Capital Intensiveness: Most real estate projects require large sums of capital, delaying deployment until a Regional Center has received the required amount of capital for the proposed project. LCR’s franchise fund model, however, allows for immediate deployment of capital, hence a faster opportunity to create jobs, with an additional benefit to lower investors’ risk by diversifying their capital into different franchisees and enjoying the benefit of the pool of jobs created by them.

What are your offerings on the educational front? 
Given the overwhelming surge in applications from international students, the competition for acceptance into American universities is fiercer than ever. This has led to lower acceptance rates to top U.S. universities and graduate schools, as many of them [officially or un-officially] limit foreign student populations to 20% or less of the student body.

In addition, given the increased number of international students, foreign university students and graduates are now subject to a highly competitive annual lottery system [7 in 10 fail to obtain] the required H-1B employer-sponsored visa. The requirement to be “sponsored” by an employer after graduation causes a competitive disadvantage for top positions and reduces the opportunity to pursue entrepreneurial opportunities.

Through an EB-5 investment, one obtains a U.S. green card in approximately 18 months thereby addressing both of the challenges mentioned above and this puts Indian college and graduate school students on a much better trajectory.

How does one go about choosing a Regional Center?
We highlight several important criteria to our investing clients of the selection of a Regional Center:

Caliber/Experience of Management Team: Your investment is at great risk if the management team is unable to bring the project to fruition. Ensure that the Regional Center has strong familiarity with the EB-5 program and fully understands its responsibility to complete the project and create the requisite jobs.

Familiarity / Comfort:  Your EB-5 investment is a long-term, multi-stage process spanning 5 to 6 years. It is important to gain a sense of confidence in the bona fides of your Regional Center. Ask yourself questions such as: Have you met in person with the Regional Center’s senior management team? Do they have track record of success in business? Have you had the opportunity to speak with its CEO? Have you visited their projects/stores? Do they work with other leading investment firms to distribute their products or do it alone?

Transparency / 3rd Party Oversight:  Ask if the Regional Center believes in providing its investors with multiple layers of oversight and transparency including proprietary investor portal to track capital deployment and job creation, fund administration, and independent SEC broker dealer oversight [LCR provides all three of these].

What are some of the job creation requirements for EB-5 visas?
The EB-5 Investor Visa Program provides an opportunity for qualified immigrant investors and their immediate families (children up to the age of 21) to obtain U.S. green cards and permanent residency through a one-time investment of $500,000 USD into a new U.S. business that creates 10 or more full-time American jobs.

Are there enough immigrant investor programmes being run?
For more than 30 years, governments around the world have offered immigrant investor programmes, exchanging residency rights or citizenship for a sizeable investment in their economies. The number of countries with immigrant investor programmes has increased dramatically in the past decade.

In the European Union, about half of the member states now have dedicated immigrant investor programmes, including countries as diverse as the Netherlands, Latvia, Bulgaria, and Spain. In addition, new “citizenship by investment” programmes in the Caribbean and, more recently, in Malta have also gained traction. In fact, last month, India announced a new investor visa programme where foreigners investing Rs 100 million ($1.5 million) over 18 months, or Rs 250 million over three years, would be eligible to live in India for 10 years.

Is the demand among prospective immigrant investors growing? What are the contributing factors?
The most popular immigrant investor programmes can be found in popular and preferred destination countries, such as the US, Canada, the UK and Australia, which issue several thousand visas each year to investors and their dependents.

The US leads the market, with 10,000 EB-5 visas issued in fiscal year 2015, while the UK issued around 1,600 investor visas during the same time period. Before Canada suspended its federal programme in March 2014, it issued between 2,000 and 3,000 investor residence permits per year.

Prospective investors seeking residency in developed countries like the USA, UK or Canada usually decide to migrate due to a plethora of reasons including:

Better Educational and Professional Outcomes:  The overwhelming recent surge in applications from international students (primarily from China and India), means the competition for acceptance into American universities is fiercer than ever.  In response, the most popular EB-5 investment option chosen is for one of the parents (typically the non-breadwinner) to become the EB-5 investor and sponsor their child(ren). As U.S. green card holders, the children will enjoy significant benefits, including (i) higher U.S. university acceptance rates [not subject to international student quotas]; (ii) lower tuition costs, (iii) access to scholarships and (iv) expanded employment opportunities after graduation [not subject to annual H1-B annual visa lottery]. The spouse or children frequently take the role of principal applicant, as they are generally better placed to fulfill U.S. residence requirements while the family’s principal earner continues business activities abroad.

Insurance Policy/Portfolio Diversification: Applicants may not want to emigrate immediately, but securing residence rights in a ‘safe’ country keeps this option open in case of future social, political or economic upheaval in their homeland.  As with any other decision regarding a family’s wealth, “residency risk” is worth evaluating and mitigating against.

Visa-free travel: Businesspeople and other frequent travelers can reduce the cost and time of applying for visas by gaining citizenship or residence rights in certain countries. The Passport Index firm recently published a report ranking the passports of all the countries in the world on the basis of their power. The United States of America (USA) topped the list with 147 visa free countries. India ranked 59 with Indian passport holders able to travel to 58 countries (either without visa or through visa on arrival). The country list is based on the 193 members of United Nations.  Chinese and Iranian nationals currently can travel without a visa to just 44 and 40 countries, respectively.

What should a potential immigrant investor bear in mind?
According to Forbes Magazine, the EB-5 investment visa is “#1 best way for investors to immigrate to the U.S.”  Obviously, LCR agrees with Forbes 100%. International residence and citizenship planning has increasingly become a central part of prudent family planning and risk diversification for wealthy Indian families and individuals. Whether it is securing the best educational and professional opportunities for your children or securing additional business opportunities for your Indian company in the U.S., it’s important to assess the pros and cons of the EB-5 program and match it with your own families’ personal and professional objectives.

Potential immigrant investors should keep three main factors in mind:
Cost: Some countries, like the United States, ask for investments in private-sector businesses, with the requirement to create
a certain number of jobs (the U.S. program requires a $500,000 investment that will create at least ten American jobs per EB-5 investment). The UK, by contrast, requires a cash donation of USD $2.5 MM to the government. Several of the newer programs – particularly in the European Union – simply require wealthy individuals to purchase property for personal use.

Status: What’s the condition; do investors actually have to live in the country? Most programs grant temporary residence with a two-to-five-year pathway to full permanent residence, followed by citizenship; during this period, investors may need to spend a set period of time
in the country to extend their stay. A handful of countries, primarily in the Caribbean, offer immediate citizenship – a status that eliminates or minimizes investors’ need to spend any time in the country to maintain their status.

Procedures: What measures ensure integrity and reduce the risk of abuse? Source of funds analysis as well as background checks typically verify that investors’ funds come from a legal source and that the individuals have no criminal history.
Read more at:IIFL

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