Investment Questions

LCR uses a variety of financial instruments across the capital structure from first equity to senior debt. LCR invests
capital into a wide variety of industries in which firm leadership has deep expertise. LCR leverages its proven
knowledge in franchise operations to target investment opportunities in restaurant franchises, while also seeking out signature real estate and similar projects (hotels, mixed use developments, condominiums and sports complexes).

Yes, provided that any applicable gift taxes are paid. It must be demonstrated that the gift is an actual arm’s- length transaction, and that it is a not a mere ruse nor that the gifted funds will be given back after permanent resident status is granted.

The EB-5 regulations require involvement in management or policy making. The regulations deem a limited partner in a limited partnership, which is properly structured and that conforms to the Uniform Limited Partnership Act as sufficiently engaged in the EB-5 enterprise.

While providing an absolute guarantee of return of capital is prohibited by U.S. immigration law since the EB-5
investment must be “at risk”, this does NOT mean that it must be a risky investment.
Our clients tell us that we developed the best EB-5 product available in the market today because we focused on their most important needs: (i) high job creation and (ii) principal protection.

To summarize, 5 key factors separate LCR’s EB-5 franchise funds from everyone else:

 Optimal investment structure: Mutual fund structure spreads development risk across over multiple

stores and thus risk is not concentrated in a single project as in most EB-5 projects.

 One of the highest job generating Industries in the U.S.: Restaurant franchising creates more jobs per
invested dollar than virtually all other industries. In fact, nearly 1 out of 10 jobs in the U.S. created in 2014 was
in the franchise industry.

 Safe instrument – Senior-secured, 5 year loans less risky than equity investments and have a clearly
established liquid exit strategy

 Proven Brand – Dunkin Donuts is a publicly traded company on the New York Stock Exchange with multi-billion-dollar market capitalization. As a franchise business, by definition, it is based on a proven business model. The Dunkin franchise model, in fact, is one of the longest, most well established franchises in the U.S. having been founded in the 1950’s and now growing by over 400 new stores per year.

 Best Restaurant Operators – LCR will only lend to proven operators in the Dunkin network, typically ones who operate multiple stores and operators whom Dunkin’ corporate HQ awarded new development rights to build new stores based on their confidence in the development and operating capabilities.

LCR’s EB-5 investments are structured as mutual fund-like vehicles where LCR acts as the General Partner of the fund and the EB-5 investors are the Limited Partners. The fund provides loans to experienced multi-unit operators for new store development. LCR’s first investment will finance the development and operation of a series of 18 Dunkin Donuts franchised restaurants in the New York metro area.

If you are currently residing in the U.S. on a non-immigrant visa, in order to invest in one of our projects you must
be an accredited investor. The $500,000 used for the investment can be counted towards the requirement of $1 million in total assets.
An accredited investor is a term defined by U.S. securities law which describes the characteristics of the investors who are legally permitted to invest in certain types of unregistered or higher risk investments, limited partnerships and hedge funds. In the U.S. an individual is considered to be an accredited investor if they have a net worth of at least $1 million or if they have made at least $200,000 each year for the past two years (or $300,000 with their spouse, if married) and have the expectation to make the same amount in the current year.

The regulations specifically allow for the pooling of funds by several investors to establish a Limited Partnership sufficient to qualify all participating investors. The only requirement is that each investor must individually meet the minimum at risk capital and new job creation requirements.

EB-5 program regulations and USCIS rulings require all EB-5 investments to be at risk, so there is no guaranteed return on investment. Each investment is specific to its risk reward analysis and pro forma analysis.

LCR has designed an investment vehicle and structure to maximize principal protection and return to its investors.
Each loan made by the LCR investment vehicle will have a defined 5-year maturity date, with strong penalties if principal is not repaid as well as collateral including personal guarantees by the borrower.

There are no other fees. If the client chooses to hire 3rd party tax advisors, those fees are of course additional. This
does not cover travel expenses to the U.S. etc., of course.

A prospective investor can first register by filling out the contact form to receive offering materials (investment
prospectus).

a. In terms of investing, once you sign the official English version of the subscription agreement (in the prospectus) and we counter-sign the same document, you are admitted as a limited partner. The next step for the foreign investor is to follow our wiring instructions and send the investment funds. Typically, within 1 to 2 days of your wire transfer, our office will send you a confirmation of receipt of the funds. If you are an EB-5 investor, a copy of the remittance confirmation will also be provided to your immigration attorney, so he or she can submit your I-526 petition.

b. At any stage of your decision-making process, please feel free to contact us via phone, send us an email or set an appointment online to speak to one of our managers.

There are two principal concepts in assessing a lending risk.

a. The probability of default.
b. The severity of default: the higher the recovery rate is, the lower the severity of loss due to default.
i. One initial way to assess the probability of default is the track record of lending in a specific space. For Dunkin that is low, at 2%.
ii. The recovery rate on default is also assessed on a track record basis. But both of these are at the aggregate level.
iii. For example, the default rate includes the default rate of loans made to store number one of a Dunkin operator and store number 300 of the Cafua family. Obviously, there is a much lower probability of default with Cafua than others. The same is true for LCR’s borrowers because they are seasoned multi-unit operators.

iv. In the same way that the recovery rate on a default of a single unit operator is going to be much lower than a default on a Cafua operator because the Cafua loan was cross collateralized, the recovery rate on a Cafua deal is likely to be 100% for many reasons including the borrower wanting to protect their credit profile. This will be true for LCR’s borrowers as well.

There are no other fees. If the client chooses to hire 3rd party tax advisors, those fees are of course additional. This
does not cover travel expenses to the U.S. etc., of course.

The risks vary depending on the project. In general, EB-5 investor risks include fluctuations of economic conditions, risks inherent in the real estate market, statutory changes and risks associated with a private offering. There are specific risk factors for each Limited Partnership, which are specifically addressed and described in detail in the offering materials for each Limited Partnership.

a. How are you managing capital deployment to accommodate return of funds requests in event I-526s are rejected? [ i.e. If an I-526 petition is rejected for non-project related reasons – (ex. USCIS is not satisfied with proof of funds, etc.) and LCR cannot find an EB-5 investor to replace me, (to the extent funds in escrow allow to prepay loan up to value of commitment), will an investor ever be stuck in the partnership?]

 No. We plan to deploy capital over an 18-24-month period meaning that there should be ample capital available to return principal to any rejected applicant.

b. Sourcing strategy? What if (LCR) cannot find (a) place to deploy (my investment)?

 We have personal relationships with many of Dunkin’s large area developers in our target geographies.

LCR’s PR advisor is also Dunkin Brand’s advisor and is aware of Dunkin expansion plans before the public. In addition, we feel that the product, specifically the Interest-Only feature of the loan, is highly appealing to Dunkin’ operators, thus making the value proposition very attractive…. leading to few impediments to deployment.

c. Is the partnership and/or project company expected to take on any debt?

 Minimal working capital (is) projected to be no more than $250K for project company, so there will be no debt on the partnership.

a. Is this an approved project with a “Matter of Ho” compliant business plan?
i. The exemplar was filed in September. Hirson reviewed the offering and Business Plan. They filed the exemplar. We have not been notified of approval/denial as of today.
b. Of the 2,400+ jobs expected to be created for this fund, how many are direct vs. indirect?
i. All indirect. We use the US Federal Government’s RIMS 2 model (initially developed in the 1970s by the Bureau of Economic Advisors as a method for estimating regional Input-Output multipliers). This measures all jobs created resulting from sales and goods produced from business activities.
c. There are only 72 stores vs. 98 investors. How many employees are hired per store and how will LCR get to the 2,400 figure?
i. Over 30 jobs are expected to be created per store on an indirect basis. We are not factoring in ANY of the direct employment within the stores themselves. This option is available to us, if needed, but the likelihood that it will be needed is very low. As for actual in-store employees, that will depend on the asset type of the store i.e. a small gas station location may only have 3-4 employees, whereas a free-standing pad site, operating 24 hours a day, would likely have more than 30 direct employees by itself.
d. What is capital structure of project company – will it take on any leverage? If so, where does partnership sit in (the) capital stack?
i. The project will not take on debt.
e. I-829 removal of conditions: Is documentation / proof of job creation provided on a FIFO basis as investors hit (the) 2 year mark or only when all fund investors receive I-526s?
i. Job allocation is on a FIFO basis.
f. How are new lending opportunities sourced? What type of diligence is done on the operators?
i. All Dunkin’ Franchisees by definition have to be approved by Dunkin’ Corporation. The higher hurdle is for them to get approval for expansion. Because all Dunkin’ operators to whom we lend are approved for expansion, they already have had a high degree of diligence by Dunkin’ corporate. Separate from that, we have full underwriting, lending, and credit criteria procedures for each borrower.
g. Are costs of diligence, drafting loan docs to franchisees, etc. assumed by the project?
i. No. All will be absorbed will be absorbed by the borrower.
h. How will timeliness of capital deployment impact job creation figures and availability by date of removing conditions (I-829)?
i. It should take that amount of time or shorter. We already have a backlog of lending opportunities.
It should not affect the I-829.
i. Whose responsibility is it to prove jobs created (for I-829) and how often will this analysis be updated – will it be ready in time to file the I-829 petition?
i. LCR and NES Financial will both monitor the use of funds, job creation and immigration status and reporting. LCR will provide regular letters to investors discussing deployment and job creation activity.

a. What reporting is provided? For which entities? How frequently?
i. Each investor has access to their own NES account, showing, among other items, principal balance and money movements. In addition, at year end a certified financials will be provided to investors by an independent accounting firm. That is something that few Regional Centers provide.
b. Will you provide partnership audited financials? What about the project company accounts – will they be disclosed?
i. See above.
c. Will you allow access to franchisee-level loan documents (i.e. loans made by the project company to franchisees)?
i. Audited financials of the LP (the fund) will be conducted annually and will be made available to investors. Access to individual loan agreements is confidential and will not be provided. We will endeavor to provide as much information as we can on a request basis.
d. What checks & balances are in place to ensure no overcharging of offering and organizational expenses, or other fees to the partnership?
i. LCR has a three-person committee that decides which expenses are allocated to the partnership and the JCE. The expense allocation will be in-line with the PPM. New legislation proposed specifically calls for auditing of Regional Centers and their fund investment activities. LCR is prepared to have an “open-book” policy when/if this occurs. This should provide comfort that all expense allocation will be appropriate.

a. Preferred return will be paid at what frequency?
i. Currently, it is set up to be paid annually. We may change that to monthly or quarterly, but have not made that decision as of today.
b. What is the plan for return of capital? Do LPs have to wait until all other LPs have reached the I-829 stage before starting to get their capital back?
i. No. But a return of capital will be on a pro-rata basis. Return of capital will not be on a FIFO basis.
c. Run through example mechanics of return of capital in the event that one is the first investor to get I-829 adjudicated?
i. When sufficient capital is available for distribution after 5 years, LCR will return it on a pro-rata basis.
d. Loan maturity is 5 years after the date last funds are advanced (and not first funds), meaning that if first advance is made today and final advance is made two years from now, then the final maturity date of Loan is 7 years from now (plus two optional one year extensions)?
i. Yes. But there are early pre-payment incentives for the borrowers such that LCR is targeting to have maximum cash available for distribution at year 5.