EB-5 INVESTMENT OPPORTUNITY
Municipal Bond 2014 FLL -‐ A, LP
I N T R O D U C T I O N
Municipal Bond 2014 FLL-A, LP (the “Limited Partnership”) is seeking $49,500,000 from 90 EB-5 investors to purchase “A” rated municipal revenue bonds from the Broward County, Florida Government to upgrade, renovate and expand the Fort Lauderdale-Hollywood International Airport (“FLL Airport”).
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I N T R O D U C T I O N SUMMARY OF DEAL BENEFITS GOVERNMENT SPONSORED PROJECT
FLL AIRPORT HAS BEEN OWNED/OPERATED BY BROWARD COUNTY, FL, FOR MORE THAN 60 YEARS
FULLY FUNDED PROJECT
$2.5B PROJECT, OF WHICH ONLY 2% IS EB-5 CAPITAL AND 98% IS OTHER CAPITAL (ADDITIONAL BOND OFFERINGS, GOVERNMENT GRANTS AND AIRPORT REVENUES)
SECURE INVESTMENT
SINGLE “A” RATED BY MOODY’S, S&P & FITCH (SAFEST TYPE OF GOVERNMENT INVESTMENT, SECOND TO U.S. TREASURIES)
DEFINED EXIT STRATEGY
AT YEAR 5, SALE OF BONDS IN THE LIQUID SECONDARY MARKET ( I.E THE NYSE)
SIGNIFICANT JOB CUSHION
3,000%, OR 300 JOBS PER INVESTOR
NO CONSTRUCTION RISK
FULLY FUNDED PROJECT; CONSTRUCTION IS MORE THAN 30% COMPLETE
NO OPERATING RISK
FLL AIRPORT IS GURANTEED AND UNDER THE FINANCIAL RESPONSIBILITY OF BROWARD COUNTY
EXPERIENCED EB-5 TEAM
BECOME AMERICAN INVESTOR HAS A 100% TRACK RECORD WITH EB-5 INVESTOR APPROVALS
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I N T R O D U C T I O N
RENDERING OF FLL PROJECT NEW ARRIVAL / DEPARTURE GATE
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I N T R O D U C T I O N
RENDERING OF FLL PROJECT NEW TERMINAL
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I N T R O D U C T I O N F O R T
L A U D E R D A L E - H O L L Y W O O D
A I R P O R T
Ranked 21st in the U.S. out of + 4,000 airports Ranked 50th in the world out of + 45,000 airports FLL Airport is currently comparable in size to Chongqing Airport. AGer the expansion, FLL Airport will be comparable in size to HongQiao Airport.
In addition to Broward County, the FLL Airport services Palm Beach and Miami Dade Counties
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I N T R O D U C T I O N DISTANCE FROM MIAMI BEACH TO FLL AIRPORT – LESS THAN 30 MILES, APPROXIMATELY 25 MINUITES
FLL AIRPORT
MIAMI BEACH
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INVESTMENT
DETAILS
A MUNICIPAL REVENUE BOND INVESTMENT – RATED “A” BY FITCH, MOODY’S AND S&P
PROJECT
Upgrade and expand the FLL Airport (“FLL Project”)
ISSUER
Government of Broward County, FL
SIZE OF BOND OFFERING
$319 Million
MATURITY DATES
Years 1 to 30; the Limited Partnership will only purchase maturities of 10 years or higher.
EXPECTED OFFERING DATE
October 1st, 2014
DEVELOPER
Broward County Aviation Department (“BCAD”), a division of the Broward County Government 8
INVESTMENT
DETAILS
What is the defini@on of a municipal revenue bond?
• A municipal bond is a type of loan issued by state and local governments. • A municipal revenue bond is a type of municipal bond dis`nguished by its promise of repayment of the loan solely from the revenues generated by a specific income producing en`ty. • In the case of the FLL Project, the EB-‐5 loan is to Broward County and it is backed by the revenues created by the FLL Airport, which carry an “A” credit ra`ng.
What is Moody’s, Fitch and S&P and what does an “A” credit ra@ng mean?
• Moody’s, Fitch and S&P are the three largest and most respected independent ra`ng agencies in the U.S. These ins`tu`ons evaluate the financial strength of the bond issuer to determine its ability to service the debt, i.e. repay the bond’s principal and distribute interest payments in a `mely manner. • An “A” credit ra`ng is one of the highest ra`ngs that a bond can receive, signifying a strong probability that the issuer will be able to service the debt.
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INVESTMENT
DETAILS
U N I T E D S TAT E S I N V E S T M E N T R I S K
Least Risk
US Treasuries (Federal) Municipal Bonds (State, County, City – FLL Project)
Corporate Bonds Secured Debt Unsecured Debt
Most Risk
Equity 10
INVESTMENT
Initial EB-5 Projects
DETAILS
FUTURE OF EB-5 INVESTMENTS
Equity Unsecured Debt Secured Debt Corporate Bonds
Future EB-5 Projects
Municipal Bonds (State, County, City – FLL Project) 11
INVESTMENT
DETAILS
LIMITED PARTNERSHIP
QueensFort Municipal Bond 2014 FLL - A, LP
TOTAL CAPITALIZATION
$2.5 Billion
TOTAL EB-5 CAPITAL
$49,500,000, or $550,000 Per Investor
EB-5 AS % OF PROJECT COST
2%
# OF EB-5 INVESTORS
90
OTHER SOURCES OF FINANCING
Additional Revenue Bond Offerings + Federal , Local & State Government Grants + Airport Revenues + Passenger Facility Charges
TOTAL JOBS CREATED
+ 27,000
TOTAL JOBS REQUIRED
900
JOB CUSHION
3,000%
INTEREST PER ANNUM TO EB-5 INVESTORS
0.5%
EXIT STRATEGY
Sell Bonds at Year 5 and Return Investor Capital
ADMINISTRATIVE FEE
$70,000 12
INVESTMENT
DETAILS
ADDITIONAL INVESTMENT REQUIREMENT -
-
Become American Investor has been through the I-‐829 process and understands what the USCIS requires in order to prove job crea`on and generate an approval of the I-829 pe``on. Part of a requirement of the I-‐829 is to be able to show that the $500,000 investment was used for costs that are deemed an acceptable use of funds by the USCIS.
- The FLL Project includes costs (between $40,000 and $50,000 per unit) that are not considered a permissible use of the $500,000 investment required by the USCIS. Such costs include capitalized interest, a debt service reserve and bond issuance costs. - The additional $50,000 is needed to cover such costs and therefore be able to prove to the USCIS that the full $500,000 was used on costs that are considered an acceptable use funds. - Any unused portion of the additional $50,000 will be immediately returned the investor directly from -
Any portion of the $50,000 that is used will result in the additional purchase and ownership of bonds. The additional principal will be recovered by the investor at the end of year 5 when the bonds are liquidated. 13
P R O J E C T
D E T A I L S
The FLL Project expansion and upgrade will include (i) a new 8,000-‐G. parallel commercial service runway, (ii) a noise mi`ga`on program, (iii) a new 14-‐gate domes`c and interna`onal Concourse G, (iv) a new five-‐gate domes`c and interna`onal Concourse A, (v) renova`ons to the exis`ng four terminals and six concourses, (vi) in-‐line baggage systems, and (vii) infrastructure improvements.
TOTAL PROJECT COSTS $2,500,000,000 CONSTRUCTION EXPENDITURES $2,300,000,000
DEBT SERVICE $103,774,000
CAPITALIZED INTEREST $75,185,000
Costs highlighted in red are not a permissible use of EB-‐5 funds and the reason for the addi`onal investment requirement
BOND ISSUANCE COSTS $13,278,000
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P R O J E C T OTHER
PROJECT
D E T A I L S FINANCING
• Previous and addi`onal bond offerings by Broward County. • Government grants from the (a) Federal Avia`on Administra`on, (b) Transporta`on Safety Administra`on, and (c) Florida Department of Transporta`on. • Passenger Facility Charges and other cash resources and revenues, principally from airport lease and use agreements, rental car operator agreements, parking revenues, and concession operator revenue.
AS OF JANUARY 2014 MORE THAN $1.5 BILLION HAS BEEN COMMITTED TO THE FLL PROJECT
• More specifically, in October 2012 and 2013, Broward County issued “A” rated revenue bonds of $621 Million and $431 Million, respec`vely. Both offerings were fully subscribed. 15
P R O J E C T C O N S T R U C T I O N
D E T A I L S S TAT U S
AS OF JANUARY 2014 MORE THAN 30% OF THE FLL AIRPORT PROJECT HAS BEEN COMPLETED
CONSTRUCTION FOR THE FLL AIRPORT PROJECT BEGAN IN 2010 AND COMPLETION IS EXPECTED BY 2017 LIVE VIDEO AND PHOTOS OF CONSTRUCTION PROGRESS hkps://www.broward.org/Airport/FLLair/Gallery/Pages/Webcam.aspx
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INVESTMENT LIMITED PARTNERS (90 EB-5 INVESTORS)
$49.5M BOND PURCHASE
LIMITED PARTNERSHIP
JCE / BROWARD COUNTY (ISSUER)
0.5%
GENERAL PARTNER (QUEENSFORT)
EB-5 investors will make a $49.5M equity contribution to the Limited Partnership (LP), the LP will invest the $49.5M into the Construction Fund (Job Creating Entity, or JCE), via purchase of Revenue Bonds issued by Broward County, Florida. EB-5 investors will receive 0.5% per annum in interest, paid semi-annually. Bonds will be sold in the secondary market at the end of Year 5 and investor capital will be returned.
STRUCTURE
PER ANNUM PAID SEMI -‐ ANNUALLY
ESCROW ACCOUNT
CORPORATE TRUST ACCOUNT
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J O B
C R E A T I O N
100% OF JOBS ARE FROM CONSTRUCTION ACTIVITY – NO TENANT OCCUPANCY ISSUES – NO NEED TO SHOW PROOF OF DIRECT EMPLOYMENT – ONLY NEED TO SHOW EVIDENCE THAT THE EB-5 MONEY WAS SPENT ON CONSTRUCTION
900 • JOBS REQUIRED + 27,000 • TOTAL JOBS CREATED + 3,000% • JOB CUSHION PROJECT IS ONLY COUNTING CONSTRUCTION JOBS CREATED AFTER 2014, WHICH IS WHEN THE EB-5 MONEY WILL HAVE BEEN INVESTED 18
E X I T
S T R A T E G Y
SECOND TO U.S. TREASURIES, MUNICIPAL SECURITES ARE CONSIDERED ONE OF THE SAFEST GOVERNMENT INVESTMENT PRODUCTS IN THE UNITED STATES. BROWARD COUNTY FLL AIRPORT REVENUE BONDS ARE RATED “A” BY T H E T H R E E M A J O R R AT I N G AGENCIES MOODY’S, S&P AND FITCH
AN “A” RATING SIGNIFIES A VERY STRONG PROBABILITY THAT ALL INTEREST PAYMENTS WILL BE MADE IN FULL AND ON TIME
MUNICIPAL BONDS TRADE IN THE SECONDARY MARKET (NYSE & OTC), WHICH MEANS THEY ARE A VERY LIQUID ASSET THAT CAN BE SOLD ON DEMAND
AT THE END OF YEAR 5, MARKED BY THE DATE THAT BONDS ARE PURCHASED FROM THE BROWARD COUNTY GOVERNMENT, THE LP WILL CONDUCT AN ORDERLY LIQUIDATION OF THE BONDS AND RETURN INVESTOR CAPITAL. BARRING SIGNIFICANT CHANGES IN U.S. INTEREST RATES, IT IS EXPECTED THAT INVESTORS WILL RECOVER THEIR FULL $550,000 INVESTMENT 19
E X I T
S T R A T E G Y
T H E S E C O N D A RY M A R K E T E X P L A I N E D
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The secondary market is the financial market in which previously issued securi`es, such as stocks and bonds, are bought and sold every day, instantaneously.
DEMAND FOR FLL PROJECT BONDS
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In October 2012 and 2013, Broward County issued “A” rated revenue bonds of $621 Million and $431 Million and in both instances, the offerings were “oversubscribed”, meaning there were more willing buyers than there were sellers.
•
There is always a willing buyer for low risk “A” rated municipal revenue bonds.
WHO WILL BUY THE FLL PROJECT BONDS IN THE SECONDARY MARKET? •
Buyers will include large ins`tu`ons, such as banks, mutual funds and insurance companies, as well as private investors, seeking a fixed income, low-‐risk investment op`on with preserva`on of capital as their main investment objec`ve. 20
R E F U N D
•
P O L I C Y
REFUND OF THE $550,000 INVESTMENT
In the unlikely event of an I-‐526 denial, the bonds held in the escrow/trust account will be released to
the denied EB-‐5 investor within 90 days, at which point the investor can (a) sell the bonds or (b) hold the bonds. (a) The investor can instruct the escrow agent / corporate trustee to sell the bonds on his/ her behalf in the secondary market to recover the investment capital. The en`re principal investment, or a significant por`on, will be returned to the investor, assuming no major increases in interest rates. (b) The investor may elect to hold the bonds and collect an annual interest payment from Broward County, of approximately 5.0%, paid semi-‐annually, un`l the maturity of the bond, at which `me, the investor will recoup their en`re investment. Alterna`vely, if the investor desires liquidity prior to maturity, the bonds can be sold in the secondary market.
REFUND OF THE $70,000 ADMINISTRATIVE FEE • Investor will receive a full refund of the $70,000 administra`ve fee if there is a denial of the I-‐526 pe``on, except if the basis for the denial is fraud, misrepresenta`on or terrorist suspicion, on the partof the Limited Partner.
INTEREST RATES AND BOND VALUATIONS
RELATIONSHIP OF INTEREST RATES AND BOND VALUES
A bond’s price is inversely related to the change in interest rates. This is because a bond’s coupon payment is typically fixed at issuance, leaving the price as the only variable that can be adjusted to make the bond’s yield compe``ve with that of newly issued bonds.
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U N I T E D S TAT E S I N T E R E S T R AT E S US Treasury Interest Rates 5.00%
Peak Rate
4.50% 4.00%
Current Rate
3.50% 3.00%
Sell at a Premium
2.50% 2.00% 1.50% 1.00%
4/1/2014
1/1/2014
10/1/2013
7/1/2013
4/1/2013
1/1/2013
10/1/2012
7/1/2012
4/1/2012
1/1/2012
10/1/2011
7/1/2011
4/1/2011
1/1/2011
10/1/2010
7/1/2010
4/1/2010
1/1/2010
10/1/2009
7/1/2009
4/1/2009
1/1/2009
10/1/2008
7/1/2008
4/1/2008
0.00%
1/1/2008
0.50%
Source: USTreasury.gov
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Since 2008, the US Federal Reserve has kept interest rates constant to (i) stabilize the economy, (ii) protect against inflation and (iii) stimulate growth.
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Using the 30-year US Treasury Rate as a benchmark, the interest rate is currently 3.57%.
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Each time the 30-year US Treasury Rate has risen in the past 5 years (to a maximum of 4.75%), it has taken no more than 6 months for the rate to decrease again to a level of 3.57%, or lower. 23
OPTIONS FOR THE INVESTOR
OPTIONS FOR THE INVESTOR IF INTEREST RATES RISE •
The investor will ONLY realize a loss on their investment if: a. b.
• •
•
The interest rate rises to a level higher than the interest rate at the `me of the bond purchase; AND If the investor elects to sell the bonds at that `me.
If the investor does not need immediate liquidity, the investor can hold his/her bond investment un`l interest rates decrease again, to a level at which the bonds were originally purchased, to recoup their en`re principal. Further, the investor can elect to wait un`l interest rates decrease to a level lower than the rate of the purchase date and recognize a gain on his/her investment. • Example: If the rates decrease to 2.70%, the investor can sell the bonds for a premium of up to approximately $75,000, or 13.6%, on a $550,000 investment, recouping $625,000. If the investor requires immediate liquidity and does not want to realize a loss of principal, the investor has the op`on to borrow up to 90% of the market value of the bonds, at a very low cost (1.5%-‐3.0%), using the bonds as collateral, and receive access to immediate cash. Once interest rates have reached more favorable levels, the investor can sell the bonds in the secondary market and recoup their en`re investment.
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OPTIONS FOR THE INVESTOR BORROWING AGAINST YOUR INVESTMENT (“MARGIN LOANS”) Margin Loans can be a low-cost, fast and flexible way to borrow funds, using bonds as collateral, to access immediate liquidity until interest rates decrease to more favorable levels. Opening an account can easily be done online, over the phone or in person within a couple of days; however, it is important to review and understand all Margin Loan requirements, rules and regulations prior to opening an account. HOW TO BORROW FUNDS: •
Step 1) Contact a financial institution such as Interactive Brokers, Fidelity, Vanguard, Scottrade, or TD Ameritrade and evaluate which institution to use. Your selection should include, among other criteria, which institution has (i) the lowest interest rate, (ii) the most flexibility, (iii) the least amount of fees, and (iv) in your opinion, the best customer service.
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Step 2) Open a Margin Account with your selected institution.
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Step 3) Using your Broward County bonds as collateral, determine the amount of leverage (or loan amount) that you would like to obtain. It can be estimated that the most that can be borrowed is 80-90% of the current market value of your bonds and the cost of the loan is estimated to be between 1.5-3.0% per annum on the total amount borrowed.
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Step 4) Execute the Margin Loan Agreement and access your borrowed capital. 25
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NO FINANCIAL ADVICE - The Information in previous slides regarding Margin Loans is provided for informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. The Information contained in or provided in this document is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information in this document is general in nature and is not specific to you the Investor or anyone else. YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED ON THIS FORUM WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A PROFESSIONAL BROKER OR COMPETENT FINANCIAL ADVISOR. You understand that you are using any and all Information available on or through this document at your own risk. RISK STATEMENT - The trading of stocks, futures, commodities, index futures or any other securities has potential rewards, and it also has potential risks involved. Trading may not be suitable for all Investors. Anyone wishing to invest should seek his or her own independent financial or professional advice.
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