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EB-5 Options for Developers
February 11, 2013

In recent years, developers seeking to raise capital have taken a keen interest in the EB-5 “regional center” investor visa program. “Regional centers” are entities designed to use immigrant investor capital to promote economic growth in a particular geographic area. Any entity, government or private organization may apply for regional center designation by submitting a written proposal addressing each of the requirements for regional center designation.

Many developers believe that creating a new regional center is the best or only option to raise capital from foreign nationals. In fact, there are three options under the EB-5 program. The best option depends upon the particular needs and plans of the individual developer.

A summary of the three options, including some of the advantages and disadvantages of each, follows:

1. Establishing a Regional Center

Advantages:

  • Developers can count indirect and induced employment to meet the 10 job per investor requirement.
  • Developers can have individual projects within the regional center pre-approved by USCIS.
  • Regional center certification may lend a certain legitimacy that helps in marketing to foreign nationals.

Disadvantages:

  • Certification of a regional center may take from six months to one year.
  • Preparing the application for certification is expensive; costs include hiring an economist, a business plan writer, immigration and transactional/securities attorneys; in addition, the filing fee is $6,230.
  • In addition to having the regional center certified, the developer still needs to have its individual capital investment projects approved.
  • There are more than 150 regional centers already approved.
  • Many regional centers have not been able to attract investors.
  • New regional centers find it difficult to compete with regional centers that have been in the business for many years.
  • Regional centers have ongoing administrative and filing requirements with USCIS; failure to comply could result in de-certification.

2. Having an Existing Regional Center Sponsor a Project

Advantages:

  • Eliminates the time and expense involved in developing a new regional center.
  • The existing regional center may already have a marketing plan and structure in place and investors ready to invest.
  • Developers can still seek pre-approval of their new project.

Disadvantages:

  • The regional center operators will likely require a fee for their services.
  • The developer must conduct serious due diligence on the regional center to avoid affiliation with a regional center that doesn’t meet expectations.
  • The developer may have to give up some control over the project to the regional center operators.
  • The developer assumes the risk that the regional center may become de-certified.
  • The regional center may need to amend its certification with USCIS to incorporate the new project, which could cause a delay.

3. Pooled Investment— Individual EB-5 Petitions

Advantages:

  • Avoids expense of obtaining regional center certification.
  • Avoids ongoing administration of regional center.
  • No delay for certification; as soon as investors are identified, the EB-5 petitions can be filed.
  • No ongoing reporting requirements.

Disadvantages:

  • 10 direct positions must be created for each investor.
  • Pre-approval is not available.
  • Marketing may be more difficult.
  • USCIS prefers 10 jobs to have been already created at time of filing petitions.
  • Ultimate removal of conditions depends on 10 positions existing at time of condition removal.
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