EB-5 Options for Developers

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.