Creating and Representing EB-5 Regional Centers - ALI CLE

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52Creating and Representing EB-5 Regional CentersHowever, the option of project pre-approval is not currently available. Also, marketing to foreignnational investors may be more difficult without the aura of regional center designation.Creating a Regional CenterIn order to create a regional center, it is necessary to put together a team of professionals:• An EB-5 Economist is a critical professional in performing the economic projection ofindirect and induced jobs; helping to establish a targeted employment area (“TEA”); andhelping to determine the geographic bounds of the regional center• A Securities/Corporate Attorney is necessary because the regional center investmentoffering is subject to securities laws. The securities attorney will prepare the privateplacement memorandum, including specific immigration risks of the investment, as well asthe Subscription Agreement. Usually the same attorney will create two or three corporateentities – the regional center entity; the “new commercial enterprise;” and sometimes theseparate job-creating entity.• The EB-5 Business Plan Writer will be preparing the comprehensive business plan topresent a credible explanation of the project, the use of the capital, the timelines, the jobcreation and other aspects of the project. Sometimes, the EB-5 business plan writer will alsoprepare an operating plan for the regional center.• The Immigration Attorney generally acts as the “quarterback” of the professional team. Heneeds to ensure consistency between the business plan and economic report; make certainthat the business plan is in conformity with USCIS policy; make certain that job creation isboth understandable and credible and consistent with USCIS policy; provide advice regardingimmigration risks for the private placement memorandum; review all documents forimmigration compliance; prepare and file the regional center designation application; prepareand file any application for project pre-approval; and in some cases prepare and file theinvestors’ I-526 EB-5 petitions.• Marketing Firm/Commissioned Agents are a critical part of the process because all of thework done by the other professionals will be for naught unless the project can be successfullymarketed to investors.• A Bank/Escrow Agent is often a part of the process since many regional centers offer aprotection to investors of having the investment amount sit in an escrow account at a bank,not to be released until the EB-5 petition is approved.Issues for Regional CentersTwo of the most important initial issues to be addressed are:• How much must investors invest?• How much capital can be raised?Klasko, Rulon, Stock & Seltzer, LLP Page 3 of 8
53Creating and Representing EB-5 Regional CentersVirtually all regional center investments are $500,000 investments. The reason is that the projects are in“targeted employment areas” (TEAs) 4 . As a practical matter, if a project is not in a TEA, the chances ofsuccess for marketing of the project to foreign investors are rather slim.There are three ways to prove that the investment project is in a TEA:• If the project is in a “rural” area, which is defined as outside of a metropolitan statistical areawith a population of 20,000 or more, it qualifies as a TEA 5 ;• If the project is in a census tract with an unemployment rate of at least 150% of the nationalaverage, it qualifies as a TEA; or• If the economist is able to aggregate a number of contiguous census tracts which togetherhave an average unemployment rate of at least 150% of the national average, and if thedesignee of the governor of the state provides a letter designating the aggregated census tractarea as a TEA, USCIS will generally defer to the state designation 6 .It is important to note that the ultimate TEA designation is not made until each investor makes hisinvestment 7 . Therefore, a developer risks the possibility that a project could commence at a time whenthe geographical area is a TEA; but by the time investors actually invest, it may not be a TEA.The amount of EB-5 capital that can actually be raised for a project is obviously a critical issue. Thatamount is based on how many direct, indirect and induced jobs will be created. Ultimately, the maximumnumber of investors is determined by dividing the job creation projection by 10. Multiplying that numberof investors by $500,000 (assuming a TEA) provides the maximum EB-5 capital raise. As a practicalmatter, investors will generally want to see that the job creation is far more (20-30% more) than theminimum required.It is thus rather obvious that the economic job projection report is a critical document. Generally,economists will use one of four recognized “input-output models;” RIMS2, REDYN, REMY andIMPLAN. These models project indirect and induced employment generally within the geographicbounds of the regional center. However, although USCIS has equivocated on the issue, it now appears tobe recognized that indirect and induced employment can be created outside of the regional centergeographic boundaries if a credible case can be made as to why other areas of the country will benefit.The immigration attorney, although presumably not an expert economist, should not just accept theeconomic report in an unquestioning manner. The immigration attorney should consider the followingkey issues in his review of the economic report:4 8 CFR § 204.6(e).5 8 CFR § 204.6(j)(6)(i).6 8 CFR § 204.6(j)(6)(ii).7 8 U.S.C. § 203(b)(5)(B)(ii).Klasko, Rulon, Stock & Seltzer, LLP Page 4 of 8
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