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The Importance of a Buffer in EB-5 Job Creation

 

This a re-post of an earlier blog article, but because of its importance to investors, we felt it was worth mentioning it again.

When starting an EB-5 regional center or EB-5 project, many look to the regulations as the Start EB 5 Buffer resized 600guideline to what is required to have a successful EB-5 offering.  The guidelines, however, are only the beginning.  Starting an EB-5 project requires thinking that will not only get USCIS approval but which will also win over investors.  To this end, it is wise to consider the job creation component with the inclusion of a buffer of extra jobs.

Why Have a Buffer at All?

Creating a buffer of more jobs than are actually required by the program has the benefit of added security to investors, which in turn means added security for the project in terms of its ability to win investor interest in the first place and ultimately to maintain a reputation for successfully delivering job creation to investors, the core measure of success to all future investors.

Having a buffer of more jobs than are required by the program means that if things don't go to plan and not all the direct jobs that were originally planned can be created, investors will not lose the opportunity to have the conditions removed from their green cards at the I-829 stage.

Where indirect jobs are concerned, job creation counts will be dependent on fulfilling the inputs that the economist had used to develop the indirect job creation calculation.  Most business people will take a conservative approach to planning their businesses, which means guessing high on costs and guessing low on revenues.  If costs are over-estimated, however, and these costs were counted as the input of investment used by the economist in his or her calculation, this conservative approach can backfire.  While coming in under budget is certainly a respectable and desirable outcome in almost any business scenario, a lower investment input to the project can mean that the originally-calculated number of indirect jobs may have to be revised downward to match the revised input, thereby meaning less jobs to go around for EB-5 investors.

How Much is Enough?

A good rule of thumb for a job creation buffer is to plan to create 20% more jobs than needed, or a total of 12 jobs per investor.  This is not a hard and fast rule but certainly 15%-20% is  recommended for those newer to the space as a minimum in order to be competitive.  With proven experience and track record, more leeway can be taken in the fullness of time.  Bear this in mind when developing your EB-5 business plan and financial projections.

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Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com). 

 

Download Your Free Paper: 9 Things to Know Before Going Down The EB\u002D5 Road

 

A Reminder About Bridge Financing in EB-5

 

bridge

The good news for those who would look to put bridge financing in place ahead of attaining EB-5 capital is that the bridge financing now only has to have been considered as temporary financing at the time that it is put in place (May 30th, 2013 USCIS Policy Memo), and the deal for that financing should somehow reflect the fact that it is short term or bridge financing. 

By definition then, anyone who is looking to get a deal going under the EB-5 program using bridge financing to get started more quickly, should be able to move forward to replace that bridge financing with EB-5 capital even if using EB-5 capital specifically was not the plan initially.  In turn, this means that EB-5 business plans can be developed with more definitive development schedules, and even better, that indirect jobs based on economic impact models that use investment dollars as an input can start to claim job creation even before investors are found.

It should also be noted, however, that commonly the farther back in time that one goes (i.e. the distance in time from the date that EB-5 funds are expected to be raised and used to relieve the use of funds from bridge financing), the more challenging it becomes to show sufficient 'nexus' (or the connection between how the EB-5 funds/ bridge funds lead to the creation of jobs).  If you are using bridge financing be sure to have an in-depth discussion with your attorney to make sure it is set up properly so that you will not have problems down the road.

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Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com). 

 

Download Your Free Paper: 9 Things to Know Before Going Down The EB\u002D5 Road

EB-5 Processing Times Changing Again

 

EB-5 Processing timesIt has been just 7 weeks since the December 5th USCIS Stakeholder call and processing times are on the move again.  It is interesting to note that as of January 20th, the posted processing times on the USCIS website have improved (just barely) for I-526 processing, and have increased significantly for both I-924 and I-829 processing.

Here are the latest statistics:

  • I-526 processing: 13.8 months, down from the 14.3 months announced on the call
  • I-829 processing: 10.5 months, up considerably from the 6.8 months announced on the call
  • I-924 processing: 10.3 months, up from the 8.5 months announced on the call

Overall the increase in processing times does not bode well for the industry.  On the bright side, however, those who are already marketing to investors or who are launching ‘direct’ projects are seeing a slight improvement of about 2 weeks in processing time, which is obviously helpful in terms of getting money on the door to move projects forward.

USCIS wants to improve these times and we hope that they will, but for those starting EB-5 projects, they would be well advised to plan for the worst and expect these times to get longer before they start improving.  Bridge financing or later project starts are the best ways to plan for these delays.  And remember that bridge financing is a great thing when it comes to claiming indirect job creation if investment dollars were used as the economic model input.  If that financing is to be replaced by EB-5 money and is already being deployed, it’s like creating jobs before the investors are fully signed up.

We hope to be bringing better news next time around!

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Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com). 

 

Notes on Economic Impact Reports for EB-5 Regional Center Projects

 

Economic models and economic impact analyses which employ these models are the basis uponeconomic model for EB-5 regional center projects which indirect jobs are claimed for an EB-5 regional center project.  I am often asked which model is best-suited for this purpose.  The following information may be helpful for those who are exploring EB-5 and speaking to economists.

  • The 3 most commonly used economic models in EB-5 regional center business plans to date are RIMS II and IMPLAN and REDYN.  New to the scene is IMPLAN's I-RIMS model which is being offered by IMPLAN as an alternative to RIMS II.
  • Commonly, RIMS II and IMPLAN models are used for simpler projects, while multi-faceted projects might benefit from the REDYN model.  The I-RIMS model may find traction in EB-5 as things move forward.

Ultimately, any EB5 regional center project developer should have a long conversation with their economist to discuss the benefits and/or drawbacks inherent in using each model and when one model might be preferable over another.

Another important consideration is understanding how the inputs that you and your economist choose to develop the model can impact the job creation estimates but also the level of safety that it offers investors in terms of likelihood of job creation.

For example, if an EB-5 deal is claiming indirect job creation then the economist must choose what investment 'inputs' they will be using to develop their economic impact model which calculates the indirect job creation. These inputs can be revenues or investment dollars or profits (among others). If they choose investment dollars as the input then the model will show less indirect job creation as a result, but because it is based on investment dollars only, it is much easier for the project to 'create' these jobs because they must only show that they invested the money they said they would invest in order to be able to claim that they created the projected indirect jobs; in other words this approach is better for an investor but less appealing for the entrepreneur because they will not be able to show as much job creation and therefore they will not be able to raise as much money from EB-5 investors.

Conversely, on the other hand, if they use the company's estimated revenues as the input to the economic model, they will usually show higher indirect job creation, but this job creation has more risk behind it and the indirect jobs cannot be claimed in full if the business does not achieve the revenue targets that they used for the model. This could potentially pose some additional risk to investors for this reason. For this reason we would normally assign less indirect job creation risk to a model that uses investment dollars as the input instead of using projected revenues as the input.

Similarly, following on to the first example, if the investment dollars were used as the input to the economic model, a project that has arranged for bridge financing or which is already underway, offers even less risk to an investor, because if they have found a way to already invest the dollars then the indirect jobs that are tied to that investment are effectively already created in the eyes of USCIS.

The most important take-away from this post is for developers and EB-5 entrepreneurs to ensure that the economist they choose is adept at using all three models, and the pros and cons of the different choices for model inputs so that they can properly guide you to the best choice.

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Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com). 

Good News From USCIS Regarding EB-5 RFE Analysis (and Prevention)

 

analysis resized 600Good news! On the USCIS call engagement of December 5th, 2014, USCIS indicated that they will try and analyze EB-5 project and regional center RFE trends in order to narrow down some of the “pain points” and educate the community on those issues.

When this initiative is carried out we think this will have the preventative effect of reducing the number of RFEs and will enhance the EB-5 program overall, including clarity regarding the development of Business Plans, beyond the somewhat dated (and not always relevant) Matter of Ho guidance. This will give additional comfort to EB-5 investors and the EB-5 community overall as they start on the development of EB-5 initiatives and business plans.

 

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Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com). 

 

Can an EB-5 Loan be Paid Back Early to the New Commercial Enterprise?

 

On the USCIS |EB-5 Stakeholder's call on December 5th, 2014, a question was asked pertaining to an EB-5 investment made in to a New Commercial Enterprise, which is subsequently loaned to a separate Job Creating Enterprise.  The question asked was whether the investor's EB-5 capital still be considered to be “sustained” if the Job Creating Enterprise successfully creates the jobs and is then sold to another party before the I-829 stage. USCIS did not address this question directly, however, later on, another attendee commented that if the Job Creating Enterprise is sold or liquidated and loaned funds (i.e. EB-5 money) are paid back to the New Commercial Enterprise, those funds should be considered to be “sustained” (in the commentator’s opinion), as long as EB-5 investor redemption has not occurred.  

This is a position that we have heard before from members of the EB-5 community, but we invite readers of this blog to comment on whether they have seen this approach used successfully.  Please let us know if you or anyone you know has had any experience with this method.  

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Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com). 

 

Canada Back in the Immigrant Investor Game (Sort of) with new Program

 

Canada EB 5 Investor resized 600You read it here first

Citizenship and Immigration Canada announced on December 22nd that Canada is launching a new pilot program whereby foreign investors can apply to invest $2 million into a venture capital fund that will be deployed to 'innovative Canadian start-ups with high growth potential' in order to attain permanent residency.

It does not seem that this program will pose a threat to the EB-5 program any time soon because of some key program features, including:

  • Net worth of $10,000,000 required
  • 15 year investment required
  • It's not clear yet, but the way the announcement is worded, it seems that the government is dictating what kind of businesses can be invested in.  Innovative + high growth = risk
  • 500 applications will be taken in but only 50 will be selected 'at random'
  • Proven language proficiency and Canadian university equivalent education required
Yikes!  This author thinks the Canadian government is about to learn a hard lesson on investment-based immigration.
Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com).
Strategic Element: your source for EB-5 business plans and feasibility studies www.strategicelementconsulting.com.
Download Your Free Paper: 9 Things to Know Before Going Down The EB-5 Road

Unofficial Dec. 5 USCIS EB-5 Stakeholder Call Transcript Available

 

eb 5 stakeholders call resized 600USCIS December 5th, 2014 Stakeholder Call Unofficial Transcript Notes

From Strategic Element, your source for EB-5 Business Plans

 

Please Note:

  • Strategic Element does not make any representation or warranties about the accuracy of this transcription or any of the statements or claims represented therein.
  • Strategic Element does not have permission to represent any of the names of any of the participants in the call so aside from USCIS employees, the names are not mentioned in the transcript that follows.  If you were one of the attendees who asked a question represented herein and you would like it attributed to you, please contact us at inquiries@strategicelementconsulting.com.  We will only include names and company names at your request.
  • Strategic Element did not include questions that were not answered or sufficiently addressed by USCIS on the call, and omitted any irrelevant comments.
  • Strategic Element attempted to transcribe the call as closely as possible to what was said by each speaker, including grammatical inaccuracies, but some comments, statements and/or questions were not audible.

 

Mariela Melero: I want to thank every single one of you for joining us today; I want to thank those you that are here but also those that are joining us telephonically. My name is Mariela Melero  and I am the Associate Director of USCIS Customer Service and Public Engagement. Our engagement today, my distinguished colleagues and friends from the immigrant investor program office, Nicholas Colucci who is the Chief of the Immigrant Investor Program Office and Julia Harrison, who is the Deputy Chief of the Immigrant Investor Program Office. In addition, we are extremely honored to have with us today USCIS Director Leon Rodriguez who will be addressing us shortly.

 

Mariela Melero went on to state that the members of the media who were joining them in the room or over the phone could contact the USCIS at 202-272-1200 for additional information.

 

I would also like to take just one minute to go over today’s agenda. The first thing that we are going to have is the opportunity, as I just mentioned a second ago, to hear from our  Director. Following the Director’s remarks, we will hear from both Nick and Julia, who will highlight various EB-5 program updates and several upcoming initiatives. After their presentations, we will move fairly quickly into a question and answer session with them and with some of our SMEs that are here as well to allow amole time to address every single one of your questions. Now we will turn the session over to our Director Leon Rodriguez.

 

Leon Rodriguez:

 

Good afternoon, it’s great to see everybody. This afternoon was supposed to be my introduction to you and your introduction to me. What has been very interesting just about the last ten minutes is that in all the stakeholder gatherings that I’ve had since becoming USCIS’s Director five months ago, this is the one in which I knew the most people. So as I worked the room when I first walked in I actually had a number of prior interactions, dealings, relationships with so many of you in this room and one in particular [INAUDIBLE] my days as the County Solicitor Montgomery County Marilyn really reminded me of a critical theme for the discussion we are going to have today and really for my attitudes and perspectives of the EB-5 program.

 

When I was County Solicitor, a big part of our role was supporting the County Office of Economic Development, supporting the County Executive as he travelled all over the world to stimulate foreign investment in Montgomery County, from China, from Korea, from Israel, from all over really seeking those business relationships with other parts of the world and they have formed in me the seeds of a belief that this is a program that is very critical to the economic development of our communities because it can mean investment, it can mean jobs if you look at the EB-5 program just in the last year talking about 5.5 billion dollars in potential investment in our communities; so I really have the desire to not merely be an operator of the EB-5 program, not merely a manager of the EB-5 program but really to be an enthusiast of the EB-5 program, to really champion the potential that it represents for our communities in the United States, subject of course to the fact that we have to do our jobs with respect to national security, with respect to the integrity of the program. So my commitment to you is to find that appropriate balance in the program between making sure that we realize the full potential of this program with full intent that the Congress had when it passed this program, but really managing it in the most efficient and appropriate way that we can with respect to the program.

 

Now one of the things that I really want to accomplish this afternoon, unfortunately I am not going to be able to stay here for the entire time, is really take the advantage of sitting in this environment to hear the kinds of things that we are going to talk about, the kinds of concerns that you may be raising; I look forward to a de-briefing after because I think it’s you who are really going to present to us the critical perspectives on how this program can run best, how it can run better.

 

I do think that the decision that we made to bring the program here in Washington, its process by the way not a complete process just yet, represents the right way to treat this critical program and so I’m gratified to see that our goals to further staff up the program, that those goals are moving closer and closer to  fruition; I actually had the opportunity to be a little cheeky with one of you and to say well what should I talk about and you said well how about you talk about that fourteen month wait and that’s why it’s critical to point out that we are still building the program, we are still getting it up its full level of staffing and so really hopeful that once we reach that full level of staffing that those waits will become a thing of the past. We know that that’s among the many issues that we need to work on – that’s a critical one that we do need to work on. So I look to hearing feedback, exactly like that feedback, because it gives us the opportunity to do better; it gives me the opportunity to as the new Director to really immerse myself in this really critical program.

 

By the way, I would take a close look at the president’s executive action; there are a couple of things in there – I think the business visa stuff is stuff that you were following all along but there are a couple of entrepreneur programs and investor programs that I think are going to be important to your community; so I would commend you attention to those programs as well and that signals my moment to be quiet and start listening. So I just want to thank you all for being here today and I look forward to a long and fruitful relationship. Thank you.

 

[Nicholas Colucci] :

 

Thank you Director. Good afternoon everybody; it’s really nice to see you all here in person. We’ve done three of these now and they’ve all been a few of sitting in a speaker room talking  to 500-600 people  so it’s nice to get some audience reaction. The 50 or so of you in this room are joined by about 500 individuals on the phone line; it includes are colleagues within IPO as well as the administrative appeals office and other colleagues across the agency.

 

Before we begin, I’d like to introduce just a few members of the IPO staff they are going to join me today in the stakeholder engagement; you met Julia, the Deputy Chief of the program. We have our three division chiefs here as well [INAUDIBLE NAME]  and Lori Melton are here. They are division chiefs over the adjudicators and then John Lion is our chief of the economists or leads the economist group.

 

I’m going to start today by looking at fiscal year fourteen which just by way of background for us ran October 1st, 2013 to September 30th of 2014. I’m sure you will all agree that it was a particularly noteworthy year for the EB-5 program, just with respect to the administration of the program to the program side some of the things that the Director talked about in terms of building the program and getting staffing together. We have excelled in our new space; we moved about a month and a half ago and it’s much more conducive to sort of our work flow needs, as well as our file storage needs; we’re happy to have that. I’m also happy to inform you that as of September 30th, all of the forms have now been transitioned to the immigrant investor program office. As you will recall, the 829 was being worked at the California service center that is since been transitioned.

 

You know one of the things that was critical throughout the year was, as the Director mentioned, was really building our staff and we were able to really recruit train and hire, not necessarily in that order, but recruit, hire and train really capable and motivated staff. I can’t speak enough of their talents to adjudicate these applications and petitions. At the end of the fiscal year 14’, we had 83 individuals on board with the program and that’s specific to IPO. With respect to our fraud detection and national security officers who support the program, thirteen of them were on board at the end of fiscal year 14’, and with respect to chief council we had eleven attorneys on board; again these groups provide direct support to the program. Today IPO stands at 94 strong and we are working to bring on board ten employees on board in the next few weeks and we do enjoy that same level of support that I’ve talked about from chief council and FDNS.

 

Now to turn to the program itself, as you know, the program just experienced really unprecedented growth in fiscal year 14’. The number of approved regional centers at the end of the fiscal year neared 600. This is an increase of nearly 230 from the end of fiscal year 13’; so a significant increase year over year. We received nearly 11,000 immigrant investor petitions throughout the fiscal year. These ranged a great number of projects and a wide variety of industries; things from huge infrastructure projects, commercial construction, mining operations, the entertainment industry; these types of projects really do run the gamut of the American economy.

 

Just another interesting statistic, the 11,000 petitions that we received, equalled greater than one quarter of the petitions that we’ve received since the program began in 1990. So again just  a remarkable year; and as a result, I know as you are all aware, for the first time the program used an allocation of approximately 10,000 visas which became unavailable as we closed out the fiscal year. As you also know, those visas are now available once again. One thing I want to mention about the fiscal year 14’, is we undertook a fairly comprehensive review of the regional center population to determine continued eligibility to the review of  the I-924 As that were submitted by the all of the active regional centers at the end of fiscal year 13’. As a result of this review, we terminated seven regional centers for failing to file the I-924A. We also issued 28 notices of intent to terminate to regional centers that no longer served to promote economic growth. We’re currently the reviewing the responses to some of those and we’ll take any appropriate final actions in the coming months. While we are on the topic of the 924A, some of you mayors have received on Wednesday an alert that went out just reminding those regional centers that were active and had an active designation at the end of fiscal year 14’, that the I-924A is due on Dec 29th. So please try to get those in by that day if you haven’t already. And then finally on the 924A, in preparation of this engagement we received a number of questions and more of the questions, actually more of the comments, asked us to revise the 924A we organize it and just to let you know the 924, the regional center application and the I-924A are currently open for public comment. We have made revisions to both of those forms. Any event you don’t know; if you have any suggestions on how we can improve the forms please do visit the [INAUDIBLE]  register and leave a comment. For those of you in the room we have the site on a slide in the room; for those of you on the telephone, we’re going to provide that after the call.

 

Before we begin a look at 15’, I just want to take a few more minutes to again look at the growth of the program in 14’. As I mentioned, we received, again 11,000 petitions. We also received, and as the Director mentioned, that represents nearly 5.5 billion dollars of potential investment in the United States economy. We also received 270 924s either applications or amendments to regional centers and more 2500 petitions to remove conditions. Let me just go over those again; I know those of you on the phone are probably writing things down – Nearly 11,000 petitions, 270 applications or amendments to regional centers and more than 2500 petitions to remove conditions.

 

Just to give you an idea of the year over year growth in each of those form charts, form fiscal year 13’ to 14’, that’s a 72% growth in the I-526, again greater than 70%. For the I-924, it’s a  34% growth and then finally 829 106%. We do a number of briefings on the EB-5 program and one of the things we emphasize is the growth of the program and I think one of the most telling statistic is the one that we use when we compare what we have now compared to just 2007 which was just a short time ago. In 2007 we had eleven active regional centers. We received fewer than 800 immigrant investor petitions, the 526s and received fewer than 200 of the 829s. So again that just speaks to the explosive growth of the program.

 

Just to talk a little bit about, very quickly about the processing time and I’ll address it in a few minutes as well. As the Director said, our 526 processing time stands at 14.3 months at the end of the fiscal year. On the 829s we’re at 6.8 months and then finally for the 924 8.5 months and those processing times are available on our website.

 

Now to look at fiscal year 15’, one of the things we did this year as a staff is we put together an operational plan that is going to help guide our work, measure our progress because as you know what gets measured, gets done and then finally keep our collective eye on the ball; we don’t want to get distracted by shiny objects; so, we want to make sure we have this plan to guide our work. We wanted to do this so that we can communicate to all of our stakeholders within the agency, the department, members of congress and all of you some of the things that are important to us and we’re trying to get down in fiscal year 15’. Two of our priorities are internally focused: maintaining a strong infrastructure and assuring that we continue to develop our workforce and I’m not going to spend a lot of time discussing them today; I would know however that with respect to both of those, we want to continue to attract, retain and develop top talent and this has become increasingly important as the complexity and the size of the projects we’re seeing continue to increase. In terms of what I’ll call the initiatives a little bit more operational in nature, we’re going to focus on three primary areas: improving customer service and outreach, providing high quality services and strengthening program integrity. I’m going to spend a few minutes discussing a component or two under each one of these areas.

 

For customer service and outreach we’re going to continue to hold quarterly stakeholder engagements and provide timely responses to the 1000s of inquiries we receive each year. Just by way of background, we set up a customer service branch April of this year and that branch has responded to about 5000 inquiries in that time; so that just speaks to the number of inquiries that the program receives. You know one of the benefits of processing times going down, that number is going to go down as well too. We are going to expand the number of engagements and Julia is going to talk a little bit about some of those in a few minutes; however, one of the new [INAUDIBLE], we’re going do is going to have IPO personnel to travel out to the field to get to know some of our federal and local partners, help them better understand the program which is absolutely critical with a program of this size and scope and then also to establish those relationships.

 

While we are in the area, we do plan to hold outreach events; so, we’ll make everyone aware when we do that. To move to high quality services, this is processing times, we’re going to try to get those forms in processing times while maintaining the high level of quality in all of our adjudications and communications. It’s going to be challenging, I mean honestly, with the processing time for the 526 of 14 months, we’ve got our work ahead of us but we’re going to make every effort to achieve the goal. We just came off of a month where we challenged the entire office, including me, we wanted to get a 1000 actions done in the month of November and we finished the month with a 1048; so, we actually hit that goal and we’re excited about it.

 

Just in terms of the staff that we have working the petitions and applications, we currently have 40 non-supervised re-adjudicators who work with staff, we have four who work the forms and applications, we have four more who are going to be coming on board and we have seventeen non-supervised re-Economists. We had our last group of adjudicators come on between the middle of September and the middle of October and I’m happy to report they’ve already completed training and done mentoring and they’re actively contributing to the program in a huge way so we’re very pleased with the progress of that group and the progress of the direction that we’re going and we expect to see processing times on the 526 come down in the near future.

 

One of the other things with respect to providing high quality services is to issue well-timed guidance and one example of that is guidance on the area of retrogression. We’re certainly aware of the impact that visa retrogression may have on the EB-5 program and we’re working internally to prepare policy guidance on several related issues. We did receive, prior to this engagement, a number of questions on retrogression and we’re going to respond to those later in the session.

 

And finally the last thing I want to talk about in terms of our three operational goals is further strengthen the program integrity in the coming year. As you know program integrity is something that is vital to all of us. For us it continues to be a top priority to collaborate with those law enforcement and regulatory organizations to help prevent fraud and develop new ways to further enhance confidence in the program.

 

In the year ahead, we plan to expand site visits both domestically and abroad to validate supporting documentation, we expect to expand our regional center to comply interviews, that’s the review of 924A, bringing in new commercial and government data sets to assist. Our FDNS team, fraud detection and national security team, is going to continue to expand in size and receive additional training on combating money laundering, fraud and international banking crime to enhance their knowledge and capabilities. They have acquired new software tools to assist them in building cases and they’re going to continue to build their tool box. You know, as you know, maintaining program integrity is not something just that we can do; we have to all work together. You’re going to be in a position to encounter incidences of fraud, whether it’s through prospective partner, potential investor or just something you see on the internet. I urge you to contact us and let us know so that we can work with our partners to investigate the activity.

Get the entire transcript.... 

Note from Strategic Element: This is the 20 minute mark of the call and concludes our posted portion of the stakeholder’s call.  In order to receive the entire unofficial call transcript note please sign up to our mailing list at: Strategic Element Mailing List 

 

Strategic Element: your source for EB-5 business plans and feasibility studies www.strategicelementconsulting.com

Franchises can be the Best Path to EB-5 for Many Investors

 

The ChallengeFranchise can be great EB-5 Opportunities

As a young man, I went to Taiwan to teach English for several months.  Almost immediately, I was struck about how challenging it was to do the simplest of things such as walking down the street to browse some shops or buying some toothpaste.  English was taught in schools, but very few people would speak it in the street and all the signs were in Chinese and so on.  Sooner or later I learned a little Mandarin and became fascinated with Chinese culture, but still, the more I learned the less I understood.

Remembering this experience helps me to understand, in part, some of the challenges faced by overseas investors, particularly those who do not speak English very well or who are not familiar with how we do business.  Of course, when it comes to investing in EB-5 projects we are talking about far more than buying a tube of toothpaste and that merely adds to the complexities they face.

There are many strong EB-5 investments out there, but there are arguably many EB-5 opportunities that are far less so.  Add to this some of the program's high-profile failures (few as they may be) and one can see why some investors may be hesitant to trust some regional centers, even those that appear to be the 'real deal'.

The Direct Alternative

For the reasons stated above, we are seeing an upswing in interest among investors in investing in 'direct' EB-5 projects (projects outside of regional centers), commonly because there is a far more direct relationship between the investor and the business owner and the business in question is usually smaller and easier to grasp and assess.  The other main reason is that EB-5 investors can also start their own qualifying businesses which they can control, thereby minimizing the risk (in the investor's opinion) of not achieving the required job creation or of failure of the project overall.

How then, does the foreign investor whose English may not be so good or who does not know our business customs get the best of all worlds?  One way is to find the 'right' small or mid-sized business that is being run by a trustworthy individual.  Another opportunity can come in the form of starting a franchise operation.

Why a Franchise?

Franchises work for EB-5 investors for several reasons:

  1. Franchises have proven business models.

  2. Franchise companies can help with top-notch market research.

  3. Franchises (mostly) have very specific operational guides which take the mysetry out of day-to-day operations for the uninitiated.

  4. Franchises can be put together with experienced and successful operators so that the EB-5 investor's involvement can be limited to setting policy, high-level strategy and management decision making, thereby making the day-to-day operation more of a turnkey situation.

The above list is one of the reasons that Strategic Element has developed a new offering helping EB-5 investors to find the right franchise and to get the operation up and running with experienced operators.

Navigating the waters of a new country and culture can be difficult indeed, however, depending on one's preferences and investment parameters, there are always different ways to carve out opportunity.  Ultimately, the first step is to decide what kind of investment one is most comfortable with.

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Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com).

 

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What is a 'Kitchen Sink RFE' and Why Does it Matter for EB-5?

 

describe the imagePlease note: this article is strictly the author's opinion based on his own observations.  It is not intended to suggest USCIS policy on this matter and only hypothesizes with regard to the possible logic behind certain RFEs in certain situations.

What is an RFE?

Let's start here. For those who do not know, an RFE is a Request for Further Evidence. This is the official name of the formal request made by USCIS to any petitioner from whom they wish to receive more information or evidence to verify certain details of their submission or to provide additional information that they feel is missing. A petitioner may receive an RFE at any stage in the EB-5 process (e.g. at the I-924 at the I-526 or at the I-826 stage) and they are quite common.

What is a 'kitchen sink' RFE?

A 'kitchen sink' RFE is an affectionate term used (without affection, mind you) by the author of this article, as well as some others in the industry, to refer to an RFE issued by USCIS that seems to go beyond requests to fill in the gaps of what has been provided by the petitioner. In a nonscientific study of RFEs conducted by the author, the author has come to suspect a certain trend, which may or may not be valid but is worth considering.

The trend appears to reveal that in instances where a petition is lacking in more than just a few important areas (or even if some things don't seem right in a non-specific way), the resulting RFE seems to go beyond questioning simply what is missing. In other words, it seems to the author, that perhaps USCIS feels that the petition should be tested in more ways than what is obvious, if they should come to think that there is reason to wonder whether the business or the people behind it are indeed credible.

This article will primarily use business plans as an example of the above. Some things for petitioners to keep in mind as they formulate their applications (specifically the business plan), is that all core assumptions should match and play through in all key documents. For example, in the case of a hotel, the occupancy rates used should flow through to the economic impact report, the pro formas and the feasibility study (assuming one is used). Following through from that, the pro forma statements should also make sense relative to the uses of funds, which in turn should match the source of funds. This is just one example of the type of more obvious issues that could raise a red flag with USCIS. If any one of these things does not fit with the rest this would not only trigger an RFE, but perhaps it would trigger a 'kitchen sink' RFE because, in the author's opinion, it may give USCIS cause to suspect the whole plan of these key elements of a petition.

Some examples of less obvious things that the author believes could trigger suspicion and therefore a 'kitchen sink' RFE are things like properly addressing the nuances of program requirements, or even things as minor as language, proper use of business terminology, and believe it or not, even something as simple as formatting of the plan. While in and of themselves these things are not cause for an RFE, they could trigger questions with regard to the professionalism and knowledge of the applicant, or maybe giving an adjudicator cause to look more closely or to start to question things that they would not otherwise question.

Avoiding the 'Kitchen Sink' RFE

The key to avoiding the 'kitchen sink' RFE, in the author's opinion, lies in providing sufficient detail, demonstrating a thoroughly thought out business plan, sufficiently meeting USCIS requirements and presenting a well organized EB-5 business plan. There are many in the industry who suggest that a short business plan is best and maybe this works for them. The author's view, however, is that within reason, being as detailed as possible is a good idea. In order to ensure that overburdened adjudicators are not overwhelmed with too much detail, the trick is to organize the plan in such a way that allows them to find the information they are looking for quickly, and should they wish to 'deep dive' and find out more, without having to ask for it via an RFE.

The other key thing to keep in mind is to work with an experienced EB-5 team. An experienced immigration attorney, securities attorney, EB-5 business plan writer, economist and feasibility study company will take you a long way. There is always an argument to be made for those who wish to save money by trying to do things themselves or going with lower-cost providers, but experience counts. What is the cost of having to deal with an RFE in terms of both time and money? What is the compounded cost of having to deal with the 'kitchen sink' RFE?

Food for thought.

Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans and custom 'direct' EB-5 projects for its clients.

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