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Why Use All-in-One Service Providers To Start EB-5 Regional Centers?

 

I often get calls from people who are new to EB-5 trying to understand the process and the details of starting an EB-5 regional center or project.EB 5 Service Providers resized 600

While the idea of calling around to industry experts appears to be commonplace, it may answer your first questions but there are so many details and subtleties to the program that, inevitably, these new EB-5-ers end up with more questions than when they started.

This is common and it speaks to the complexity of the program and how the rules shift for every specific situation.  Calling around is not a bad idea to start, but be careful of taking it too far as differing opinions among professionals can end up in frustration for some.

Another approach for EB-5 newbies is to consider speaking to all-in-one service providers, who can bring the right set of seasoned experts to the table and spearhead the process of managing all the moving parts in a coordinated manner, typically at a price that is competitive with what one would get in trying to do it all themselves (without the benefit of project management that these providers offer).  All-in-one providers can identify problems and questions to be addressed, sooner rather than later.  They are also familiar with what is not available to most: the basis of various RFEs (requests for further evidence) from USCIS, from a long experience and history of researching what has occurred with other regional centers.

The cost to your overall development of getting an RFE or not getting it right the first time can far outweigh the cost savings one might get from trying to manage the project yourself. A good all-in-one shop will save most people considerable time and money in the long run, and will help put together a EB-5 project, business plan and application that not only minimizes the likelihood and/or severityof an RFE, but which can also help to avoid errors arising from (often subtle) issues that can hold up an entire project.  

The other key benefit of using an all-in-one provider is that they have a good view into the investor side of things as well, so not only will they help to devise a project and business plan (the heart of the application) with the strongest likelihood of approval, but they can also help you to structure details in such a way as to be as palatable as possible to investors. The fringe benefit is about 1,001 less headaches as well.

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.

What is EB-5? Learn About This Valuable Program

 

The EB-5 program is an initiative created by the U.S. government in 1990. It was created to encourage foreign investment in U.S. businesses, and to provide an incentive for entrepreneurs looking to fuel job growth.describe the image

 

For Foreign Investors: A Path to U.S. Residency

EB-5 is a U.S. immigration category that provides a method for foreign nationals to obtain a green card (initially conditional) by investing money in the United States. To qualify as an EB-5 investor an individual must invest $1,000,000 in a U.S. business, or $500,000 in a business that is operating in a designated Targeted Employment Area (TEA; a high-unemployment or rural area, according to specific EB-5 definitions).

In addition to the investment amount, EB-5 applicants must also show proof of creation of 10 U.S. full time jobs as a result of their investment. If their petition is approved, they are granted a conditional green card in the U.S. At the end of a two year period, the investors must demonstrate that the full investment has been made and put at risk and that the jobs have been created for the conditions to be removed from their green card.

The EB-5 program has changed over time, and the most notable change is the development of the EB-5 regional center. EB-5 regional centers are pre-approved entities that allow EB-5 investors to pool their money together. These regional centers make the job creation requirement easier on investors, as regional centers need only demonstrate direct or indirect job creation (indirect jobs are calculated by an economist), via the Job Creating Enterprise, or the business which is creating jobs and for which a business plan is submitted to USCIS.

 

For Entrepreneurs: Attract Investment Dollars

The EB-5 regional center has created a compelling way for U.S. entrepreneurs to attract foreign investment capital. Becoming a regional center can create a clear incentive for high net-worth foreign investors to provide capital in blocks of $500,000 or $1,000,000.

However, this powerful option is not without its costs. Becoming an EB-5 regional center requires U.S. Citizenship and Immigration Services (USCIS) approval of a business plan and a full 'I-924' application package. The application process is a complex and demanding one for the un-initiated. Despite this, new regional centers are forming all the time, encapsulating a wide variety of development projects, from real estate to assisted living facilities.

 

EB-5: A Powerful Tool

The EB-5 program is a significant initiative that has created a rare commodity in the world of investments – a true economic win-win. It is attractive to investors as a path to U.S. residency, and to entrepreneurs as a powerful catalyst for foreign investment.  

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.

Can my EB-5 Project Claim Jobs Created by Tenants

 

 

describe the image

I am often asked about whether an EB-5 project can count jobs that are created by tenants of a particular development.  For example, if someone has an EB-5 business plan to build a shopping mall and each individual shop is leased out to third parties who will operate their own retail businesses, can all the regular retail staff be counted?

The short answer to this question is yes it is possible, however, where this was once an easier task to accomplish, USCIS has since issued a series of rules and guidance that must be adhered to in order to qualify these positions.

The following is the guidance language issued by USCIS on the matter, however, as is often the case there is a question of interpretation on several points.  We have added our own comments to the text (in bold) but please recall that we are not lawyers and our interpretations are based solely on the language we see.  Many of these will likely require change as adjudications clarify the policy.

From USCIS December 20th, 2012

"December 20, 2012 GM-602-0001
Guidance Memorandum

SUBJECT: Operational Guidance for EB-5 Cases Involving Tenant-Occupancy


Purpose

This guidance memorandum (GM) is intended to facilitate adjudication of cases involving issues related to the "tenant-occupancy" methodology for establishing job creation in EB-5 cases. The guidance has been formulated following careful internal deliberation, consultation with sister government agencies, and review of responses to requests for evidence (RFEs) issued in February 2012 to a number of outstanding Regional Center applicants who relied on the tenant-occupancy methodology. This guidance will be applied to pending cases and cases filed on or after the date of this guidance that rely on the tenant-occupancy methodology. This guidance does not rescind or supersede other EB-5 guidance.

Scope

Unless specifically exempted herein, this GM applies to and binds all U.S. Citizenship and Immigration Services (USCIS) employees.

Background

Among the issues raised in the February 2012 RFEs, USCIS sought evidence that the projected jobs attributable to prospective tenants (which would occupy the commercial space created by the EB-5 capital) would represent newly created jobs, and not jobs that the tenant had merely relocated from another location. This determination is necessary to assess whether there is a reasonable causal link between the EB-5 enterprise and the job creation that would allow for the attribution of the tenant jobs to the EB-5 enterprise. These RFEs suggested the types of evidence applicants could submit to make this showing.

Implementation

Prior to issuing the February 2012 RFEs, USCIS determined that the tenant-occupancy methodology can satisfy the EB-5 program requirement of presenting a "reasonable methodology" that is "supported by economically or statistically valid forecasting tools," if the applicant presents in "verifiable detail" information sufficient to establish by a preponderance of the evidence that the tenant jobs have resulted from the EB-5 enterprise (i.e., that the creation of tenant jobs were facilitated by the EB-5 enterprise, for example through a showing of constraint on the supply of appropriate commercial space or of excess demand for such space)."

Our interpretation: have to show excess demand or constraints on supply

"In regional center cases that rely on tenant occupancy models, as in any other regional center
cases, USCIS requires evidence that the claimed jobs result, directly or indirectly, from the
economic activity of the EB-5 commercial enterprise. Jobs that are merely re-located rather than created do not count. With respect to indirect job creation, the task for the applicants and
petitioners is to project the number of newly created jobs that would not have been created but for the economic activity of the EB-5 commercial enterprise. In making that projection, they are to use economically and statistically valid forecasting tools."

Our comment: This can be done by an economist, above and beyond the normal economic impact report

"Whether an applicant or petitioner has demonstrated that an EB-5 enterprise caused the creation of indirect tenant jobs will require determinations on a case-by-case basis and will generally require an evaluation of the verifiable detail provided and the overall reasonableness of the methodology as presented. To claim credit for tenant jobs, applicants and petitioners may  present evidence backed by reasonable methods that map a specific amount of direct, imputed, or subsidized investment to such new jobs."

Our Comment: things such as tenant improvements and, rent abatements MAY qualify as a form of investment.

"However, for applicants and petitioners that instead seek to utilize a facilitation-based approach, USCIS will not require an equity or direct financial connection between the EB-5 capital investment and the employees of prospective tenants."

Our interpretation: if we are facilitating the development of a new business (e.g. setting up a building geared to restaurants with a kitchen, etc.), then USCIS does not need to see an overt nexus between money and jobs.

"Rather, facilitation-based tenant job credit will depend on the extent to which applicants or petitioners can demonstrate that the economic benefits provided by a specific space project will remove a significant market-based constraint. One way applicants and petitioners can make this showing is to indicate how a specific space project will correct market imperfections and generate net new labor demand and income that will result in a specified prospective number of tenant jobs that will locate in that space.

Our Interpretation: creating new demand for business by creating that business in the first place, will in effect create new job demand.

Continuing below: investing in a specific market category in a high unemployment area the project need only show that they are filling an 'investment void' to generate new demand.

"In high unemployment areas in which new projects are not likely to significantly displace other income or labor, applicants and petitioners should generally indicate how a specific project will fill an existing investment void in that area to generate new demand for the tenant business. Prospective tenant jobs demonstrated by reasonable methods and supported by verifiable evidence pursuant to the above approaches may be used as direct inputs into appropriate regional growth models to generate the number of indirect and induced jobs that result from the credited tenant jobs."

"Where applications for regional centers are approved based on their use of tenant-occupancy
projections, the approval notices should contain appropriate language regarding the assumptions underlying the approval, which if not borne out may impact related adjudications at the I-526 or I-829 stages. 1  For example, a Form I-924 with I-526 exemplar may be approved where no specific tenant has been identified to occupy space but where the applicant or petitioner reasonably projects that a restaurant will eventually lease the premises.2  If, after approval of the I-924, the space is leased to a different type of tenant (i.e., a type of restaurant that yields different expected employment or a non-restaurant), or fails to achieve previously projected occupancy rates, such a change alone will not generally constitute a material change that triggers the elimination of deference in an actual Form I-526 or negates any possibility of individual investors removing their conditions at the Form I-829 stage."

Our Interpretation: an I-526 exemplar based on tenant occupancy may be approved based on the projection that a certain type of tenant will lease the space. 

"3  However, while such modified tenancy arrangement(s) may be permissible under EB-5 program rules, they could nevertheless impact the project’s ultimate job creation numbers. Therefore, the approval notice should caution that the approved job creation estimates are based on a restaurant occupying that space, and that if no tenant or a different type of tenant eventually occupies the space, the economic impact analysis and ultimate job creation numbers will be revisited in future adjudications that relate to that project.

USCIS will issue separate guidance on crediting jobs in a situation where more than one EB-5 entity may be seeking credit for the identical job position. In the interim, where only one case filed with USCIS has sought credit for a specific job position, that case should be credited with the job, provided that all program requirements have been satisfied.

Adjudication of cases involving tenant-occupancy should proceed based on these principles.

Use
This GM is intended solely for the guidance of USCIS personnel in the performance of their official duties. It is not intended to, does not, and may not be relied upon to create any right or benefit, substantive or procedural, enforceable at law or by any individual or other party in
removal proceedings, in litigation with the United States, or in any other form or manner."

 

Final Word

Ultimately the rules set some guidelines but we have still seen some pushback from USCIS in terms of how these guidelines have been interpreted in some cases.  Thos wishing to include tenant occupancy job creation in their EB-5 business plans, should try to work with counsel who is experienced in the area and in particular who has been able to study some RFEs.

 

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.

 

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

 

'Reasonable Expectation' of Job Creation for EB5 Regional Centers?

 

describe the imageOne of the issues that causes some concern and confusion among EB-5 Regional Centers is how USCIS assesses what "reasonable" expectation of job creation means when looking at an investor's I-829 petition.

The Director's View (Not Official Policy)

On a December 2012 phone call with USCIS, one of the few bits of useful information that came about was stated, albeit peripherally, when one of the stakeholders asked what USCIS's view is on this issue.  When asking the question the stakeholder suggested that USCIS should evaluate what "reasonable" means on a case-by-case basis, and went further to suggest that in some cases "reasonable expectation" could even mean one year from the time of the I-829 petition.  While this does not mean it is policy, Director Mayorkas suggested that he was inclined to agree.

This new revelation is not definitive by any means, but at least gives founders of EB-5 regional centers some kind of hope that reasonable expectation of job creation can and should likely be treated by USCIS as something that can be justified given the right business case and reasonable industry standards in any given situation.  This clarification gives those who are starting EB-5 regional centers some welcome added breathing room when it comes to job creation.

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.

 

The Birth of The EB-5 Financier

 

Well it has finally happened and will  likely prove to be a welcome development for those who eb-5 financiers can help to raise capitalwant to find new sources of capital for their development projects without wishing to navigate the often-choppy waters of EB-5.

Strategic Element has become aware of a few experienced financiers who are adding EB-5 capital to their lineup of options for raising capital for their developer clients.  These financiers will essentially take care of everything EB-5 for their clients, while offering them the opportunity to access capital from EB-5 investors.  These EB-5 financiers will make capital available to their clients in a manner that is akin to financing models that adhere to common industry standards.

A New Twist

EB-5 financiers have already been in existence in a de-facto sort of way in the form of already-approved EB-5 regional centers who make their centers available to project developers for a fee, saving them the need to set up their own regional center. These EB-5 regional centers will offer varying levels of service ranging from simply offering developers a regional center ‘shell’ to work under, all the way to complete project management of the application process and getting the investors.  This approach, however, still leaves developers with a considerable amount of work and challenge in that they must often manage the approval of the project itself and it often leaves the developers to go and find their own investors overseas.  This might work for some, but others might prefer to have everything managed by another party in a way that is consistent, reliable and readily available for all projects.

Considerations when looking to submit a project under an existing regional center:

  • The developer has to find the ‘right’ regional center with the right approvals for industry and geography

  • The developer must do their due diligence on the regional center and its operators

  • Developers are still subject to the potential reputation impact on the regional center should another of their ‘sponsored’ projects fail

  • Each deal must be negotiated on a case-by-case basis, with each regional center manager wanting to approach things in a different way and offering differing levels of service

  • The main advantage is maintaining a certain amount of control of the fundraising process while removing the need (and time and expense) of attaining a regional center approval

Benefits of the EB-5 financier approach:

  • Bypassing the management of the often-tricky I-924 process

  • Developers can work with experienced financiers, who will properly vet projects according to industry standards

  • Developers can work with a financing model familiar to them

  • Developers benefit from not having to raise their own funds from individuals overseas (arguably the hardest part), instead relying upon the financier's already-existing network with overseas investors

When considering starting an EB-5 regional center, developers who do not wish to be distracted by the process may do well to consider this new option.

If you have a regional center that you would like to make available to investors, call or email me to let me know, so I can add you to my list. Similarly, if you are a project developer looking for an EB-5 financier or just a regional center to work under call or email me to let me know.

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.

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

Do Construction Jobs Count for EB-5 Regional Center Job Creation?

 

Do Construction Jobs Count?construction resized 600

When starting an EB-5 regional center many want to know if direct construction jobs can be counted.  The applicable rule for counting construction jobs in an EB-5 regional center project is that the construction time for the project must be two years in duration, from start to finish.

How is 2 Years Defined?

There is some question as to when the construction period starts; is it when demolition or digging begins or is it when concrete is poured (i.e. the beginning of vertical construction)?  USCIS does not have a definitive guideline on this point, however, we do try to encourage clients to try to focus on vertical construction in order to mitigate the risk that USCIS may not view demolition or digging as construction.

3rd Party Verification

Of course, as soon as this construction allowance was declared, there were many who started to say, "we can make it last two years."  Unfortunately it's not that easy.  USCIS has taken steps to prevent people from exaggerating construction timelines by asking for third party verification of estimated construction times from independent experts. 

Doing it Right

The ability to count construction jobs is a huge benefit to the EB-5 program, because they are easy to document and they are relatively easy to fulfill.  Be sure, however, that if your regional center is planning to count construction jobs that it does so in a calculated and realistic way.  Remember too that if you are calculating construction jobs based on expenditure estimates, you should be careful about using conservative expenditure estimates.  While conservative estimates are desirable at most any other time, if your estimates are guessing high on expenses, and you come in under budget, the applicable construction job calculation for your investors at the I-829 stage (when they are seeking to get conditions removed from their green card) will be based on the actual funds expended.  This point is true of course for all expenditure-based job creation estimations.

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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.

Some Deeper Implications of Chinese EB-5 Visa Retrogression

 

Long line for Chinese EB-5 InvestorsOn Saturday, August 23, 2014, the Department of State announced that the maximum number of EB-5 visas available for use by individuals born in mainland China had been reached for the 2014 fiscal year.  It should be noted that the unavailability of ‘space’ under the current quota for Chinese investors only applies until September 30, so as of October 1, 2014 space will again be available as the quota is reset for the new fiscal year.  While this impact might seem minimal (and it is for this year), there are several deeper implications to the fact that the retrogression has officially started to impact Chinese investors, who make up about 80% of all EB-5 investors:

A Saturated Marketplace

Unless the government increases the EB-5 quota, the market is saturated at its current level with too many deals in the market for available investors and likely too many marketers and agents as well; and the market is likely about to become oversaturated, with more and more regional centers and projects being approved every day.   This means that all the stakeholders in the EB-5 value chain will face increasing competitive pressure.

EB-5 is About to Grow Up

As a result of market saturation, we might well see the beginning of more competitive EB-5 offerings and more competitive behavior among Chinese agents including possible fee reductions and more aggressive selling behavior.  EB-5 offerings will also have to have increasingly experienced teams and proven track records and we may even start to see better deal terms offered to investors overall, including the possibility of higher returns to investors.  Over the medium term, we anticipate that the quality of EB-5 offerings will increase as supply of available investments increasingly exceeds demand and investors ‘cherry-pick’ the best deals.

Longer Wait Times for Projects to get Money in the Door

The logical extension of the onset of retrogression is that once a lineup of investors starts to form to the point where the backlog does not get cleared quickly in the subsequent fiscal year, there will be longer and longer wait times for projects to get their money from EB-5 investors.  Initially (and hopefully) this longer wait time will be offset by promised quicker processing times by USCIS, but over time the inevitable impact of delayed access to EB-5 investor dollars will become a factor, forcing projects to possibly change deal terms, make broader use of bridge financing or, in other cases, to reconsider whether EB-5 is a viable route to fundraising at all.

A (Temporary) Silver Lining

The silver lining for EB-5 projects, slim as it may be, is that investors will probably feel more pressure than previously not to put off moving forward with an EB-5 investment. Over the next year or two we anticipate the penalty for delay will be up to 6 or even 12 months in processing time.  If the retrogression causes anxiety to Chinese investors, we may start to see that the lineup of investors will start to increase relatively quickly.  In the early days of the 2014/ 2015 fiscal years this may be a good thing for deals already in the marketplace as investor activity would be brisk.

Over time, however,  should the backlog begin to grow one need only look at what happened in Canada, where the Federal Investor program backlog eventually grew to nearly 60,000 applicants who were willing to wait up to an estimated 7 years to get processed (based on average processing throughput). The government recently closed the program and those who were waiting to 'get in' all lost their opportunity to participate in the program, which will likely cause a fear among Chinese investors of something similar happening in the U.S.   Chinese investors are likely far more aware of this than project owners are as Canada is and has been a popular choice for investment-based immigration.  Furthermore, with the recent cancellation of the Canadian program, many EB-5 investors likely came to the EB-5 market after being ‘cancelled out’ of the Canadian program.  With the start of retrogression, any investor paying attention will start to feel some pressure to make a move sooner rather than later so as not to get caught up in the backlog.

Be Ready

EB-5 project founders beware; the market is likely about to change considerably over the next one or two years; consider your positioning and offering in light of recent changes and sharpen your pencils in order to be ready to win in this changing marketplace.

Phil Cohen is the founder and president of Strategic Element Consulting (www.strategicelementconsulting.com) and author of the EB-5 Definitive Guide (www.starteb5.com).  Strategic Element helps clients with the development of regional centers and projects. 

EB-5 Investors: Hard to Find 'Good' Deals

 

Many ChoicesBad EB 5 Deals resized 600

Over the last 2 years, the EB-5 program's popularity has grown exponentially.  As of June 2, 2014, USCIS had approved approximately 579 regional centers.  And yet, investors today are often complaining of a lack of "good" deals available to them.

What Makes a Good Deal?

There are many factors that make up a good deal.  Investors are first concerned with getting their green card, which in turn means that the business has to create the jobs successfully.   Depending on which economic model is used and whether direct and/or indirect jobs are being claimed by the regional center project, investors may have to look at different factors to determine the likelihood of job creation, as presented by the regional center.

Because investors are also concerned about the preservation of their initial investment capital, there must be either a strong collateral base or a very strong likelihood of the business's success (which is preferred over collateral).

Another key element to a good deal is not only the number of jobs to be created (with a sufficient buffer over the required amount) but the likelihood of being able to claim those jobs.  Recent updates to the program such as tenant occupancy and updates on using guest expenditures in economic modeling, mean that there are more jobs that can be claimed, but also mean that claiming those jobs can be technically difficult, in terms of meeting USCIS requirements.  Simpler is better.

There are a multitude of factors that come into play in what comprises a good deal.  Many of these factors would be sought by any investor, let alone an EB-5 investor, however, there are  unique deal elements sought solely by EB-5 investors.  Many of these factors play off against each other, making for a relatively complex dynamic which must be balanced by any regional center wishing to raise capital successfully.

How to Strike a Balance That Sells

The best way to establish a deal that will sell to investors is to make oneself aware of the various possible permutations that can be considered in terms of structuring a deal and finding a combination that fits the deal and also suits investors.  Players who are newer to the game will have to offer more favorable terms to investors, as compared with regional centers who are more established, who can offer deals that may not be as strong but which will still be preferred by investors simply because of the reputation of the regional center.

Those wishing to start an EB-5 regional center or EB-5 project would be well advised to check with their advisors or resources such as The EB-5 Definitive Guide regarding what kinds of factors play well with investors in order to develop the right mix.

Why go to the trouble and expense of setting up an EB-5 regional center and project if your deal will not resonate with EB-5 investors?  Take the appropriate steps to ensure that you are not one of the more than half of EB-5 regional centers who are inactive.

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.

 

 

Risk and Reward for EB-5 Investors

 

Risk and Reward

While EB-5 capital is commonly used for mezzanine capital by the companies raising funds, the investors essentially face a venture capital-level risk profile. When considered in this way, the return in dollars to an EB-5 investor is considerably below market for this risk profile.  This is no secret and it is the model that the industry has settled into, for the most part.  This model appears to make sense for all concerned since the investors get the added benefit of a path to US citizenship if the businesses create the requisite jobs, giving them enormous perceived value for their investment, while at the same time the project developer faces additional risk, time and cost in setting up a project to fit the EB-5 program.

With this view in mind, one should remember that venture investment is inherently risky, ask any venture capitalist.  Even better, have a look at venture capital funding lists to see the kinds of businesses that get funded every day by seasoned investors, some very odd and seemingly risky businesses indeed.  According to a September 2012 Washington Post article, “About three-quarters of venture-backed firms in the U.S. don't return investors' capital, according to recent research by Shikhar Ghosh, a senior lecturer at Harvard Business School”.  By comparison projects that I’ve seen available via the EB-5 program today would seem to be far less risky than that, on the whole.

This is not to say that some deals in the EB-5 marketplace do not, in some cases, exaggerate their prospects or put forward aggressive projections and/or assumptions, but this is true of many businesses seeking funding, using EB-5 capital or not. Like for any business investment, investors must thoroughly investigate the business plan, claims being made, the team and even the companies who are representing the deals.  This can be done in part by feasibility studies or by other consultants who specialize in project reviews, feasibility studies or the like.

 

Managing Risk

Are there people with bad intentions in EB-5?  Find me someone who says that this has never been nor will it ever be the case and I will show you a fool.  There is no doubt that there are people out there who might come to think that investors will be blinded by the possibility of attaining a green card and will fall for a bad deal without looking at it too closely.  While this is not true for the great majority of EB-5 deals that this author has seen, nobody can say that it hasn't happened.

Should an investor be careful in making an EB-5 investment? 100% and unequivocally yes! Investors must investigate any project that they are looking at investing their hard-earned dollars into and this cannot be stressed enough.  Every deal has pros and cons and good and bad elements and the investor should weed out all the risks for themselves (or get a knowledgeable consultant who can help them) so that they can make a decision that they are comfortable with.   Will there be deals out there that don’t succeed? I imagine so, it is a free market after all and the statistics for failures of new businesses in America show relatively high numbers. It would be safest for investors to assume that EB-5 deals would not be different on the whole, although EB-5 deals are often brought to market by experienced teams and the author does not believe that EB-5 business failures are even in the same ballpark as published statistics on the whole.

There are many deals for EB-5 investors to choose from today and investors must choose the project and risk profile that suits them best, and again, they absolutely must investigate any business deal, EB-5 or not.  I have seen investors willing to take undue risk in their EB-5 investments in their eagerness to move themselves toward the opportunity to participate in the American dream.  Spending more time to check out every detail, however, will help to ensure that the investment gets the desired result with the least amount of risk.  So EB-5 investors don't rush, investigate everything and then make the choice that you are 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.

Can I Apply EB-5 Capital to Multiple Companies Under a Single Project?

 

Not every EB-5 project is a giant, multimillion dollar development.  In fact, today we see more andEB 5 Multiple companies more so-called 'direct' or 'stand-alone' EB-5 projects in the market.

One question that is commonly asked is whether EB-5 funds can be applied to more than one business under the same project.  The short answer to this question is yes.  USCIS recently clarified that this approach is possible, however in the May 30, 2013 memo some additional clarity was provided.

As a result of this memo, in conjunction with previous guidance, it can now be taken that in a direct or stand-alone project, EB-5 capital can be applied to a group or a portfolio of subsidiary companies, provided that these companies are wholly owned by the project company.

In the case of an EB-5 regional center, EB-5 money can be applied to a group of unrelated companies.  This, of course, is a very high-level statement.  The mechanics of developing an EB-5 project in this manner should be reviewed in close consultation with a qualified and experienced EB-5 attorney.

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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