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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.

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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).

 

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

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.

Download Your Free Paper: 9 Things to Know Before Going Down The EB-5 Road

Why We Think Direct EB-5 Is Gaining Ground (For Now)

 

Direct EB 5 Option resized 600Those paying attention to EB-5 activity have likely noticed an uptick in discussion about so-called 'direct' EB-5 projects (that is EB-5 projects that do not make use of EB-5 regional centers).  This increased discussion is rooted in the fact that EB-5 investors are showing an increased interest in these kinds of investments.

Here are a few key reasons that we think this is happening:

The EB-5 regional center 'taint': we have heard about a few deals in the last while that have gone wrong. And unfortunately some media seems intent on re-hashing these stories, even though it is already old news.  Unfortunately, this has scared many investors.  Rightly or wrongly, regional centers at large have been painted with this ‘taint’ and as a result many are more comfortable with the concept of a 'direct' EB-5 project.

Quicker processing times:  we are hearing that USCIS project approvals for 'direct' EB-5 projects can often be had in a shorter time period when compared to approvals for regional center-based projects.

Smaller Deals: 'direct' EB-5 projects are often smaller deals.  Many investors are just more comfortable with with developing an understanding of the business plan for a smaller deal because they may not be used to assessing the larger deal EB-5 business plans which can often have several layers of complexity, not to mention the additional need to assess the reputation of a regional center, which is often owned and operated by a different group than the project oners or developers.

Simplicity: 'direct' EB-5 deals are less complicated in terms of the number of rules and requirements they must adhere to and also in terms of the number of moving parts (i.e. entities involved in the legal structure as well as the project itself, no econometric reports needed, etc.).

The main drawback associated with 'direct' EB-5 projects is that they are not able to take advantage of indirect job creation.  For projects that can create sufficient jobs to raise the amount of EB-5 capital they require, a  'direct' EB-5 structure is something worth considering, but this should not dissuade people from considering the EB-5 regional center approach as ultimately a good deal is a good deal; a strong team with a good project and good investor terms will still sell well in today's investor market, although the market is becoming more saturated so all deal fundamentals as well as the the legal team, the economist and the business plan writing team, should be structured to ba as strong as possible.  With approvals still taking several months, always remember that attitudes may shift again by the time a given project is approved.

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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.

 

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

Different Types of EB-5 Business Plans: The Investor's Perspective

 

For those considering making an EB-5 investment, you will no doubt hear of three differentapproved resized 600 kinds of EB-5 business plans: hypothetical, actual and exemplar. Each of the three different kinds of business plans have different benefits and drawbacks from the investor's perspective. This article will provide a brief explanation of each different type of business plan and what it means to investors.

Each of the three different kinds of EB-5 business plans would be submitted alongside a regional center application.

Hypothetical

A hypothetical EB-5 business plan is a plan that provides an approximate overview of the project in question. The details required for a hypothetical plan are usually very high level and non-specific. Details included in a hypothetical plan can include economic model inputs, feasibility study or information and general proposals and predictions. The benefit of using a hypothetical plan is that it allows the project owners the ability to move more quickly in terms of getting their project financed, which adds to overall project stability. On the downside, however, investors should be aware that when a hypothetical plan is used, a more formal or exemplar plan would need to be submitted with the project's first investor (I-526) application. From the investor perspective, this means that the business plan is effectively being reviewed and approved by USCIS for the first time with the first investor's I-526. If an investor is among the first to apply for an I-526 under a given project which uses in an exemplar plan, the project would effectively be reviewed for the first time by USCIS at that time. Subsequent investors in a given project would likely benefit from USCIS giving deference to the project approval based on the first investor's approval.

Actual

An actual EB-5 business plan is a more or less complete plan although it may be missing some critical pieces such as offering documents. The pros and cons of an actual plan from the investor perspective are similar to those of a hypothetical plan, although presumably USCIS will review the information that is in front of them with regard to the plan itself. Although the project would not benefit from a formal USCIS approval, project developers would benefit from having feedback from USCIS on what was submitted. In effect, this means that the risk to the investor of the project itself not being approved at the I-526 stage is smaller than in the case of a hypothetical plan.

Exemplar

An exemplar plan is a complete plan, which includes offering documents, transactional documents and evidence that the project is shovel ready (i.e. ready to start right away). When USCIS accepts an exemplar plan, it is very unlikely that the plan itself would be challenged at the I-526 stage. This kind of approval provides investors with the least overall risk of USCIS refusing the project part of their application.

Does That Mean Exemplar Plans Are Best?

Not necessarily. As a general rule, investors may prefer the security that comes from an exemplar plan being used, however, it is worth noting that the team behind the project, experience with EB-5 and the team that does due diligence on the project can provide a significant added value in terms of mitigating the risk or ensuring that the deal in question is a good one. If an investor's application is not accepted at the I-526 stage due to project deficiencies, with a good team this only means that there may be some delay in processing the I-526.

The best advice for investors is to look for a quality project first and to ensure that whoever is representing the project is experienced in EB-5 and has done a significant amount of due diligence. Given the sea of choices in EB-5 today, investors should consider the quality as the top priority and worry less about delays, which can be common regardless of the kind of business plan being used.

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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.

Re-post: USCIS Easing of ‘Material Change’ Rules

 

One of the important new items that came about as a result of the EB-5 Policy Memoranduchange resized 600m issued by USCIS on May 30, 2013 relates to a changed definition of what constitutes material change.  Material change is important to  EB-5 submissions in that if the change is considered by USCIS to be material, an amendment or revised application would need to be submitted which would incorporate that change.  Until then, there were 2 key elements of an EB-5 business which, if changed, would have been considered to be a material change by USCIS. 
These two elements are a change to the declared industries of focus and a change to the geographic area of the regional center. 

In the May 30th memo, USCIS added some clarity to some of the material change parameters, stating that a change to the declared industries of focus or a change to the geographic area of focus would no longer require the submission of a formal amendment. In the case of the geographic area of focus the amended area would need to be contiguous with the originally-declared area.

This is great news for the EB-5 community in so much as it now enables EB-5 businesses to bypass the lengthy and often tedious process of submitting an amendment for an existing project or even for a new project.

The Downside

The downside to this change, however, is that USCIS will still want to review any changes to the original plan for approval at the time that the investor submits their I-526.  This means that while the change can be developed and submitted more quickly, the first investors on a given project must now shoulder some of the risk because they will not know if the EB-5 project changes will be approved until the I-526 itself is approved.  For those who are newer to EB-5 or just starting an EB-5 regional center, there is still, arguably, some benefit to submitting for a formal amendment in order to be able to present investors with a more solid deal that will have already been reviewed and approved by USCIS.

 

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

 

Material Change As it Relates to Investors' I-526s

 

A move by USCIS with regard to material change is relevant to investors who havechange2 resized 600 already obtained conditional permanent resident status.  In the event that an I-526 petition was submitted and the investor was granted conditional permanent resident status based on that petition, a new I-526 petition would be required to be submitted by the investor in the event that there was a material change to
the business.

USCIS has stated that if the EB-5 business plan should change after status is bestowed upon the investor, the investor can still have their conditions removed as long as the jobs have been
created and the investment has been made in the business as indicated in the initial plan.  Should the business plan change by the time the investor applies to have their conditions removed, the investor can still succeed in having their conditions removed; however, USCIS would want to examine the changed business plan for compliance and the investor would not benefit from deference to the plan that was approved at the I-526 stage. In other words the new business plan would need to be evaluated by USCIS on its own merits.

Overall, this adds new flexibility for those who are starting EB-5 regional centers or EB 5 businesses, however, all parties would be well advised to remember the added risk placed upon investors in these circumstances.

 

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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.

 

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

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

 

 

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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

 

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