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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 ( and author of the EB-5 Definitive Guide (  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.


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.

Do I Need a Feasibility Study for My EB-5 Regional Center Project?


Feasibility studies are becoming more and more commonplace in the EB-5 world to prove the feasibility and plausibility of a given EB-5 regional center project.  This isEB5 regional center application resized 600 especially true for larger projects but also for projects where feasibility studies are common, such as in the hotel business.

When things become common in EB-5, the community often starts to treat them as (essentially) expected by USCIS in order to be safe. Indeed, when it comes to increasing the professionalism of what is being presented for an EB-5 project, USCIS does follow suit as often as not. Indeed, some recent RFEs have asked for formal feasibility studies.

Using a feasibility study developed by a reputable source is the best form of market, competitive and overall plausibility analysis for the project in question, minimizing any reason for USCIS to respond with an RFE for these particular points. In our business we consider it a best practice and strongly recommend that our clients make the investment in these analysis reports where it is reasonable to do so.

Always seek to maximize your odds of success the first time when it comes to starting an EB-5 regional center and project application.  Follow the general rule of thumb for feasibility studies that if they are readily available or commonly used for a particular type of development then they should be attained for you project submission.  It can help to save processing time and money in the long run.  Of course, the added overall benefit is providing an extra element of credibility to your investors.


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.


Flexible Adjudication Saves Time on EB-5 Regional Center Applications


As readers of this blog are likely aware by now, the rules flexible resized 600
and processes involved in the development of an EB-5 regional center application are relatively complex and often subject to interpretation by the lawyers involved and also by the adjudicators. 

As a result, in anything but the most straightforward of cases, there is often the issue of whether the question has been properly answered or whether certain rules apply in particular ways or in particular unusual circumstances.

When facing these kinds of unknowns, developers of EB-5 regional centers and EB-5 projects are often in the position of putting their best foot forward and hoping for the best when it comes to the adjudication of their I-924 application (or the project plan itself).  In these circumstances some project or regional center founders might find themselves in a dilemma in terms of whether to submit their business plans as "hypothetical" or as "actual”/"exemplar" plans.  The reason for the dilemma is that a hypothetical plan requires less detail to be approved but if one can have their plan approved as an actual/exemplar plan then they can benefit from deference to this approval when their investors submit their I-526 petitions.

When unsure, there is the possibility of trying to get the maximum benefit of an actual/exemplar approval without losing time should USCIS determine that there is insufficient information to approve the plan as an actual/exemplar.  The way to go about this is to make a written request when the project is being submitted so the plan be adjudicated as an actual/exemplar, but if this is not possible to adjudicate the plan as a hypothetical.

In most cases, this will not hold up the process and allow the entrepreneur to move ahead with the project as quickly as possible should they not be able to get actual/exemplar approval right away.  Saving the step of a re-submission can also save some of the costs involved in doing so.

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

What Does An Ideal EB-5 Business Plan Look Like?


describe the imageThere are conflicting views among EB-5 professionals as to what constitutes an ideal EB-5 project business plan.

If you are a follower of this blog you are likely already aware of the "Matter of Ho" business plan requirements as well as other requirements that have been issued by USCIS via policy memoranda and other unofficial statements. The question comes in, however, as to what level of detail is sufficient for a qualifying business plan.

Some attorneys and advisors are of the mind that a shorter business plan is better as longer plans by definition (in their opinion) are inherently committing the entrepreneurs behind the business to doing more, or at least that's the concern.

On the other hand, there are those who believe that longer plans with more detail give USCIS very little wiggle room when it comes to questioning details and issuing RFEs. We count ourselves in the second group and we believe that our record with RFEs proves the point. When we develop our business plans, we are of the belief that more detail is better, while at the same time we are careful to minimize forward-looking statements which would bind any entrepreneur to doing more than they would be committed to doing if they were to submit a shorter plan.

We believe that this approach works, not only because we rarely see RFEs for our business plan work, but also because we believe that preventative efforts to minimize RFEs go a long way for our clients in terms of helping them to avoid extra time and/or expense in getting their EB-5 projects approved.  Indeed, when we are asked to fix business plans written by others because of RFEs, we commonly see plans that skimped on details, leaving room for questions to form in the mind of an adjudicator.  

Thinking things through in detail is a way of forcing oneself to answer questions that others may have as well.  Similarly, a good business plan developer will provide that detail without over-committing the business to specific actions where it is not necessary to do so; rather, they will use the detail to make the business concept more convincing and to demonstrate that the entrepreneurs behind the business are very serious about what they are doing and are considering all the things that matter in order to be successful.

The other reason that we err on the side of developing more detailed business plans, is that we are providing investors, who also see the plan, with enough backup information to give them comfort about the project and a level of security relating to their investment, making it an easier 'sell' for the entrepreneur.

True, longer plans do typically cost more, however, the incremental amount of investment for addressing this step thoroughly is minimal in the context of other professional costs and the cost of the whole process and the value of the benefits it can provide to the entrepreneurs and ultimately to the investors represents a considerable ROI in the long run.

The trick, from our perspective, is to assume that many readers are not likely to read every single detail of the business plan, so we structure the plan in such a way as to make it easy for the reader to find what they are looking for, and also to easily find any supporting detail, should they wish to dig deeper.

We suggest speaking to several service providers before making any decisions on your EB-5 team, however, given that a business plan is one of the least expensive (and key) parts of the process, we encourage anyone considering going down the EB-5 road to consider not just the price but the financial and timing impact of the product before making a final decision.  


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.

Why Bother with a TEA for my EB-5 Regional Center Project?


Why a TEA?TEA Target Employment Area resized 600

A question often asked of EB-5 professionals is, "why should I seek to have my EB-5 regional center in a TEA (Target Employment Area) if it only reduces the investment requirement for EB-5 regional center investors, meaning that I will need to find more investors to raise the same amount of money?".

Simply put, the answer is the saleability of your deal.  EB-5 regional center investors have to put their capital at risk for a period which is usually at least 5 years and for returns that are below market for a comparable level of risk.

For these key reasons, EB-5 regional center investors seek to invest the lowest-possible amount in a given project.  As a result, most EB-5 regional center projects are put into TEAs and projects that are not are at a disadvantage, unless they are able to entice investors with other benefits.

Find out more about starting an EB-5 regional center at

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

The Importance of Escrow to the Success of EB-5 Regional Centers


describe the imageMany EB-5 regional center projects these days no longer wait for approval of their actual or hypothetical project business plans before releasing EB-5 investors' funds to a qualifying project.  This approach may work for some, but when starting an EB-5 regional center or project it is recommended to think twice first.

Avoiding escrow represents an additional element of risk as far as investors are concerned because the investor does not get the benefit of knowing whether there might be an RFE issued by USCIS for this particular EB-5 project, before their funds are committed (and accordingly, what the nature of that RFE might be).  Typically, the best recommendation from the investor's perspective is for new EB-5 projects or regional centers to make use of escrow so that the funds may be held in trust while USCIS's review of the project business plan is pending.  Over time, as the EB-5 regional center and/or project manager builds its reputation for delivering for EB-5 investors, it might make more sense to ask investors to take this 'leap of trust', although these projects will always be up against other choices that do make use of escrow.

Some EB-5 regional centers might make use of other options.  For example, one option is to release a portion of the funds immediately to the project and another portion later, when the investor's I-526 application is approved.  This approach mitigates some risks for both sides but also poses some risk for both sides.  For example, if an investor is denied their I-526 application they will have committed half their funds to the project already by this point. Depending on the terms of the agreement, the funds that have been committed may not be refundable to the investor which would obviously be a concern for them.  This is not ideal for the investor, but at least in this scenario the risks are shared by both parties.

It is always a bit of a balancing act for EB-5 regional center and project founders to come up with a deal that allows them access to capital without having to wait nine months or longer, while the regional center's I-924 or exemplar, actual or hypothetical I-526, is reviewed by USCIS.  In this time other project fundamentals may change, resulting in new challenges to the project's overall success.  At the same time if investors perceive too high a level of risk, they may simply look elsewhere.

To compound this challenge, the ground is constantly shifting within the EB-5 world itself, with long processing times, changing policies or directives from USCIS and a rising number of established and reputable regional centers developing proven track records.

We advise our clients who are starting EB-5 regional centers to consider reputation first.  Earlier deals, if more favorable to investors, may pose more challenges to the regional center or the project, but if investors are won over and returns and exits are delivered according to plan, the regional center will be able to leverage the investor community's earned reputation of that particular regional center or project operator.  As a result, future investors might have more faith when they must trust the regional center to deliver on issues of good faith, such as whether escrow will be used and to what degree.

Phil Cohen is 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 the Best Way to Start an EB-5 Regional Center: Build or Buy?


 starting an eb-5 regional centerWhen looking to start an EB-5 regional center one can launch a new regional center from scratch, or alternatively, if the stars are aligned, one can look to purchase an existing regional center (likely one that is inactive).

The risks of starting a new regional center from scratch generally include the time and expense of doing so.  However, if starting a new regional center then the regional center's founder is assured of a clean slate and of having a regional center that exactly suits their needs.

On the other hand, if one wants to buy an already-existing regional center, one may do so if the right opportunity is available.  The right opportunity should generally mean that the regional center in question does not have a tarnished reputation, that they are approved for the industries (i.e. NAICS codes) in which the founder would like to operate and that the regional center is approved for the appropriate geographic area of focus.  It is worth noting that the recent policy memo issued by USCIS now states that geographic area can be amended at the I-526 stage (when the investor submits their petition), although this means that investors will be left uncertain as to whether this might actually happen until their application is adjudicated and the details of this poilicy change remain unclear. Another important note regarding buying a regional center is that while the entity itself can be purchased, a formal amendment would be required to allow the new owners to operate the regional center in question.

If one wants to start an EB-5 regional center by purchasing an already-existing entity, they should look first for the right territory (or a regional center that borders on the territory to which they would like to expand).  One way that this can be done is to research approved EB-5 regional centers on the USCIS website.  The website will indicate in what state that EB-5 regional center is operating.

Alternatively, to determine the specific geographic area and the industries of focus, one approach is to make contact with the regional center itself.  As a first step, one might explore the prospective regional center's website (if there is one) to see if they have posted their initial approval letter, which will outline the geographic area of focus and the approved industries. In the event that any changes to geographic area of focus or approved industries would be required in advance of submitting any I-526s, the regional center would need to file an amendment application with USCIS.  Filing an amendment may be a little simpler than filing for a new regional center, although the time it takes USCIS to approve an amendment may be just as long as filing for the regional center in the first place.

If a prospective EB-5 regional center has been identified, the next step would be to contact the regional center to discuss with them how active they are and whether they might be interested in selling the entity.

The biggest challenge overall in purchasing a regional center is assessing the reputation of the regional center itself and whether they have had any issues in relation to a bad history with investors or a past reputation that was somehow negative.  If one has the resources to do this, purchasing a pre-existing regional center may be a viable alternative that can save potentially months of time that it might otherwise take to develop and file a properly composed EB-5 regional center I-924 application.

In another blog article I discuss the notion of using an existing regional center as a sponsor of a project, sometimes called 'renting' a regional center.

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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