EB-5 Commentary

EB-5 Processing Times Changing Again

Posted by Phil Cohen on Wed, Jan 28, 2015 @ 07:59 AM

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

Here are the latest statistics:

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

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

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

We hope to be bringing better news next time around!

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

 

Tags: EB-5 center I-924, EB5 capital, I-829, I-526, USCIS, EB-5 regional centers, I-924, EB-5

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

Posted by Phil Cohen on Wed, Jan 21, 2015 @ 09:18 AM

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

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

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

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

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

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

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

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

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

Tags: EB-5 center I-924, EB5 Regional center, regional center EB-5, EB-5, EB-5 Regional Center, EB5

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

Posted by Phil Cohen on Wed, Jan 14, 2015 @ 07:10 AM

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

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

 

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

 

Tags: EB-5 Project, EB-5 investors, I-526, USCIS, EB-5 regional centers, I-924, EB-5, EB-5 Business plan

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

Posted by Phil Cohen on Mon, Jan 05, 2015 @ 07:54 AM

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

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

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

 

Tags: EB5 capital, New Commercial Enterprise, EB-5 Project, I-829, EB-5 investors, applications, USCIS