EB-5 Commentary

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

Posted by Phil Cohen on Mon, Feb 29, 2016 @ 11:26 AM

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 the initital questions but there are so many details and subtleties to the program that, inevitably, these new EB-5ers 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.

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

 

 

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

Tags: EB5 Regional center, EB-5 explained, EB-5 investors, USCIS, EB-5 Regional Center, EB5

The Birth of The EB-5 Financier

Posted by Phil Cohen on Mon, Feb 22, 2016 @ 02:02 PM

New alternative ways to access EB-5 capital have been emerging for those who eb-5 financiers can help to raise capitalwant to find new sources of capital for their development projects without wishing to navigate the often-choppy waters of EB-5.

There are now an increasing number of both experienced and new financiers who are adding EB-5 capital to their lineup of options for raising capital for their developer clients.  These financiers will essentially take care of everything EB-5 for their clients while offering them the opportunity to access capital from EB-5 investors.  These EB-5 financiers will make capital available to their clients in a manner that is akin to financing models that adhere to common industry standards.

A New Twist

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

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

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

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

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

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

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

Benefits of the EB-5 financier approach:

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

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

  • Developers can work with a financing model familiar to them

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

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

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

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

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

Tags: capital raise, EB5 capital, Chinese Investors, EB-5 Project, EB-5 explained, bridge financing, EB-5 investors, USCIS, EB-5, EB-5 Regional Center

Building, Buying or 'Renting' an EB-5 Regional Center: Which is Best?

Posted by Phil Cohen on Thu, Sep 10, 2015 @ 07:14 AM

starting an eb-5 regional centerWhen looking to start an EB-5 regional center one can launch a new regional center from scratch, make a deal to use an existing one 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 in which the project 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 policy 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.

 

 

 

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

 

 

 

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

Tags: amendment application, EB-5 center I-924, EB-5 Regional Center Application Cost, EB5 Regional center, regional center EB5, EB-5 explained, EB-5 investors, USCIS, EB-5 regional centers, EB-5 Regional center processing times, I-924, EB-5, EB-5 Regional Center, What is EB-5?, EB5

Grassley-Leahy EB-5 Bill: Not Passed But Affecting The Market

Posted by Phil Cohen on Fri, Sep 04, 2015 @ 07:07 AM

proposed eb-5 bill grassley leahyAs anyone in the EB-5 space is likely aware by now, Senators Charles Grassley and Patrick Leahy have introduced a bi-partisan bill to amend the EB-5 Immigrant Investor Program.

While the prevailing sentiment in the industry is that the bill will not be passed in its existing form, there is some debate as to whether or not some of the proposed program changes in the bill may be passed and whether the program may be temporarily extended for a shorter time while additional changes are considered.

In light of this, it is worth noting what impact the bill is having on the marketplace. At the time of the last renewal date three years ago, there was some degree of rush to get applications in across the industry, but there were few who doubted that the program would be renewed and there were no proposed changes to the program that anybody was aware of at the time. In addition, at that time, there were far fewer approved regional centers and projects in the marketplace (209 approved regional centers at the end of the 2012 fiscal year versus 949 approved regional centers today). The overall result two years ago was largely that things were business as usual.

This time around, things are a bit different. Because of all the unknowns surrounding the bill, professionals in the industry are largely overwhelmed with the demand to get projects in under the deadline. This activity is currently nearing a peak. Many projects that were closer to being ready have been sped up and already launched into the marketplace.

We are already hearing that many Chinese agents who might normally take on just two or three projects at any given time are now four and five projects deep, some commanding larger fees than usual because of the abundance of offerings. As the industry overall appears to be working hard on getting many other projects to market, we are anticipating that there may be a glut of projects coming up. Marketing activity is expected to reach a frenetic pace in the coming months as agents and other marketers jockey for position and mind share of investors.

On the flip side, this author anticipates that there will be a bit of a lull in the launch of new EB-5 projects into the marketplace following September 30th, as those projects that did not get started in time will be waiting on the sidelines to see what, if anything, changes on the 30th and whether the program will be only temporarily renewed (with only some or no changes), setting a new deadline for the next rush before a second wave of changes comes along.

2016 may prove to be a roller coaster year for EB-5.

 

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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: regional center EB5, Chinese Investors, EB-5 investors, applications, USCIS, EB-5 regional centers, EB-5, EB-5 Regional Center

Pros & Cons of Different EB-5 Business Plan Types

Posted by Phil Cohen on Mon, Jul 20, 2015 @ 11:42 AM

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

Any kind of EB-5 business plan could be submitted alongside a regional center application, while a so-called 'direct' application requires the use of an exemplar EB-5 business plan.

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 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 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 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.

It is also worth noting that proposed changes to the EB-5 program (not yet approved), would not allow for the marketing of projects to investors without approval of an exemplar business plan, which is a departure from current rules, which allow for marketing once a hypothetical plan is filed.

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, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com). 

 

Tags: EB-5 Team, Chinese Investors, EB-5 Project, EB-5 investors, I-526, USCIS, EB-5, EB-5 Regional Center

Guest Expenditures in EB-5: A Double-edged Sword

Posted by Phil Cohen on Mon, Apr 27, 2015 @ 06:55 AM

On the February 26, 2014 stakeholder’s call EB-5 Investmentwith USCIS they clarified when indirect job creation could be attributed to guest expenditures.  This is good news primarily because guest expenditures were never allowed to be used before.  More specifically, USCIS stated that guest expenditures could be counted when a project:

  • is serving an unmet demand in its area
  • is providing a differentiated product (i.e. a
    product that is not otherwise available in the area) targeted to a specific
    market segment
  • is being developed in response to
    (and presumably to serve traffic resulting from) a new development in the community

On the surface, this appeared to be good news for the EB-5 community, as guest expenditures can have a significant impact on indirect job creation figures.

The Downside

There is a downside, however.  As many have documented in the case of tenant
occupancy, it often proved to be very difficult to know exactly how USCIS would interpret various attempts to meet the standards, given that they are not very specific.  With approval times as long as they are today, the unknown is whether or not USCIS would accept given justifications on a case-by-case basis. Since guest expenditures could arguably have an impact on job creation and therefore the amount of money that an EB-5 project could raise from EB-5 investors, this unknown could have an impact on the capital stack and project timing if there is a delay or considerable back-and-forth in dealing with USCIS.  

To the extent that a project can afford the time or can otherwise be flexible in terms of their capital stack, attempting to use guest expenditures can have a significant upside.  Most, however, would find that it would be very challenging to have to change an anticipated capital stack according to whether or not the use of guest expenditures would be allowed.

Over time, it is anticipated that more clarity will come both from USCIS in terms of policy memoranda and from the EB-5 community as we see what is accepted and what is not and the  reasons for those decisions.  In the meantime, however, many have seen significant pushback from USCIS when they have attempted to use guest expenditure.

Investors would also do well to try to recognize when guest expenditures are part of the plan, especially in a case where a hypothetical plan was submitted.  Until there is more clarity on what will be acceptable in the eyes of USCIS, guest expenditures can add some additional potential risk or delay in relation to the investor's approval at the I-526 stage.

 

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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, capital raise, EB-5 Regional Center Application Cost, EB5 capital, EB-5 investors, applications, USCIS, tenant occupancy, I-924, EB-5, EB-5 Regional Center, job creation

Chinese EB-5 Visa Retrogression Shouldn't be Stopping You

Posted by Phil Cohen on Mon, Mar 09, 2015 @ 08:50 AM
describe the image

As a follow up to a blog article posted here on September 9th, 2014 (Some Deeper Implications of Chinese EB-5 Visa Retrogression), I want to reiterate what many in the industry are already saying in order to help quell some fears associated with Chinese visa retrogression and to help make sure that those who are new to the EB-5 community understand that retrogression is not the death knell of EB-5.

Retrogression does not mean that investors cannot have their I-526 petitions processed and approved. It only means that they won't get their green cards right away upon I-526 approval.

Retrogression probably does not mean that Chinese investors will lose interest in EB-5 any time soon, perhaps even the contrary.  If anything, the Canadian program demonstrated the propensity for Chinese investors to wait in line.  When the Canadian program was cancelled, there were over 60,000 investors in line, willing to wait up to seven years to be processed. Arguably, the EB-5 program might be slightly less of a draw because of the 'at risk' requirement, but being the only North American game in town worth mentioning these days in addition to the still-increasing base of HNW individuals in China I would suggest that there may well be a rush to get in line over the next 2 to 3 years.

Retrogression does not mean that projects should stop marketing in China, the source of 85% of EB-5 investors today.  For the reasons stated above Chinese demand is not expected to abate.  For the medium and longer term, however, those who expect to be involved in EB-5 for the forseeable future should expand their marketing horizons.  Bear this in mind, when developing your EB-5 business plan.

Retrogression does not mean that projects will be delayed in getting money into their projects (yet).  Funds can be released to a project upon I-526 approval and because there will be no additional delay in processing of I-526 petitions from Chinese applicants once retrogression kicks in, funds can be released on schedule.  Over time, this may change as the backlog grows.

 

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

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

Tags: capital raise, EB5 capital, Chinese Investors, EB-5 Project, EB-5 investors, I-526, USCIS, EB-5, EB-5 Business plan

A Reminder About Bridge Financing in EB-5

Posted by Phil Cohen on Mon, Feb 09, 2015 @ 07:12 AM

bridge

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

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

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

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

 

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

Tags: capital raise, EB5 capital, EB5 Regional center, bridge financing, EB-5 investors, USCIS, EB-5 Business plan

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

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