Creating an EB-5 Regional Center

Martin Lawler and his team of EB-5 expert lawyers assist and advise developers and financiers on operating EB-5 Regional Centers. We will advise on structuring the organization, necessary documents, timing, and the Regional Center's operation.

We have represented 5 developers/financiers to set up Regional Centers for investors to qualify for EB-5 investor green cards. Within four months of approval, one Regional Center filed over 12 I-526 applications and has many more in the process of investing.

We are also helping set up several more Regional Centers. We can recommend economists, business and securities lawyers, and business plan writers who quickly prepare the necessary documents.

In some cases, investors can invest in the Regional Center's project directly and the investor's EB-5 I-526 application can be filed before the Regional Center is approved by the USCIS. In other cases, investments can be made in the Regional Center while its designation application is pending with the USCIS, but the I-526 individual petition cannot be filed until the Regional Center application is granted.

Regional Centers are complex, expensive, and time consuming projects. They involve constant marketing, government compliance, and locating and managing projects. They can be excellent means of raising capital, but they require a substantial commitment. Martin Lawler is pleased to discuss creating a Regional Center with you.

1.0 Introduction

Here is an overview of the requirements to set up a Regional Center which we hope will answer many common questions about this process. Each application will require individual analysis and specific advice.

For information about the application process an EB-5 immigrant must follow to obtain a green card, please click here. A flowchart of these steps can also be found here. A news story about EB-5 immigration appeared on CNBC in which I am quoted.

2.0 Advantages of a Regional Center

The principle advantage of a Regional Center is that indirect employment can be counted toward the 10 jobs each EB-5 investor must create (or in some cases save). If an EB-5 visa applicant invests in a new manufacturing company that will itself hire ten workers, then a Regional Center is not needed because the job creation threshold may be met through direct employment creation. In contrast, if the EB-5 applicant invests in a project to construct a hotel, which is then leased to a management company, that hires the hotel workers, then a Regional Center is needed. The job creation threshold in this case can only be met through indirect employment creation because the hotel employees are not hired by the construction project capitalized by the immigrant investors..

The law permits only a Regional Center investor to qualify for an EB-5 green card by creating (or in some cases saving) 10 direct or indirect jobs, such as those in the hotel example, plus induced jobs downstream in the economy. Indirect employment is usually measured by an economist using an input-output model.

Another advantage is that the Regional Center can loan out the funds to a company or project. The investor may not loan the funds directly to an enterprise. The investor must make a capital investment.

Regional Centers provide other advantages including that the funds are considered “at risk” when deposited with the Regional Center or placed in its escrow account. This means the investor’s first application can usually be filed more quickly than if he/she creates their own business that may take time for the funds to be spent to prove they are at risk.

3.0 The Regional Center

A Regional Center is any economic unit, public or private, engaged in the promotion of economic growth, improved regional productivity, job creation, and or increased domestic capital investment. USCIS regulations establish eligibility criteria for a Regional Center and related reporting requirements. In most cases, a Regional Center operates a Limited Partnership for each project.

4.0 Two Models – Loan or Equity

Generally there are two Regional Center models. One takes in investors’ capital and loans it out to a project. The other model involves purchasing an investment project and expanding or rehabilitating it with investors’ capital. A Regional Center may do both. Some are trying a mutual fund/venture capital fund. This involves complex tracing of the capital and jobs.

5.0 Geographic Area

Each Regional Center designates a geographic area for its investment projects. The region must be contiguous and may involve many counties or a whole state. There can be more than one Regional Center in the same area. A person (or group) may set up more than one Regional Center, and the jurisdiction can be expanded by filing an amendment to the Regional Center application approved by the USCIS.

6.0 Economic Activity(ies)

A Regional Center must designate the type(s) of economic activity(ies) to be funded, such as real estate, hotel, wind power, etc. The Regional Center application can be amended at a later time to include additional economic activities. Regional Center applications are supported by an economic analysis explaining the economic benefit and job creation for each economic activity, as well as the methodology for measuring job creation.

Amount of Investor Capital

If the investment project is in a Targeted Employment Area (TEA), the EB-5 immigrant’s investment is $500,000 (plus the Regional Center’s subscription fee of $30,000 to $50,000 or more). A project outside a TEA requires an investment of at least $1 million. Regional Centers can fund projects in TEAs and other areas. A TEA is defined as a rural area (outside a town of 20,000) and outside a metropolitian statistical area or a high unemployment area (150% above the national rate). Since most Regional Center projects are in TEAs, it is difficult to compete with them by offering a $1 million investment project.

8.0 Capital for Setting Up the Regional Center

USCIS requires a Regional Center to be adequately capitalized with about $100,000. Capital from EB-5 investor visa applicants cannot be used to set up the Regional Center.

9.0 Cost of Setting Up a Regional Center

In addition to the owner’s capitalization of the Regional Center, other costs of setting up and obtaining USCIS approval of a Regional Center include fees for:

• Immigration attorneys;
• Economist;
• Business and securities attorneys ;
• A business plan writer to assist in drafting the needed business and operations plans.

Once I learn more about your plans and project I can provide fee quotes for setting up a Regional Center. I can also introduce you to a Regional Center marketing expert.

The USCIS’s filing fee for a Regional Center application is $6,230. After approval of a Regional Center application, there are legal fees for ongoing consultation, researching issues, and preparing annual reports to USCIS.

10.0 Timeframe

USCIS says Regional Center applications are decided in about 6 months. Some may take longer.

11.0 Operating a Regional Center

The Regional Center business is challenging. There is considerable competition for investors. There are more than 200 approved Regional Centers (although most do not have projects and are not yet in operation). Some Regional Centers have been in operation for many years. Some are newly formed in the past few years. Some Regional Centers have set up in other states. USCIS rules are not always clear and often change, and job creation is always key. Investors are primarily interested in immigration and want to see their capital returned, not high profits. In addition, there are all the problems associated with locating, managing, and monitoring good projects that create 10 jobs per investor.

12.0 Statistics

There are 10,000 visas per year reserved for the EB-5 category. Of these, 3,000 are reserved for Regional Center applicants (although Regional Center investors can use all 10,000 visas). The 10,000 visas have never been exhausted since the EB-5 program was created, even though each investor and dependent family member needs a visa number (the principal investor may bring his/her spouse and children under age 21). USCIS reports the following numbers of EB-5 visas issued (this includes family members):

• 2009 – 4,191
• 2008 – 1,443
• 2007 – 793

I can send you a per country breakdown of where investors come from.

13.0 Statute Expiration

The Regional Center statute was created in 1990 for five years. It has been extended many times since. The current law expires on September 30, 2012. Congress likes the EB-5 program and extension is anticipated. I am a member of a committee that has proposed changes to the Regional Center statute. Senator Leahy (D. VT.) is expected to introduce legislation.

14.0 Documents

Once retained, I will provide a list of documents needed for the Regional Center application. I will work closely with you, the economist (whom I can recommend), and the corporate and securities attorneys (whom I can also recommend).

I am pleased to talk with you about setting up a Regional Center. Please contact our office to schedule an appointment.