The EB-5 Visa
Developers are quickly learning about the EB-5 visa as a mechanism for acquiring capital. Since 2008, when capital markets went dry, the EB-5 has been one of the few sources of hydration. Gone are the days when developers could easily obtain conventional financing at attractive interest rates. Securing EB-5 funding often means resuscitating projects from life support. Resourceful developers are successfully utilizing the EB-5 to create infrastructure, building hotels, office buildings, shopping centers, schools, assisted living facilities, hospitals, and so much more.
The EB-5 program has two subcategories: the traditional EB-5 program (often referred to as the “million dollar green card”) and the regional center program. The traditional program involves investing $1,000,000 into a business, actively managing it, and creating ten direct jobs. The EB-5 regional center program allows developers to pool foreign investor funds into a limited partnership and invest its capital into qualifying projects approved by USCIS. As the investments are almost always within a high unemployment or rural area, the investment amount is $500,000 and indirect job creation is permitted. Due to the lower investment amount and the relaxed job creation requirement, it is understandable that during FY 2011, 90 to 95 percent of foreign investors utilized the regional center as opposed to the traditional program.
Over the past five years, there has been exponential growth in the number of regional centers created in the United States. There are currently 173 approved regional centers operating in 40 states, as well as Guam and the District of Columbia. IIUSA, the national trade association of EB-5 Regional Centers, estimates that the program will account for over $1.25 billion in foreign direct investment and more than 25,000 jobs created or saved in FY 2011.
What is also encouraging is USCIS’ renewed commitment to improving the program. USCIS Director Alejandro Mayorkas and California Service Center Director Rosemary Melville have recently implemented a series of reforms designed to streamline the adjudicatory process and provide more transparency and consistency in their approach.
This should be welcome news to developers who desperately need funding for their stalled projects. An EB-5 regional center allows developers to tap into foreign investment capital at a relatively low cost and use those funds to finance or supplement existing financing. The carrot for the investor is, of course, the green card. The successful approval means residence in the United States for the investor, his/her spouse, and their children under 21. Statistically, when compared to other immigrant visa categories, the EB-5 category has an extremely high success rate with 93 percent of I-829 petitions being successful thus far in FY 2011.
Getting a regional center approved, however, is not a simple task. Creating a regional center and enabling foreign investors to obtain their green card is a collaborative process that requires the close cooperation of the developer, as well as the immigration, tax, and corporate lawyers.
The application must include a private placement memorandum or offering circular, a subscription agreement, escrow agreement, marketing strategy, and a comprehensive business plan, as well as an econometric model for job creation. Qualified counsel should review the marketing materials and overall strategy to ensure that securities violations are not committed. The immigration lawyer often will quarterback the process, ensuring the business plan and offering circular are EB-5 compliant, coordinating with the economist, and acquiring the Targeted Employment Area (TEA) designation. Current processing times are averaging five months; however, USCIS Director Mayorkas has indicated a premium processing product would be forthcoming relatively soon.
The real work begins once the regional center and project have been approved. A network of agents is typically deployed to pitch the project abroad. Once investors are found, immigration lawyers must prepare foreign investor petitions clearly showing the source and trace of their investment funds. High net-worth foreign investors will also need the advice of tax counsel for pre-residency tax planning. It is the regional center’s obligation to ensure the capital raised is fully invested in the project and that the requisite jobs are created.
The EB-5 program continues to gain momentum and popularity. For a project to be successful, careful planning and skilled professionals working in unison are essential. This is a win-win endeavor. The developers get sought-after capital to complete a project, the foreign investor gets a green card for himself and his family, and most importantly, struggling economies in high unemployment areas are infused with cash and jobs, stimulating local economies throughout the United States.
Roger Bernstein is a Florida Bar-Certified immigration lawyer specializing in EB-5 regional center cases. He is a founding partner of the Miami immigration law firm Bernstein Osberg-Braun LLC, and a partner in American Life Investments, LLC, a USCIS-designated Regional Center in Miami-Dade County, Florida.
Karen Caco is the only immigration attorney in the world to have visited all of the existing regional centers, and as a result, is extremely knowledgeable about EB-5 regional center designation applications and individual EB-5 cases. She is a partner at Bernstein Osberg-Braun Caco & Solow
By Roger Bernstein and Karen Caco
Bernstein Osberg-Braun, Caco & Solow
11900 Biscayne Blvd., Suite 700
Miami, FL 33181
South Florida Legal Guide 2011 Financial Edition