ILW.COM EB-5 Blog

If you don’t have something nice to say (about the EB-5 program), then don’t say any. By Matt Gordon

The mainstream press, as all EB-5 community members know, has done a slanted and horrible job at providing balanced and unbiased coverage of the EB-5 program. Of course, many bad things have happened in the program and there are still many bad actors running amuck. In a multibillion dollar and growing industry, both are here to stay, although hopefully with a declining frequency in the future. What has been absent from mainstream press reporting has been the good stories. Excepting ILW’s work, its hard to find anyone publishing neutral let alone positive information on the happenings about EB-5. That is, until last Friday.

On Friday, JP Morgan Chase and Initiative for a Competitive Inner City, a foundation started by Harvard’s Michael Porter, jointly issued a research report entitled, Financing Growth: A Practical Resource Guide for Small Businesses. The report itself is very pragmatic, dealing with the pros and cons of all potential investment sources for small businesses, including EB-5 capital. What it doesn’t do is EB-5 bash. It lays out what’s good and what isn’t about it. While this isn’t the popular press, it is a published research report that presented the EB-5 sector in a fair light. So maybe (hopefully) this can show the popular press that the world wants a little more balanced information about the program.

It was particularly gratifying to see my firm’s subsidiary, E3 Cargo, as the only example featured to illustrate how EB-5 capital can be used for small businesses. E3 Cargo is a great story within EB-5. E3 Cargo is hiring workers in Indianapolis, Indiana as we speak. It is located in Census Tract 3580, which has over 11.4% unemployment (which is in Marion Township, which has over 16%). The EB-5 program and the use of targeted employment areas is supposed to be about revitalizing economically distressed areas. With E3 Cargo, we create jobs right where the policy makers wanted them, not in a gerrymandered geography linking high and low unemployment areas, but right where the jobs are needed.

Hopefully other institutions and journalists will start to report on other companies that are working hard to fulfil EB-5’s policy mandate. There are many good stories out there.

To see a full copy of the JP Morgan report, see http://www.icic.org/ee_uploads/pdf/F...owth_FINAL.pdf

An appealing option for project developers raising capital is to solicit foreign investors who are pursuing an EB-5 Visa. Like the foreign investor who needs to properly research a potential investment as discussed in our previous article, project developers need to be careful and thorough when locating potential investors.

A Regional Center is not required for the investment to qualify as an EB-5 investment but is the most utilized and preferable route. In order to secure an EB-5 Visa, an investor needs to invest at least $500,000 depending on whether it is located in a rural or targeted employment area.[1] A targeted employment area “. . . is a rural area or an area experiencing unemployment of at least 150 percent of the national average rate. A rural area is any area outside a metropolitan statistical area . . . or outside the boundary of any city or town having a population of 20,000 or more according to the decennial census.”[2] Additionally, 10 full-time jobs must be created or preserved for qualifying U.S. workers within two years.[3]

The project developer needs to ensure that the project can meet the above legal requirements. This area of concern requires performing extensive risk analysis and due diligence. It is highly recommended that the developer contact a Regional Center that has been vetted by USCIS, which means the center has already been successful in developing projects using EB-5 financing. Developers need to be aware that even if a Regional Center is listed on USCIS’s website, this doesn’t mean that the Center has been vetted. Due diligence is necessary when choosing a knowledgeable and reputable Regional Center.

Besides EB-5 requirements, there are many other issues that need to be addressed in order to be successful in securing EB-5 funding. Developers also need to be aware of the SEC Regulations regarding broker-dealers. Illegal transactions have occurred where unlicensed broker-dealers solicit investors for developers and receive finder’s fees. Working with an unlicensed broker-dealer can affect the ability for a developer to secure future financing. It can also result in rescission claims by investors and/or investigation by the SEC.

Although EB-5 financing can certainly be an attractive option for a developer’s capital stack, careful planning needs to be in place. The right team of professionals should be hired so that proper due diligence and risk assessment can be performed.

To find out about professional, well-researched, articulate, expository narrative Visa Business Plans, whether for EB-5 or any other business-related Visa, as well as a variety of ancillary services, all of which are designed to specifically address USCIS’s concerns, contact e-Council Inc.com at info@ecouncilinc.com.

e-Council Inc.com’s website, newsletter and other forms of communication contain general information about legal matters. The information is not legal advice, and should not be treated as such. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider. If you have any specific questions about any legal matter you should consult your attorney or other professional legal services provider.

---

[1] http://www.uscis.gov/working-united-...grant-investor

[2] Id

[3] Id

Fortune Magazine recently reported that, “According to the former chairman of the supervisory board of China Investment Corp., China’s sovereign wealth fund, 70% of China’s investment overseas is unsuccessful.” The article attributed that failure rate to a lack of three things: local knowledge, management skills, and sophistication. It added that, “Such an abysmal record can mean only one thing – Chinese investors need professional help.”

Regional Centers and Direct EB-5 Projects should consider this fact when promoting the EB-5 immigration opportunity. With all of the benefits that the EB-5 program offers, the one at the top of the list should be the availability of Regional Centers and Direct EB-5 Projects themselves. One of the purposes of the American Corporate Services, Inc. concept is to provide investors with a single point-of-contact that offers access to expertise in every area of the both the investment and the immigration process.

The happiest day in a Chinese investor’s life should be the day he shakes the hand of an American Corporate Services, Inc. President. With the failure rate of the super-rich investors as high as 70%, American Corporate Services, Inc. have the ability to provide a much greater success rate for investors who immigrate using EB-5.

To learn more about how to put the EB-5 investment visa program to work for you, contact Dr. Gregory Finkelson at American Corporate Services or call 415-682-2550. To order my book, How to Find Chinese Investors, Agents & Clients for Your EB-5 Projects & Services - A Practical Guide for Regional Centers, Attorneys, Developers and Businessmen, click here.

According to recent announcements by Charles Oppenheim, the Chief of the Visa Control and Reporting Division of the U.S. Department of State, a retrogression of the EB-5 immigrant visa category will likely take place during the U.S. government’s 2014-2015 fiscal year. The State Departments’ fiscal year just began on October 1^st and ends on September 30^th.

The precise timing of when this retrogression will take place remains unclear. In his mid-October 2014 update to the AILA (American Immigration Lawyers Association), Charles Oppenheim, predicted that the EB-5 immigrant visa category would retrogress in May 2015. Later that same month, at the IIUSA (Association to Invest in the USA) Conference, he reported that the retrogression would probably occur in July 2015[1].

According to Oppenheim, whether it takes place in May or July, the EB-5 Visa regression will likely have a cut-off date of July 2013. Since visas are issued on a “first come, first served” basis, this means that during the month of July 2015 (or whenever the retrogression takes place), only those EB-5 investors and their derivative beneficiaries with a Priority Date in July 2013 or earlier may apply for an EB-5 immigrant visa. The “Priority Date” is defined as the date an I-526 Petition was filed.[2]

According to the National Law Review, “Oppenheim attributed the establishment of a July 2013 cut-off date to the increasing volume of I-526 Petition approvals by the U.S. Citizenship & Immigration Services (the USCIS) and his estimation of approximately three derivatives per I-526 Petition.” Currently, the US government limits the total number EB-5 immigrant visas to 10,000 per fiscal year, which includes both investors and their derivative beneficiaries.[3]

Despite this announcement, EB-5 investors should continue to file I-526 Petitions as needed for business purposed. Retrogression will have no effect on the adjudication of I-526 Petitions by the USCIS. It is thus important for an investor to secure their spot in the EB-5 immigrant visa queue by filing their petitions as soon as possible.[4]

As previously reported on our blog, the demand for EB-5 visas for Chinese investor immigrants exceeded the number of visas available to them in the 2013-2014 fiscal year. This resulted in a Chinese EB-5 visa retrogression, which was announced on August 23, 2014 by the U.S. Department of State.[5] Fortunately, since visa quotas are reset at the beginning of each fiscal year, which began on October 1^st, Chinese nationals are again eligible to receive visas. Notably, this was the first time in the program's history that a per-country quota had been met.[6]

The impact of an upcoming retrogression on the economy remains to be seen. For investors, retrogression means greater uncertainty and future delays in visa processing. Consequently, retrogression of the EB-5 immigrant visa category may cause a drop in demand for the EB-5 immigrant visa, leading to lower foreign investment in the United States. Comprehensive Immigration Reform, if and when it occurs, may have the advantage of making such retrogressions less likely, since proposed reforms have included an increase in the US government’s visa quotas.

To find out about professional, credible and comprehensive Visa Business Plans, whether for EB-5 or any other business-related Visa, as well as a variety of ancillary services, all of which are designed to specifically address USCIS’s concerns, contact e-Council Inc.com at info@ecouncilinc.com.

e-Council Inc.com’s website, newsletter and other forms of communication contain general information about legal matters. The information is not legal advice, and should not be treated as such. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider. If you have any specific questions about any legal matter you should consult your attorney or other professional legal services provider.

---

[1] Notably, e-Council Inc.’s Founder and President, Lauren Cohen, recently returned from speaking at the 4^th Annual IIUSA EB-5 Market Exchange Conference in San Francisco, CA.

[2] An I-526 Immigrant is filed by an EB-5 investor to demonstrate that they are in the process of investing, or have already invested the required amount of capital in a suitable EB-5 project. Source: http://www.eb5investors.com/eb5-forms/i-526-petition

[3] http://www.natlawreview.com/article/...-cut-discussed

[4] http://www.eb5insights.com/2014/09/0...egory-current/

[5] http://travel.state.gov/content/dam/...Preference.pdf

[6] http://www.huffingtonpost.com/ali-ja...b_5884602.html

The amount of Chinese foreign property investments in general currently stands at $33.7 billion USD. The amount invested in the past year is 200 times greater than in 2008, the beginning of the world-wide economic crunch. The U.S. portion of those investments is $9.72 billion and climbing.

“Domestic restrictions and cooling market conditions in the Chinese real estate sector are pushing many investors to diversify to developed countries where signs of economic recovery and the prospect of asset appreciation promise more attractive returns.”

Not all of that is EB-5, but it is clear that EB-5 investments significant portion. Applying some simple math, 7,688 I-526 applications in the past fiscal year represents a potential aggregate investment of $3.8 billion. We cannot emphasize enough the opportunity we have to assist Chinese businessmen and women with the process of investment and immigration.

To learn more about how to put the EB-5 investment visa program to work for you, contact Dr. Gregory Finkelson at American Corporate Services or call 415-682-2550. To order my book, How to Find Chinese Investors, Agents & Clients for Your EB-5 Projects & Services - A Practical Guide for Regional Centers, Attorneys, Developers and Businessmen, click here.