ILW.COM EB-5 Blog

A Rose By Any Other Name - May Not Be So Active Management by Matt Gordon

In the lone amendment of S. 744 passed by voice vote in committee on May 16, 2013, was a potentially important and equally easy to overlook change to the section heading in section 4805.  Previously the section was entitled, “Alien Entrepreneurs”, which pursuant to the amendment was struck and replaced with the heading “Employment-Based Immigrants”. 

This seems to imply a very important shift in the legislative intent for post-investment activity by the petitioner.  8 CFR §204.6 (j) requires that petitioner show proof that he or she “… is or will be engaged in the management of the new commercial enterprise, either through the exercise of day-to-day managerial control or through policy formulation, as opposed to maintaining a purely passive role in regard to the investment.”

The new section heading implies a clear departure from the intent that the petitioner actively manages the business which is the recipient of his or her investment capital. According to the Merriam-Webster dictionary, an entrepreneur is “one who organizes, manages, and assumes the risks of a business or enterprise.”  The existing requirements of subsection (j) were entirely consistent with this definition.  The new section heading, “Employment-Based” is both in the passive voice and result oriented.  The heading says nothing about who creates or manages the business that creates the employment.  Further, so long as the desired employment is created by the new commercial enterprise that is the recipient of the petitioner’s investment capital, the petitioner would satisfy the policy mandate of being an ‘Employment-Based Immigrant’.

Of the many changes and improvements offered by S.744 for the EB-5 program, this in particular, holds the potential to provide additional pathways to apply EB-5 capital to business models which, under the existing regime, would be far more difficult.

Download Leahy's Amendment

 

California Announces Special TEA Designation Process for EB-5 Investment

The Office of Business and Economic Development at the California Governor’s Office, otherwise known as GoBiz, announced on Monday, May 6, that the state of California is offering a new form of applying for TEA designation for projects wishing to raise EB-5 investment. TEA designation, or Targeted Employment Area, is given to areas that are rural or have an unemployment rate of at least 150% of the national average in the United States.

Not securing TEA designation can be highly damaging to projects. Without TEA designation, EB-5 investors will be required to place $1 million into a U.S. business (versus the $500,000 required if the investment is made into a TEA) and it will be much more difficult for the project to secure EB-5 funding.

Earlier this week, an open conference call for stakeholders was held by the Deputy Director, Paul Oliva, of International Affairs and Business Development at the GoBiz, to confer on the Special TEA designation process that California is implementing.

The Special TEA application process is effective beginning May 1, 2013, and is supplemental to the existing designation of individual census tracts, rural areas, counties and cities. Under the new system, a project that does not qualify for TEA designation may apply if it is surrounded by twelve or fewer contiguous census tracts with an unemployment rate of 150% the national average.

Before April 2012, the State of California permitted TEA classification in specific geographic zones, such as those defined as enterprise areas, but GoBiz found the process to be too troublesome and took up too much time. Until May 6, California businesses wishing to use EB-5 capital could only acquire TEA designation in different census tracts, towns, cities, counties, metropolitan statistical areas (MSA), census designated places (CDP) and rural zones meeting the unemployment requirement. If the project did not meet these criteria, the State of California did not approve TEA designation, regardless of whether or not the area around the planned project location met the requirements. Meanwhile, other states have been known to allow different combinations of adjoining census tracts and the required unemployment rate, as long as it meets 150% of the national unemployment average. California opted to streamline TEA designation and reduce workloads.

Under this new application system, EB-5 projects can apply for a custom TEA certification. In order to apply, a map of the project address and a table detailing each census tract and the respective unemployment rate must be submitted. In addition, applicants must submit a letter supporting the EB-5 project from the Economic Development Corporation (EDC) in the city or county where the project is planned to be established. The Governor’s Office will provide a template for the letter; the letter must show support and agreement that the census tracts will be a source of workforce in the project. In this manner, local communities may submit input on how they will be affected by the project and this process will deter arbitrary TEA designation.

The new process for TEA designation in California is expected to increase EB-5 capital funding for hotel and other projects in the state. These projects will create jobs for U.S. workers, at no cost to U.S. tax payers. To learn more about the EB-5 Immigrant Investor Program, visit EB5Investors.com.

$600 Million Northeast Kingdom Development

Bill Stenger and partner of Jay Peak, Ariel Quiros, announced the two new chief executive officers of two companies, as a part of the partners’ EB-5 plan, that will create over 600 jobs in the Northeast Kingdom. Stenger and Quiros are excited about the leadership for the two new companies.

First, AnC Bio Vermont, a biotech company, will be headed by Dr. Ike Lee, a Harvard Medical School graduate and president of AnC Bio South Korea. AnC Bio Vermont will be separate from the South Korean company. Lee believes that, rather than being isolated, the company will be at an advantage at its location in Newport. The company may be able to attract scientists who wish to work in a rural setting but cannot often find jobs in rural areas. In fact, he hopes they may be able to attract scientists who left Newport for areas like Silicon Valley. He also hopes to have the opportunity to develop new technologies with the University of Vermont and introduce them to the market. Additionally, he voiced that the Newport location will be advantageously close to the biotech centers of industry for both the United States and Canada in Boston and Montreal.

Second, Menck USA, a German company manufacturing windows that are energy-efficient, will be headed by Todd Bachelder. Bachelder believes that Vermont’s long-time tradition of woodworking and the region’s history as a supplier of wood will be beneficial to the company. It will also help the company find the right people to fill positions; thus why many window manufacturers are attracted by the northern region of the United States. They will be moving into a 90,000-square-foot property once occupied by a high-end ski wear producer, Bogner of America, Inc.  

Stenger and Quiros formed the most ambitious development project in the state of Vermont and what has become known as what may perhaps be the largest EB-5 project in the United States. Stenger often expresses the sentiment that the projects are about creating jobs for U.S. workers. He himself has been involved in five EB-5 projects, including Jay Peak, the $25 million Pump House Indoor Waterpark, the Renaissance Block in downtown Newport, the Newport Marina and Conference Center, the Burke Mountain’s development and the Newport Airport.

The Jay Peak EB-5 projects, including Jay Hotel ($75 million) and the Pump House Indoor Waterpark ($25 million), have been finished. Additionally, Burke Mountain’s development has started the process of permitting for the first phase, which will include a lodge and two hotels to begin in the summer and open in December.

The EB-5 Program is a federal program in the United States overseen by the United States Citizenship and Immigration Services (USCIS). Under EB-5, a foreign investor may obtain a conditional green card in exchange for a $500,000 investment in a Targeted Employment Area (TEA) (generally a rural area or area of high unemployment). The investment must create 10 full-time job for U.S. workers within a two year period. If proven to have done so, the investor may obtain a green card of him or herself and his or her family members (including spouse and children under the age of 21). To learn more about the EB-5 Program, visit EB5Investors.com.

Miami on Track to Create Third Government-owned Regional Center

The city of Miami is currently working on creating the third government-owned Regional Center in the United States. The Regional Center will bring EB-5 capital and economic growth to the city and its surrounding counties. Miami has not yet announced when it will be submitting its application for Regional Center designation to the United States Citizenship and Immigration Services, but the city already has its first EB-5 project underway. The project is Panorama Tower, a 830-foot-tall structure on Brickwell Ave, developed by Tibor Hollo. The project is in a Targeted Employment Area and plans to create 2,000 jobs.

Miami’s plans for Regional Center designation became popular amongst investors after a press conference. Attorney Mikki Canton is spearheading the project and has already been contacted by County Mayr Carlos Gimenez last month who has pledged $50,000 to $100,000 in support of the project. The Miami Regional Center plans to charge developers an application fee and a percentage on each development project. At the request of Mayor Tomas Regalado, the Regional Center will designate profit to the fire and police departments of the city of Miami each year.

The plans for the Miami Regional Center are an excellent example of the potential the EB-5 Program has to improve the economy of a community through the raising of funding and the creating of jobs. The city also opened a department for international business development with Canton in charge.

Last week, the Gang of 8 Senators revealed long-awaited proposals that would enact some very important changes to the EB-5 Program and would augment the program’s potential for benefitting the U.S. economy. First, the Senators are proposing to increase the number of visas reserved for the program each year. Currently, this number is capped at 10,000 and also includes visas assigned to the family members of each EB-5 investor. Under the proposal, this number would be increased and visas given to family members would no longer go towards this count. With more available visas the program would be able to raise more capital each year.

To put the numbers into perspective, 3,463 EB-5 visas were issued by USCIS in 2011 and 7,641 were issued in 2012. The program has become more popular in China; 80% of EB-5 investment comes from China. Real estate projects make up 80% of EB-5 funded projects and the approval rate for EB-5 visas is at 80%; meanwhile, 92% of petitions for permanent green cards are approved.

Other key changes proposed by the Senators include the permanent establishment of the Regional Center Pilot Program, which has historically been renewed since its inception by Congress in 1992.

Regional Centers benefit from specific privileges, such as being able to count directly and indirectly created jobs, access to low-interest financing for projects and they are able to inject direct foreign investment into a community.

The EB-5 Program attracts the brightest and best business-minds from other countries; EB-5 investors have typically been successful in their own countries and bring this drive to the United States. Moreover, EB-5 is attractive to would-be immigrants because it does not require sponsorship from within the U.S. and the entire process typically takes one year (while other forms of obtaining a U.S. green card can take as long as five to ten years).

To learn more about the EB-5 visa, visit EB5Investors.com.

Comprehensive Immigration Reform Bill by Gang of 8 Details EB-5 Change

On Wednesday, April 17^th, 2013, the Border Security, Economic Opportunity and Immigration Modernization Act of 2013 was introduced. This marks the long-time work of the Senate members known as the “Gang of 8” to produce an immigration bill. Generally, it is perceived that the bill will better the nation’s economy, benefit national security and increase global competition in the real estate sector.

Jeffrey D. Deboer, Real Estate Roundtable CEO and President, said that the Border Security, Economic Opportunity and Immigration Modernization Act of 2013 will affect hiring practices, property ownership and investment, construction, and residential and commercial development. He also noted that Congress should act promptly in order to ensure pro-growth visa reforms and ensure that the United States is at the front lines of the global race for resources and talent.  One of the largest roadblocks that is standing in the way of growth in the national economy and in the real estate industry is a lack of access to resources and capital, including those that are financial and human. Regardless of where a project is located (abroad or at home), what the country now needs is financial investments and the right people to turn conceptual business plans into projects that will create jobs.

The proposal by the Gang of 8 (including Senators Graham, Rubio, Flake, Schumer, McCain, Bennet, Menendez and Durbin) includes significant changes to the EB-5 Immigrant Investor Program. These changes include the recapture of unused immigration visas from past fiscal years, making the EB-5 Regional Center program permanent (it was originally introduced as a pilot program in 1992), eliminating the per country quotas for visa numbers (China is predicted to reach the quota in 2014), more immigrant visa numbers specifically for the EB-5 Program and the exemption of spouses and children from the employment-based immigrant visa numbers of principal applicants (which is capped at 10,000 visas).

These provisions to make the program a permanent one will improve U.S. communities and infrastructure by attracting foreign investors. The bill also encourages immigrant entrepreneurs of high-tech start-ups and small-businesses via a new visa platform that emulates similar programs in other countries. (Congress still needs to ensure that the caps on visas for entrepreneurs and immigration investors are satisfactory enough to motivate job creation in U.S. companies and U.S. projects.

Other implications of the Comprehensive Immigration Reform bill includes streamlining and updating the visa process by means of the JOLT Act in order to attract vacation travelers and international business to the United States.  This will expand and modernize the Visa Waiver Program. The bill also proposes to raise the number of H-1B visas so that STEM students (studying engineering, technology, science and mathematics in the United States) will have more incentive to stay in the country and putting DREAM students (those who enter the country undocumented at a young age) on a faster path to citizenship.

The Border Security, Economic Opportunity and Immigration Modernization Act of 2013 proposes changes that will benefit the EB-5 Program, which in turn will increase job creation and foreign investment in America.  Read more about the EB-5 Immigrant Investor Program and employment based visas at EB5Investors.com. 

GreenTech Automotive’s Involvement in the EB-5 Program Brought into Question By Virginia State Senator

Thomas A. Garrett, State Senator of Virginia, publicly addressed a letter on Thursday, April 11^th, 2013, to Alejandro Mayorkas, the director of the United States Citizenship and Immigration Services (USCIS). Garrett’s letter formally asked USCIS to formally investigate the use of EB-5 funds in the electric car company named GreenTech Automotive. Garrett also requested that USCIS put the appropriate officials on the job and requested a formal response detailing the results.

GreenTech Automotive was founded by a candidate campaigning for governor in the state of Virginia: previous company chairman and Democrat Terry McAuliffe. It is no secret that GreenTech Automotive functions using EB-5 capital.

The EB-5 Visa Program is overseen by USCIS; an EB-5 Visa (fifth preference employment-based immigration) is obtained by foreign investors who invest $500,000 to one million and create 10 US jobs. After the completion of two years, if it is proven without a doubt to USCIS that the 10 jobs were created, the investor and his or her spouse and children under the age of 21 obtain residency.

Garret cites a story in The Washington Post as evidence for the need for an investigation into GreenTech Automotive’s involvement in the EB-5 Program. In 2009, under Tim Kaine, the former governor of Virginia, officials of economic development in Virginia were quoted from an email and it was reported in The Washington Post. The Virginia Economic Development Program officials, including VP of business expansion Liz Povar, questioned the proposed use of EB-5 funds at GreenTech Automotive. Povar described it as a visa-for-sale scheme and a second official voiced an agreeing opinion. The company had planned to build a plant in Virginia; that plan switched to building the plant in Mississippi. McAuliffe’s campaign did not provide a comment.

The spokesperson of McAuliffe’s current political campaign for the office of governor, Josh Schwerin, asserted on Friday (April 12, 2013) that the call for investigation into GreenTech Automotive’s association with the EB-5 Program is an attack on a beneficial government program that creates jobs to the benefit of the US economy. Additionally, the EB-5 Program has been supported by the administration of Robert McDonnell (the current governor of Virginia), almost all US Senators, almost all the House Representatives and Fortune 500 companies across the country.

Schwerin also notes that the letter may be an effort to redirect attention from the controversy surrounding Star Scientific Inc. (maker of supplements) and Ken Cuccinelli (Virginia’s attorney general). A federal inquiry was previously requested by Senator Mark herring when both McDonnell and Cuccinelli received personal gifts from Star Scientific’s chief executive (Jonnie Williams).

Applicants to the EB-5 Program are expected to adhere to specific rules and an intensive application process. All EB-5 investment should be made in compliance with the securities laws of the United States. Additionally, the investment has to be made in a US commercial entity and create 10 full-time jobs for 2 years.

For more information about the EB-5 Visa Program, visit EB5Investors.com.

State of Vermont Retracts Approval from Dream Life Project

According to Brent Raymond, Vermont Regional Center director, a memorandum of understanding in September 2012 was canceled because the parameters of the American Dream Fund’s Dreamlife project had changed from those initially approved. Since then, Dreamlife spokesman Phil Mooney took the role of head of the consortium, in place of Richard Parenteau. Mooney’s excellent background and record and various reassurances convinced Vermont to be comfortable with reinstating the project. Thus, a new memorandum of understanding in November 2012 was born of the rebuttal of this first cancellation. However, this November memorandum of understanding has also been cancelled.

Lawrence Miller, the Secretary of Commerce, has pointed out various problems with the project and materials of misrepresentation. The project proposed the building of 10 homes for assisted living in Vermont. Under the plan, the project was going to use $160 million in EB-5 investment and create over 3,000 jobs. The only other EB-5 project in Vermont bigger than this would have been Jay Peak.  

According to Miller, the number of issues and questions the Vermont Regional Center had about the American Dream Fund’s project kept increasing. For example, American Dream Fund incorrectly identified USMS Team, LLC., limited liability corporation located in Florida, as the legal counsel for the project. In reality, USMS does not have a license to practice law in the state of Florida. The fact that the American Dream Fund represented to Vermont that USMS Team, LLC. was a law firm that was going to ensure that the Dreamlife project was in compliance with U.S. law regarding the EB-5 Visa Program is a breach of the memorandum of understanding.

Additionally, American Dream Fund listed three professionals and claimed that they were a part of the Dream Life Project Team in marketing materials posted on the project’s website. These trade professionals included Carl Childs, a structural engineer, Thomas Leytham, an architect, and Edward Pearson, from Pearson & Associates. According to Miller, the three professionals were not aware that American Dream Fund had listed them as being on the project. Miller also cited that, while aboard, Mooney directed potential investors to the project’s website where these misrepresentations existed.

Thus, on March 27^th, the memorandum of understanding from November, between the American Dream Fund I, LLC., the Agency of Commerce and Community Development, was canceled by Miller. Since then, Mooney has claimed that Dreamlife was completely transparent and open about the project. According to Mooney, he repeatedly notified Raymond that USMS was not a law firm. He also claims that he has a copy of a letter between Leytham and Miller, dated March 29^th, explaining that Leytham did know his name was on the project’s website. He also says he has a copy of an email from Childs who was not against having his name in the website materials. Supposedly, Childs agreed to be named in the project but did not guarantee that he would have time to work on the project once it started.  

Dreamlife is the first EB-5 project to not move forward in the state of Vermont. For more information on the EB-5 Program and information about Regional Centers, please visit EB5Investors.com.  

Can EB-5 Capital Breathe New Life into the Northeast Kingdom?

Some hold the belief that capital raised from the EB-5 Program is a viable method for repairing the economy of the “Northeast Kingdom,” the nickname for the northeast corner of the state of Vermont. EB-5 projects have already been successful in the past in Vermont, including the four-season ski resort Jay Peak.  

The Employment-Based Immigration: Fifth Preference Visa, otherwise known as the EB-5 Immigrant Investor Program, was first established by Congress 23 years ago and a pilot program, established 21 years ago, allow immigrant investors conditional residency in the United States contingent upon an investment of at least $500,000 (if invested in an economically depressed area known as a Targeted Employment Area). The program was enacted in order to promote growth of the U.S. economy by forming American jobs and it is how developers, such as Bill Stenger of Jay Peak, believe money may be brought back into areas like the Northeast Kingdom.

The EB-5 Program is regulated by the United States Citizenship and Immigration Services (USCIS), which reserves 10,000 visas each year for use in the program. It is a condition that the investment set the stage, directly or indirectly, for at least 10 jobs in the United States. The USCIS designates Regional Centers under the pilot program depending on their proposals for the promotion of economic growth. Upon successful completion of the investment and the application process, the foreign investor will be granted a green card, not just for themselves, but for the investor’s entire family (including spouses and unmarried children under 21-years-old).

Vermont governor, Peter Shumlin, and Vermont state senator Patrick Leahy are in support of the program. Developer Bill Stenger, who mentioned that he will begin to pay back the 35 investors of the successful EB-5 project Jay Peak this year, believes that EB-5 capital will be extremely important in bringing economic life back the Northeast Kingdom. Both Stenger and Ariel Quiros hope to raise over $800 million in EB-5 funds to build an assortment of research, manufacturing and tourism-related projects that would potentially create 10,000 jobs (a great number of which would be within scientific research and high-end manufacturing). These 10,000 jobs could be incredibly beneficial to an area that has a history of poverty and unemployment. The developers also note that the EB-5 capital would be especially helpful during a time in which commercial banks do not seem motivated to lend funds in rural areas.

Permanent residency in the Unites States is very valuable to many potential immigrants and it is apparent that the EB-5 Program is a great opportunity for both immigrant investors and the U.S. economy to mutually benefit. To learn more about the EB-5 Program, visit EB5Investors.com. 

Many Real Estate Developers Look to Using EB-5 Funds

Today’s real estate world has begun to bounce back and development around the United States is increasing. Builders are on the move for more creative sources of funding and firms want to find different ways of raising money, other than the popular forms of tax credit lending and the use of mezzanine funding.

The EB-5 Investor Visa Program is one alternative method of raising funds that has recently become more popular in the last few years. Under the Immigration Act of 1990, the EB-5 Program is a way for foreign investors to gain conditional residency in the United States by investing in an American business or Regional Center. This program is administered by the United States Citizenship and Immigration Services (USCIS) and EB-5 is an abbreviation for Employment-Based Immigration: Fifth Preference. EB-5 has recently been a valuable option for those wishing to raise funds for real estate development and real estate projects using EB-5 funds are typically conducted through an EB-5 Regional Center.

A Regional Center is a public or a private body that is designated by USCIS to oversee EB-5 projects. Regional Centers are also involved in job creation, improving the productivity of specific regions, increasing domestic capital and promoting economic growth. Most of EB-5 investment (90-95%) is conducted through Regional Centers.

Developers wishing to secure funds through EB-5 investments should keep in mind that Regional Centers are designated by the USCIS, and thus, EB-5 projects take a long time to be approved. Also, raising funds from the investments may take from nine to twelve months due to time needed for review of the investors and the business plan for the project. Additional time will be needed for other steps of the process, including agreement between the Regional Center and the project, overseas marketing of the project, the processing of the applications for the investors’ visas, securing the investment and more.

Developers should be sure that using EB-5 funds for their project will be cost effective in the long run. For example, a smaller project may not benefit from the use of EB-5 funds because of the extra costs and time constraints the project will face. However, many larger development projects may benefit from the use of EB-5 investment. First of all, EB-5 investment can be used in any type of development project, including office buildings, hotels, industrial, and multi-family projects. Additionally, EB-5 Program is also an option for diversifying a project’s capital and projects will profit from lower-interest rates on loans through EB-5 because the investment may be made in the form of equity or a loan. Most likely, a larger project is better suited for the use of EB-5 investments.

After making the investment, the investor, their spouse and their unmarried children under the age of 21-years-old will receive conditional green cards for two years. If the creation of ten jobs is approved by USCIS at the end of the two years, the investor and his or her family may be eligible for permanent residence and many investors go on to obtain full citizenship in the United States.

For more information and a directory of EB-5 attorneys, visit EB5Investors.com

The Tampa City Council Supports the Development of an EB-5 Regional Center in Tampa

The city council of Tampa, Florida met on March 7^th to vote on a proposal by Councilwoman Yvonne Yolie Capin to create an EB-5 Regional Center in the city to attract foreign investment from EB-5 investors. Foreign capital would create more jobs without cost to U.S. taxpayers.

EB-5 investors are attracted by the promise of U.S. residency. If they invest into an EB-5 Regional Center, United States Citizenship and Immigration Services will grant green cards to the investor, their spouse and children under the age of 21. For some investors, this is the only option for permanent residence in the United States. The majority of EB-5 investors are from China, but the program continually grows more popular all over the world in countries such as Taiwan, the Middle East and Latin America.

An EB-5 Regional Center is specifically designated by USCIS to manage EB-5 projects. Regional Centers have existed since 1992 when they were approved by Congress under the Immigrant Investor Pilot Program. A Regional Center may be a private or public body and may receive various investments for multiple projects at once as long as each investment creates 10 American jobs.

The Tampa city council approved Capin’s proposal by a vote of 4-3. The matter is now in the hands of the city’s mayor, Bob Buckhorn, who is hesitant about creating an EB-5 center in the city. Many cities and potential investors have become concerned about fraud since the Securities and Exchange Commission charged Intercontinental Regional Center Trust of Chicago (IRCTC) with fraud in February of this year for misrepresentation and defrauding 250 EB-5 investors of $145 million and $11 million (for administrative fees).

Mayor Buckhorn is understandably concerned; however, this case should not reflect negatively on all Regional Centers (of which there are over 220 across the country). Capin believes that, if administrated carefully, an EB-5 center could be greatly beneficial to the city of Tampa. She has been pushing the proposal for months.

Some of Capin’s colleagues disagree. Some of them feel that Tampa businesses should continue receiving EB-5 capital without an established Regional Center. For example, the 1912 federal courthouse in Tampa’s downtown is currently being renovated into a hotel with the use of EB-5 investments. Others, such as Council Chairman Charlie Miranda, do not condone the EB-5 Program all together, arguing that it is immoral for the United States to deem wealthy investors worthy of entry into the country while other would-be immigrants wait years before being granted a green card.

Despite this opposition, Capin has support from within the community and some of her colleagues. Councilwoman Mary Mulhern agreed that Tampa should be focused on the creation more jobs. Meanwhile, the University of South Florida, the Tampa International Airport SEO Joe Lopano and Congresswoman Katy Castor were supportive of the creation of an EB-5 center in Tampa.

Whether or not Mayor Buckhorn will approve the proposal is yet to be seen. Overall, many believe that a Regional Center would bring economic growth to the city and foster development with no cost to U.S. taxpayers in a way that would be beneficial for years to come.

For more information on the EB-5 visa, please visit EB5Investors.com.