EB-5 – Is Investing in a Regional Center a better option for you?
By Sonia Mann, Attorney
Parikh Law Group
The EB-5 Immigrant Investor Visa requires that an applicant invest $500,000 or $1,000,000 into a US-based commercial enterprise. The investment may be done by either investing into a government-approved Regional Center or into an independently-approved commercial venture. In choosing the right option for themselves and families, EB-5 investors must weigh the costs and benefits of each investment choice and assess which route will work best to achieve their permanent residency and investment goals. In this article, we will discuss what a Regional Center is, provide information on investment pooling, and evaluate the pros and cons of choosing this type of investment over direct investments.
A regional center may provide investors with more ease as compared to an independent commercial venture. Not only are the USCIS requirements less stringent, as the Regional Center’s investment ventures have already been vetted and approved, but your capital may be pooled with other EB-5 investors into a single project. The Regional Center, which will be either a public or private entity, will obtain all licenses directly from USCIS, and will serve as either a financier of a loan or as a general partner in equity.
The role of Regional Centers is to either develop and create their own projects for EB-5 investors to invest in, called an “equity model”, or to pool the resources of several EB-5 investors and lend those monies to existing projects, in what is referred to as a “loan model”.
In an equity model, the Regional Center will hold equity in the commercial enterprise along with the EB-5 investors and operate as a general partner. The EB-5 investors will serve as limited partners. The Regional Center may also act as a licensor, in which they would enter a licensing agreement with you as the EB-5 investor and charge a fee. In this scenario, the Regional Center would receive a fee from you but would not hold equity in the commercial enterprise.
In a loan-based model, EB-5 investors may loan capital to a third-party project developer, or “job creator”. In exchange, they receive equity in the project in the form of stock or LLC/partnerships interests. Because this form of lending involves more than a mere loan from an investor who expects to be repaid, it is permitted under USCIS EB-5 regulations.
Regional Centers are often run by investors including real estate developers, immigration experts, and project financiers. They may also utilize the services of economists and corporate or securities counsel to assess unemployment rates, project job creation, and conduct assessments into other aspects of the business such as SEC disclosures and anti-fraud protections. Using their vast knowledge of immigration and investment, they develop, vet and select projects for the purposes of attracting EB-5 investors. Most often, a Regional Center will be located in what is known as a “Targeted Employment Area”, or TEA, which is an area of lower than average employment and therefore allows for a minimum EB-5 investment of $500,000. After the projects have been selected, it is the Regional Center’s job to apply for and obtain an approval license from USCIS, again making the path easier for foreign investors to invest in a new or existing commercial enterprise. Once a project is underway, most likely a project principal will be appointed to serve as the project lead and also the point of contact between investors and other people involved in the business and project plans. Your immigration attorney, prior to filing your EB-5 petition, will work with the project lead and other key members and review all of the business documents on your behalf to ensure compliance with USCIS requirements. If everything appears acceptable, they will file the EB-5 petition on your behalf.
Investing as an EB-5 investor into a Regional Center requires complementary expertise in the fields of business law, real estate and immigration laws. Having a legal team of attorneys well-versed and experienced in each of these areas is of utmost importance for the success of your application and business. The attorneys at PLG have over a decade of shared experience in navigating through the complexities of all of these areas. Contact us at (312) 725-3476 to discuss your planned investment options and how we may represent your interests most effectively.