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EB-5 Foreign investor visa program

Regional Center

What is a Regional Center?

Background:

  • In the mid 1990’s a pilot program which created the Regional Center was passed into law.
  • The Regional Center program allows U.S sponsors to create investment opportunities in which a foreign investor could invest their funds and obtain U.S residency.
  • Through the creation of jobs and foreign capital investments the Sponsor promotes economic growth.
Development of Regional Center
  • Regional Centers are developed by U.S Sponsors
    • This usually requires a $1 million investment per investor unless situated in a Targeted Employment Area (TEA)
    • If TEA $500,000
  • Job Creation Requirement (10 Full Time Workers) Direct or Indirect
  • TEA Designation:
    • Rural area with a population of 20,000 or less; or
    • An area where the unemployment rate is no less than 150 percent of the U.S. national average.
  • Towns or areas with where unemployment rates are high.
Examples of Regional Center Projects
  • Mixed Hotels (Condo Hotels), Office, Retail or Residential Space
  • Higher Education
  • Health Services (Hospitals, Research Facilities)
  • Ski Resorts
  • Commercial Office Space
  • Other
Benefit to Foreign Investors
  • Job creation requirement becomes the responsibility of the Regional Center Sponsor not the investor.
  • Investor not in charge of the day to day management of Regional Center
  • If project is an established, reputable Regional Center it is easier for investors to get their residency status.

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“New” Commercial Enterprise

Investment Alternatives for Investors
  • A foreign investor may also qualify for residency by investing in a “new” Commercial Enterprise as opposed to investing in a Regional Center by:
    • Creating a new business
    • Expand an existing business
    • Purchase an already existing business; or
    • Save a failing business
Development Requirements for CE
  • Job Creation (10 Full Time U.S Employees).
  • Jobs must be created within a 2 year period of CE.
  • Investor must actively manage the investment.
  • Capital Investment
Benefits to Investors
  • Flexibility – investor can to in what industry to invest and choose the location of the business
  • Control and involvement in the day to day management and operation of the business
  • Ability to choose their team (Management, Attorney, etc.)

Risks: RC vs. CE

What are the Risks with Regional Center’s?
  • Escrow is not required, hence your funds can generally be used immediately by the project developers and your right to a refund will be limited
  • If a Regional Center project fails within the first two years after a green card is issued, an investor will be unable to remove the conditions, and subsequently lose the green card
  • There’s always the possibility that USCIS might revoke the certification of a Regional Center, when this occurs an investor is left no recourse
  • Law not clear on Regional Center Fiduciary Duty
  • Fraud
What are the risks with Commercial Enterprises?
  • A business plan is required with application of CE and must be approved
  • Only Direct jobs satisfy job creation requirement
  • Approval Process takes longer than Regional Centers
  • Investor must live near business

 Successful vs. Failed Projects

Successful EB-5 Projects
  • Lake Buena Vista Resort Condo – Hotel
    • Managed by experienced industry professionals
    • Investors go through an eligibility process
    • Initial Conditions have to be met
    • Funds are places in Escrow
    • Company will return funds if conditions not met investor (subscriber)
Unsuccessful Projects
  • Jay Peak Development (Ski Resort)
    • Federal Officials, along with Vermont Officials, allege that Miami businessmen, Ariel Quiros and his partner, resort CEO Bill Stenger, orchestrated a “Ponzi” like scheme of Fraud.
    • Quiros used over $50 million for personal use
    • Largest Fraud in Vermont History
    • $200 Million raised from investor misappropriated
    • No overwatch by state agencies
    • Criminal Probe Ongoing
Continued …
  • What happens to the foreign investors residency process when an EB-5 Project fails as in the Jay Peak development in Vermont?
    • Investors ONLY recourse is to sue for compensatory and punitive damages
    • If any of the investors who had received conditional residency, unable to remove conditions, will lose their Green Cards

Conclusion

  • The future of the EB-5 program is very promising as an increasing number of people are becoming aware of its existence and benefits
  • The EB-5 program is a win/win platform for our economy, U.S sponsors and foreign investors
  • Regional Center developer sponsors need to create a team of experienced industry professionals to minimize risks for investors and build a reputable RC
    • Real Estate Attorney
    • SEC Attorney
    • Immigration Attorney
    • Experienced Management

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