by M. Keil Hackley and Summer Robertson

Part 2 for Part 1 click here

As discussed in Part I of this series, in 1990 Congress created the Immigrant Investor Pilot Program as an adjunct to the EB-5 Program. The pilot program allows immigrant investors to invest the required capital in government-designated Regional Centers established to promote economic growth and job creation. The first question most often asked by the prospective investor is “What is a Regional Center?” The legal definition is any economic unit, public or private, engaged in the promotion of economic growth, improved regional productivity, job creation and increased domestic capital investment. But what does that mean in plain English? It means that the investment must be made in a commercial enterprise which focuses on a geographical region within the United States. The commercial enterprise must be formed for the ongoing conduct of lawful business, including sole proprietorships, partnerships (both limited and general;), holding companies, joint venture, corporations, business trusts, and other entities publicly or privately owned.

The structure of each Regional Center will vary as well as each project within the Regional Center. The savvy investor will want to pursue EB-5 investment opportunities which are low risk, demonstrate a solid business plan for economic growth, an economic analysis which fulfills the job creation requirement. Besides looking for a return on their investment, the investor should inquire about an exit strategy demonstrating how the Regional Center intends to return their money in 5 to 6 years. By way of example, let’s take a resort and land developer engaged in the development of a parcel of land upon which a $1.5 million dollar hotel and entertainment complex will be built. In this hypothetical, the developer has acquired some bank financing. The developer believes the infusion of foreign based capital will catapult the project to completion within the next couple of years. Having become aware of the EB-5 Program, the developer seeks an opinion from his team of advisors.

Before advising the developer to seek Regional Center status, the advisors will likely review the boundaries of the project to ensure the geographic area constitutes an area of high unemployment. This is critical because unless the project is located in a targeted employment area (where unemployment is at least 150 percent of the national average rate or in a rural area) the capital investment is $1 million dollars. That required investment is cut in half if the investment is deemed to be in a targeted employment area. A reduction in the investor’s capital outlay to $500,000 is likely to increase the number of interested investors and likely to increase the overall success of the project.

Assuming the project is within targeted employment area boundaries, advisors will next evaluate the strength of the enterprise’s business plan and whether it sufficiently proves the need for at least 10 qualifying employees. This means the business plan must contain in verifiable detail a description of the business and its objectives, a comprehensive market analysis, and among other documents, an economic report using reasonable methodologies demonstrating how the project will create at least 10 full time jobs (direct or indirect) for each $500,000 invested.

Should the developer desire to proceed with Regional Center designation, it will be through the combined efforts of knowledgeable and experienced corporate counsel, immigration counsel, and other qualified advisors, that an application to the Department of Homeland Security will be made. Once the project is approved as a Regional Center, the developer’s team will begin to identify qualified foreign investors and evaluate each prospective investor’s eligibility for an EB-5 immigrant visa.

M. Keil Hackley, Senior Partner, Hackley & Robertson, P.A. is the Former Deputy Chief Counsel of the Immigration and Naturalization Service (now Department of Homeland Security.)