Eleven Beaches Real Estate Group & The United States EB-5 Visa Program
Our Broker, Leo Bullock works with one of the largest EB-5 consulting firms and regional center operators in the United States. Our Advisors currently own and operate 14 USCIS-approved EB-5 regional centers that cover more than 20 states. All in, the team has been involved in the structuring and creation of hundreds of EB-5 projects and regional centers.
Eleven Beaches Real Estate Group specializes in projects situated in the State of Florida.
Step-by-Step Process for Documenting an EB-5 Project
Because each EB-5 project is different, no universal solution fits all projects. However, the
procedure for assembling a comprehensive and USCIS-compliant set of documents for any EB-5 project is essentially the same.
Step 1: Determine Targeted Employment Area (TEA) Qualification
Since the primary motivation of most EB-5 investors is to receive U.S. permanent residency and not necessarily to achieve a high return on their investment, the overwhelming majority of investors prefer to invest the minimum amount of $900,000 in an EB-5 investment project, as opposed to $1,800,000 for projects not located in a TEA. Therefore, selecting a project located within a TEA is critical in the marketplace today. TEAs are designated areas either located in (i) high unemployment areas with an unemployment rate of at least 150% of the national average unemployment rate or (ii) rural areas.
Step 2: Determine Job Creation
Since the primary aim of the EB-5 program is to provide economic growth in the form of new job creation, one of the first steps in the process is to determine the potential job creation from an investment project. Under the regional center investment model, direct, indirect, and induced jobs will count toward the 10 required jobs per EB-5 investor. This means that job creation will be derived from cost expenditures, project revenues, and the direct employment of workers (W-2 jobs).
For real estate projects, the real estate developer will provide the EB-5 project
sponsor with a detailed cost-and-revenue pro-forma for the development of the project. The EB-5 economist will then determine the number of jobs the USCIS will attribute to the development of the project. For each EB-5 investor that the EB-5 project accepts, at least 10 jobs must be created that last a minimum of two years.
Step 3: Determine Target EB-5 Capital Raise
Once the total number of potential jobs has been determined, that number can be divided by 10 and then multiplied by $900,000 (for EB-5 projects located in TEAs) or $1,800,000 (for EB-5 projects not located in TEAs). For example, if a project is located in a TEA and creates 180 jobs, the project can support a maximum of 18 investors (who each invest $900,000) or a total of $16.2 million in EB-5 capital investment. The math is relatively simple: 180 jobs created / 10 jobs required per investor = 18 investors x $900,000 per investor = $16.2 million in total EB-5 capital investment. In this example, the target project can support a total of 18 investors who will all initially receive temporary and eventually permanent green cards, assuming that the project actually does create the
required 180 jobs.
Since many investment projects do not ultimately cost exactly the amount
initially budgeted or generate exactly the amount of anticipated revenue, building
a job cushion into the EB-5 project job calculations is important. By creating such
a cushion, in the event the development of the project costs less than anticipated
or generates slightly less revenue, all the EB-5 investors will still receive their
permanent green cards without any issues. If the project did create less than the
required number of jobs per investor, some of the investors would be at risk of
not having their green cards become permanent at the I-829 stage of the EB-5
visa process.
So, what does all this mean for determining the EB-5 capital raise for a
project today? EB-5 investors are very sensitive to receiving their permanent
green cards and successfully demonstrating the required job creation.
Therefore, in today’s market, EB-5 projects should have a job cushion of at least
20%. There is no restriction on the maximum amount of job cushion a project
can have. A large project with a small percentage of EB-5 capital could have a
job cushion in excess of 300%, which significantly reduces the immigration risk
for any EB-5 investors since the project would have to go terribly wrong for the
required number of jobs not to be reached.
Step 4: Finalize Project Documentation & Open Project Escrow Account
Once the EB-5 project is fully documented, the project sponsor is
responsible for reviewing and approving the final set of investment documents
that will be filed by EB-5 investors. After the documentation has been finalized,
the project sponsor will work with a major U.S. bank to setup an EB-5 project
escrow account for the NCE, to which EB-5 investors will wire their investment
funds as they subscribe to the investment offering. While USCIS does not require
an escrow account, it is highly recommended as a measure to ensure investor’s
funds are properly deployed into the project.
Step 5: Marketing the EB-5 Project to Investors
Once the escrow account has been opened and the legal documents related
to the securities offering have been finalized, the NCE can begin to subscribe
investors to the EB-5 project offering. At this point, the project sponsor has
several potential options for marketing the project to EB-5 investors: (i) direct
marketing by the sponsor to investors overseas, (ii) hiring a registered U.S.
broker-dealer to manage the EB-5 capital raise, or (iii) partnering with foreign
immigration firms overseas that specialize in placing investors in EB-5 projects.
The marketing process and related decisions involve complex securities law
issues, and it is crucial to ensure that any decisions related to such marketing
are compliant with relevant securities laws in both the United States and the
countries in which the investments are marketed. Many EB-5 projects use an
informational seminar format to provide information on the projects, so it is
important to develop a set of marketing materials and have them translated into the local language. Typically, a representative of the NCE will attend these
seminars to present the EB-5 project, speak with investors, and answer
questions.
Step 6: Subscribing EB-5 Investors
Once a new investor decides to invest in a specific EB-5 project, he or she
will typically sign a subscription agreement and wire a predetermined amount to
the NCE’s escrow account. Once investor suitability has been determined
according to the procedures set in place by the NCE, the EB-5 investor will work
closely with an immigration attorney to prepare their I-526 investment petition,
which includes as a primary component the documentation tracing the source of
the required EB-5 investment funds and indicating that such funds were lawfully
obtained.
Step 7: Release of EB-5 Capital From Project Escrow Account
Each EB-5 project decides on its own escrow release structure, which
determines when the investors’ EB-5 capital will be available or deployed to the
NCE to invest in the JCE. Some EB-5 project sponsors choose to have investor
capital released from escrow and available for investment upon submission of
the investors’ I-526 immigration petitions to USCIS. Other EB-5 project sponsors
choose to have capital released from escrow upon the approval of each
individual EB-5 investor. Still others may use a hybrid approach where a portion
is released on filing, and another portion is released on approval. Determining
the correct escrow structure balances several factors, including the desired
timing for receipt and subsequent deployment of the capital, an understanding
of USCIS processing times, expectations of EB-5 investors, and the overall
strategy investment and marketing strategy with respect to the EB-5 project.
Please reach out to us today with any questions that you may have regarding U.S. EB-5 Visa programs and procedures. It would be our pleasure to assist you.