A Preliminary EB 5 Economic Analysis of an Assisted Living Center in Las Vegas, Nevada

Transcription

1 A Preliminary EB 5 Economic Analysis of an Assisted Living Center in Las Vegas, Nevada June 19, 2013 Prepared by: Impact DataSource, LLC Economic Consulting, Research and Analysis Austin, TX

2 Overview Impact DataSource, an Austin, Texas economic consulting, research and analysis firm, conducted a preliminary economic analysis of the investment in an Assisted Living Center (the Project ). The Project consists of a 100 unit assisted living and memory care facility to be located in Las Vegas, Nevada. The project will create 162 eligible permanent jobs under the U.S. Citizenship and Immigration Services (USCIS) EB 5 Immigrant Investor Program. The proposed site is located in an area for which a targeted employment area (TEA) certification can be obtained and therefore qualifies for a $500,000 minimum investment per immigrant investor through the EB 5 program. Based on these facts, the issuer may be able to raise up to $8.0 million from 16 foreign investors each making the minimum required investment. Projected Employment Impact DataSource estimates that the investment in the Project would create a total of 63 jobs from construction and 99 jobs from operations for a total of 162 eligible jobs under the EB 5 immigrant investor program. Employment Generated by the Project Total Permanent Jobs Construction 63.0 Operations 99.2 Total Employment The total of 162 jobs in the table above includes the indirect and induced jobs created during construction and the direct, indirect and induced jobs from operations after construction is completed. Multipliers The calculations for both construction and operations rely on RIMS II multipliers for the geographic area of Clark County, Nevada. The multipliers are shown in detail later in the report. 2

3 DISCUSSION OF CONSTRUCTION JOBS Construction Costs Included in Impact Model The construction job estimates are based on the allowable construction expenditures provided in the pro forma. To be consistent with USCIS guidance, the estimates for land, certain soft costs and furniture, fixtures and equipment have been excluded from the analysis. The following table summarizes the amounts included in the impact model to estimate job creation. Summary of Construction Expenditures Included in Impact Model Cost Amount Industry Included Land $1,500,000 Excluded $0 Sitework $600, Construction $600,000 Hard Construction $8,500, Construction $8,500,000 Furniture, Fixtures & Equipment $750,000 Excluded $0 Construction Fees $400, Construction $400,000 Contingency & Reserves $450,000 Excluded $0 Reserves $1,600,000 Excluded $0 Fees $200,000 Excluded $0 Total $14,000,000 $9,500,000 Construction Timeframe Because the construction of the Project is expected to last one year, the initial construction activity will only support permanent indirect and induced employment. According to guidance from the USCIS, the direct employment related to construction activity may not be counted in the total job count if the construction activity lasts less than two years but the indirect and induced jobs may be counted. The following clarification is provided in a letter from USCIS Chief James W. McCament on January 16, 2009: The Indirect and induced jobs created as a result of construction jobs whether counted or not may be included in the job count. Even when the construction jobs may not be counted towards the job creation requirement, they do have indirect and induced impacts that are eligible to be included in the final job count because they are "continuous, permanent employment. Construction Jobs Methodology The EB 5 eligible jobs created during construction are calculated based on the construction expenditures of the Project by utilizing the industry specific Type II final demand employment multiplier. The final demand employment multiplier used in this analysis represents the change in the number of indirect and induced jobs that occurs in all industries for each additional 1 million dollars of output delivered to final demand by the industry. The final demand employment multiplier for the construction industry is shown in the table below. 3

4 RIMS II Industry RIMS II Multipliers Construction Indirect & Induced Employment Multiplier Construction Note: The above multiplier reflects the number of indirect and induced jobs created per $1 million of eligible expenditures. Next, we can apply these multipliers to the relevant construction expenditures to arrive at total job creation. In order to apply the RIMS II multiplier properly, expenditures are deflated to 2010 dollars. Employment Calculations for Construction Expenditures (millions) 2013$ Expenditures (millions) 2010$ Multiplier Jobs* Hard Construction $9.500 $ *Reflects eligible permanent jobs (indirect and induced). In summary, the $9.5 million in estimated construction expenditures will support 63 permanent jobs. 4

5 DISCUSSION OF ASSISTED LIVING OPERATIONS JOBS Assisted Living Operations Calculations The job estimates from the assisted living facility s operations are based on the revenue projections provided in the pro forma. The following table summarizes the annual revenues used to estimate job creation. Employment and Annual Revenues During Operations Projected Revenues Year 2014 $4,500,000 Operations Jobs Methodology The jobs created during operations are based on the facility s revenues by utilizing the industry specific Type II final demand employment multiplier. The final demand employment multiplier used in this analysis represents the change in total jobs that occurs in all industries for each additional 1 million dollars of output delivered to final demand by the industry. The final demand employment multiplier for the relevant industry is shown in the table below. RIMS II Multipliers Operations RIMS II Industry Type II Total Employment Multiplier Nursing and residential care facilities Note: The above multiplier reflects the number of total jobs created per $1 million of revenue. The revenue method utilizes the final demand employment multiplier and the price adjusted revenues to determine the total employment. The table below shows the total job creation during 2014, the first year of full operations following the one year construction period. Revenue Method Employment Calculations for Operations Revenues (millions) 2014$ Revenues (millions) 2010$ Multiplier Jobs* Year 2014 $4.500 $ *Reflects total jobs (direct, indirect and induced) In summary, the full operation estimates during 2014 indicate that 99.2 total jobs would be created as a result of operation of the facility. This estimate relies on the revenue method. 5

6 TARGETED EMPLOYMENT AREA ANALYSIS Impact DataSource believes a targeted employment area can be constructed for the proposed Project s site at 3400 S Las Vegas Blvd Las Vegas, NV The site does not qualify as a targeted employment area based on unemployment rates at the state, MSA or county level. The national unemployment rate during 2012 was 8.1%. Therefore, to qualify as a high unemployment area, a Subdivision's average unemployment rate must be at least 12.2% BLS Annual Unemployment Statistics Unemployment Rate Nevada 11.1% Las Vegas Paradise, NV MSA 11.2% Clark County, NV 11.2% Census Tract % Proposed TEA Area An 11 census tract area that includes the Project site exhibits high unemployment. The site is located in Census Tract 67, with an unemployment rate of 4.9%, but when combined with all adjacent census tracts, the combined area has an unemployment rate above 12.2%. The following table demonstrates a combined area that would meet the necessary TEA threshold. Unemployment Estimate for Selected Census Tracts in Clark County 2012 Annual Averages Census Tract Labor Force Employment Unemployment Level Unemployment Rate Tract ,582 1, % Tract % Tract ,226 1, % Tract ,185 1, % Tract ,200 1, % Tract % Tract ,677 1, % Tract % Tract ,027 1, % Tract 67 SITE % Tract 68 2,173 1, % Combined Area 15,358 13,202 2, % 6

7 The approximate location of the Project site is indicated by the blue star in the following map. Census tracts that are highlighted in red contain unemployment rates that are greater than or equal to 12.2%. Area Unemployment Proposed TEA Area 7

8 Unemployment Calculation Methodology To determine the unemployment rate by individual census tract, Impact DataSource employed a census share methodology approved by the Bureau of Labor Statistics and the U.S. Citizenship and Immigration Services. The following steps were followed to calculate the local unemployment rate by census tract. 1. Obtain most recent census data on employment and unemployment ( averages from the American Community Survey) for the census tracts and the county in which the tract is located. 2. Calculate the share of census employment in the larger county which contains the census tract; 3. Calculate the share of census unemployment in the larger county which contains the census tract; 4. Obtain the most recent employment and unemployment data published by the Bureau of Labor Statistics for the larger county. In our case, the most recent annual average 2012 was used; 5. Multiply the employment share calculated in Step 2 above by the most recent county employment estimate obtained in Step 4 above; 6. Multiply the unemployment share calculated in Step 3 above by the most recent county unemployment estimate obtained in Step 4 above; 7. Add the derived employment and unemployment estimates to calculate labor force for the census tract. 8. Divide unemployment by labor force to obtain the unemployment rate; and 9. Compare the derived unemployment rate for the Census tract to the national unemployment rate for the same time period multiplied by 1.5. County level unemployment was obtained from the Bureau of Labor Statistics, using 2012 annual Local Unemployment Statistics. 8

9 About Impact DataSource Impact DataSource is a 19 year old Austin, Texas economic consulting, research and analysis firm. The company has conducted over 2,500 economic impact analyses of firms, projects and activities in most industry groups and in Texas and 26 other states. Impact DataSource has completed economic analyses for several successful regional center projects under the USCIS EB 5 program. In addition, Impact DataSource has prepared and customized over 50 economic impact models for its clients to perform their own analyses of economic development projects. These clients include the New Mexico Economic Development and the Metro Orlando (Florida) Economic Development Commission. The New Mexico Department of Economic Development uses Impact DataSource s computer model to project the economic impact of new or expanding firms in the state and costs and benefits for the State of New Mexico and each local taxing district. The model also calculates the amount of eligible state and local incentives and calculates a rate of return and payback period for these incentives. The People of Impact DataSource: Impact DataSource's team includes the following members: Jerry Walker, principal/economist, Paul Scheuren, principal/economist, and Michael Kester, economist 9