2013 Wolfsdorf Immigration Law Group (all rights reserved) The contents of this document are proprietary and should not be duplicated or shared

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1 2013 Wolfsdorf Immigration Law Group (all rights reserved) The contents of this document are proprietary and should not be duplicated or shared without express permission from Wolfsdorf Immigration.

2 WOLFSDORF IMMIGRATION LAW GROUP Full service immigration law firm with offices in Santa Monica, CA and New York, NY Who s Who Legal Corporate Business Immigration Lawyer of the Year for 2012, 2011 and 2010 (Official research partner of ABA and IBA) 17 lawyers and over 20 years of EB-5 practice, including setting-up and representing regional centers and individual investors with large Chinese-speaking staff Bernard Wolfsdorf is past National President of the 12,000 lawyer American Immigration Lawyers Association (AILA) Bernard Wolfsdorf presently serves on AILA s EB-5 committee California Licensed Chinese speaking Real Estate Broker on staff EB-1A (extraordinary) EB-1C (managerial) EB-2 (NIW) & (L-1 company transfer) O-1(extraordinary) F-1 Student and all other Visas Global Mobility Visa services providing one-stop in over 50 countries. 2 U.S.: bernard@wolfsdorf.com

3 EB-5: The Basics ( Congress created EB 5 category in ,000 green cards available each year in this preference Two types of EB 5 cases: Individual and regional centers (RCs) Approximately 90% of EB 5 petitions now through RCs Current annual usage: increasing rapidly, more than double last year Conclusion: may be oversubscribed soon I 829s: filed months after investor gets conditional resident status I 829 procedure generally Legislative status of EB 5 program extension until September 30, 2015

4 EB-5 Requirements: Investment in a new commercial enterprise Established after November 29, 1990; or Restructured or reorganized; or 40% increase in net worth or number of employees Equity or loan investment Investment at risk Amount of investment $1,000,000; or $500,000 if targeted employment area (TEA) or rural area

5 EB-5 Timing Chart:

6 ( Difference between Stand alone EB 5 and Regional Center EB 5?

7 Stand-alone EB-5 Investor buys business or starts new business Must be 10 direct employees Few applications but increasing

8 Stand-alone EB-5 Engaged in management Matter of Ho business plan Money used for job creation Proof of job creation 10 full time employees Job descriptions Job creation timeline

9 Regional Center EB-5 What is a regional center? Over 90% of all applications Huge increase in past 3 years Main advantage: Indirect employment counts

10 Persons For Whom Stand-alone EB-5 May Be Best Option ( Actually wants to start/manage business Will create 10 jobs for U.S. workers up front Investment is driving force Wants to control investment Wants to maximize profit Understands there may be many complex legal issues

11 Persons For Whom Regional Center EB-5 May Be Best Option ( Retirees/students/disabled adult children of I.R. or LPR Does not want to start/manage business Will not create sufficient employment Wants to be geographically mobile Wants/needs to do something quickly Immigration is driving force

12 Webinar Los Angeles, CA July 16, 2013 EB-5: Structures and Differences Prepared by: Jor Law, Esq.

13 Disclaimer This presentation is designed to provide practical and useful information on the subject matter covered. However, it is provided with the understanding that no legal, tax, accounting, or other professional services are being rendered or provided. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

14 Typical Characteristics of Direct EB-5 vs Regional Center Direct EB-5 May only count direct jobs Typically smaller deals May be cheaper to implement Typically one-entity structure Typically equity model Cannot act as sponsor of other people s project Regional Center May count direct, indirect, and in induced Jobs Typically larger deals Costs are typically higher Typically two-entity structure Typically debt model Owner of RC may choose to sponsor other qualifying projects

15 What s Typically Needed Direct EB-5 Business plan for project LP/LLC/Corp agreements Investor questionnaire* Subscription agreement* Escrow Agreement* PPM/Offering memorandum* Miscellaneous ancillary documents Regional Center Business plan for RC Business plan for Project Economic report LP/LLC/Corp agreements Investor questionnaire Subscription agreement Escrow Agreement PPM/Offering memorandum Miscellaneous ancillary documents Investment/Loan documents if 2 entity model RC sponsorship agrement (depends on structure) * Sometimes skipped for cost considerations

16 Direct EB-5 Model (may be used by RCs too) Investor COMPANY Investor Investor is the Capital Raising Entity Investor Investor & Project Company Investor Investor (usually LLC/LP or corp) Investor SECURITIES OFFERING RISK RC is usually an LLC/LP or corporation. ASSETS ARE HERE RC itself serves as CRE and PC. The RC is ALSO the job-creating entity. Investors become direct co-owners of the RC (and CRE/PC) - minority members/partners (if CRE/PC an LLC/LP) - minority shareholders(if CRE/PC a corp) Greatest risk: investors MAY direct say in control (albeit minority) and direct connection to assets If aggrieved can file direct lawsuits and derivative actions against controlling persons

17 RC Structure: Indirect Equity Single-entity Model REGIONAL CENTER sponsors Investor Capital Raising Entity Investor & Project Company Investor Investor Investor (usually LP or LLC) Investor SECURITIES OFFERING RISK RC does not itself serve as CRE or PC. Its relationship to the CRE/PC is indirect sponsorship only. The CRE/PC is the job-creating entity. ASSETS ARE HERE Investors become direct equity co-owners of the CRE/PC (not the RC). Significant risk: investors MAY have direct minority control and direct connection to assets but not to RC If aggrieved can file direct lawsuits and derivative actions against controlling persons But again, not against the RC even if affiliated if arms length

18 RC Structure: Indirect Equity or Loan Two-entity Model REGIONAL CENTER sponsors Investor Investor Capital Raising Entity LOANS $$$ TO Project Company Investor (usually LP or LLC) OR INVESTS IN (usually LLC) Investor SECURITIES OFFERING RISK ASSETS ARE HERE RC does not itself serve as CRE or PC - its relationship to the CRE is indirect sponsorship only. The CRE is a passive, single purpose entity (funding only). The PC is the active, job-creating entity. Investors become direct equity co-owners of the CRE (but not the RC or the PC). Smallest risk: investors have no control over CRE and NO direct connection to assets. If aggrieved, investors can file direct lawsuits only against CRE controlling persons. Not against the RC or PC even if affiliated if arms length.

19 Biography Jor Law Homeier & Law, P.C. is a law firm devoted exclusively to corporate and business transactional law, including securities, for clients ranging from established and publicly traded companies, to startup businesses and entrepreneurs in a wide range of industries. The firm s practice includes finance, secured lending, mergers and acquisitions, licensing, securities, venture capital, new media, technology, e-commerce, and other general transactions. Homeier & Law, P.C., is a leader in EB-5 related corporate and securities transactions, and represents a number of regional centers as well as private EB-5 clients. Jor Law is a founding shareholder of Homeier & Law, P.C. As part of his regular corporate and securities practice, Jor routinely advises on EB-5 related transactions. In that capacity, Jor represents both investors looking to invest through the EB-5 program as well as businesses seeking capital through the EB-5 program including through regional centers. Jor frequently presents at EB-5 industry events, including those held by the American Immigration Lawyers Association, State Bar of California, and Los Angeles County Bar Association. Jor received his J.D. from Columbia University and his B.A. from UC Berkeley. Jor is a member of the California and New York State Bars. In December 2008, Mr. Law was named a "Best Lawyer" by LegalForce. For three years in a row, in each of 2009, 2010, and 2011, Jor was recognized by Super Lawyers magazine as one of Southern California s Super Lawyers Rising Stars, placing him among the top 2.5 percent of the best up-and-coming attorneys in Southern California who are 40 years old or younger, or who have been practicing for 10 years or less.

20 Contact Michael G. Homeier, Esq. (818) (direct); Jor Law, Esq. (818) (direct); Clem Turner, Esq. (646) (direct); L.A. - Tel: (818) Fax: (818) N.Y. Tel: (646) Fax: (646) Corporate Law -- Securities Law -- Business Transactions EB- 5

21 Usadvisors.org Four possible outcomes for each EB-5 investment EB-5 project Risk analysis & due diligence Prepared by Michael Gibson USAdvisors.org CRD #

22 Usadvisors.org Four possible outcomes for each EB-5 investment: 1. I-829 Approved Full Principal returned 2. I-829 Denied Full Principal returned 3. I-829 Approved Full Principal not returned 4. I-829 Denied Full Principal not returned 3 out of 4 outcomes could be considered an EB-5 investment failure EB-5 project Risk analysis & due diligence Prepared by Michael Gibson USAdvisors.org CRD #

23 Usadvisors.org There are two principal risks involved in an EB-5 Investment: 1. Conditions will not be removed 2. Principal will not be returned Reasons why Conditions will not be removed: 1. Capital was not invested according to the business plan (Material Change) 2. Sufficient jobs were not created (or saved) as outlined by the business plan or in accordance with USCIS regulations Reason why Principal will not be returned: 1. Value of investment is insufficient to repay investors EB-5 project Risk analysis & due diligence Prepared by Michael Gibson USAdvisors.org CRD #

24 Usadvisors.org Why many EB-5 Investors will loose a substantial portion of their Principal invested: 1. Emotional investing 2. Ignorance 3. Fraud / Misinformation 4. Lack of Material Disclosure Reasons why projects fail: Micro or Non-Systemic Risks: 1. Lack of capital & inability to raise sufficient funds in time 2. Poor management, budgeting burn rates 3. Unrealistic development and cash flow expectations 4. Poor understanding of market / competition Systemic Risks (Macro): 1. Global lack of credit / capital for investment 2. Higher costs of inputs (labor, materials) and lower consumer demand EB-5 project Risk analysis & due diligence Prepared by Michael Gibson USAdvisors.org CRD #

25 Usadvisors.org 1. Research and due diligence increases an understanding of the risks involved with an investment to help the client make an informed, not emotional decision 2. It is possible to quantify most risks based on market and industry data in an attempt to measure the risks and probabilities of failure across various industries and asset classes 3. Without doing a risk assessment of the asset and market it is not possible to assign a value to the asset at either inception or estimate the potential future value at exit, thus increasing the probability of a negative outcome EB-5 project Risk analysis & due diligence Prepared by Michael Gibson USAdvisors.org CRD #

26 Risk v. Uncertainty Uncertainty: A state of having limited knowledge where it is impossible to exactly describe existing state or future outcome, more than one possible outcome. Risk: A state of uncertainty where some possible outcomes have an undesired effect or significant loss. Almost no EB-5 investments are made using objective risk assessment & probability analysis Most EB-5 investments are made using subjective intuition Risk (which can be measured as opposed to Uncertainty) can be reduced in four ways: 1. Avoidance 2. Diversification 3. Hedging 4. Insurance (by transferring risk) *None of these options are available to the EB-5 investor as a LP in a Private Placement (PP) offering. In addition, all participants in the illiquid (LP/PP) investments will be subject to systemic risks.

27 Usadvisors.org Information v. Advice Information = general (non-specific) to answering a question Advice = Specific to answering a question this is true regardless of whether or not a client relationship has been established, money has been exchanged or disclaimers have been obtained that if a client relied on your comments to make a decision, then you have given advice EB-5 project Risk analysis & due diligence Prepared by Michael Gibson USAdvisors.org CRD #

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30 Usadvisors.org This report has been prepared by: USAdvisors.org a licensed Financial Advisory Firm FINRA CRD # for questions or more information please contact: Michael Gibson EB5Info.com michael@usadvisors.org Skype: usadvisors EB-5 project Risk analysis & due diligence Prepared by Michael Gibson USAdvisors.org CRD #

31 EB-5 Economic Trends In EB5

32 Meeting the Requirements Changes in Output Gain in Employment Gains in Business Taxation Changes in Labor Income Statistical information on the US economy Specific Statistics on the Utilities & Business Services

33 Recent Developments RIMS II Data Discontinued Tenant Occupancy Round Two 2013 Policy Memo 1. Industry Sectors 2. Geographical Area Amendments Construction Timelines (more or less than 2 years) Verification of Inputs 1. Feasibility Studies 2. Industry Standards

34 RIMS II DATA DISCONTINUED Likely Effects of the Sequester RIMS II Will Continue Manual Deflation of the Model for current EAs Data Availability in the future

35 Tenant Occupancy The Saga Continues? Round One Prove there is unmet need and you are not tenant shifting Round Two Prove the need for possible tenants Round Two Extensive Proof & Little Response Data from USCIS

36 2013 Policy Memo Industry Sectors and Geography Industry Sectors Anything Goes Geography Not so Simple 1. Prove that the New Area Adds Benefit to the RC Area 2. Can an Approved RC in LA do a project in NYC? 3. Where we are with USCIS Stay Tuned

37 Construction Direct vs. Indirect Regulations say full time jobs but practical application centers around construction timeline How do I prove jobs where created in construction industry

38 Verification of Inputs Feasibility Studies Simply the Best Option Industry Standards 1. RS MEANS 2. Industry Reports on model inputs 3 rd Party Data Good, Your Clients Experience Not So Good By Itself

39 QUESTIONS

40 Question and Answer Session 2013 Wolfsdorf Immigration Law Group (all rights reserved) The contents of this document are proprietary and should not be duplicated or shared without express permission from Wolfsdorf Immigration.