EB-5 Visa. County Business Council Economic Development Committee. Wednesday, Sept 24, Presentation by

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1 EB-5 Visa County Business Council Economic Development Committee Wednesday, Sept 24, 2014 Presentation by David Hirson, Partner, David Hirson & Partners, LLP Janet Wang, Principal, EB5 Direct Investment 1

2 EB-5 Investor Visa 2

3 What is EB5? Congress created the fifth employment-based preference (EB-5) immigrant visa category in 1990 for qualified foreigners seeking to invest in a business that will benefit the U.S. economy and create or save at least 10 full-time jobs. The basic amount required to invest is $1 million, although that amount is reduced to $500,000 if the investment is made in a rural or high unemployment area (TEA). Of the approximately 10,000 EB-5 green cards available each year, 3,000 are reserved for foreign nationals who invest through a Regional Center. Each Project strives to be in a Targeted Employment Area, each unit of investment is $500,000 TEA is each State designated. 3

4 EB-5 Investor Visa Fifth employment based Preference (EB-5) An immigrant visa category created in Investment of US$1 million, or US$500k if the project is in a Targeted Employment Area (TEA).defined as: a) High 150% of National Average b) Rural Area (Not within a MSA) Note: almost all EB5 projects are in TEA 2. Visa Quota of 10,000 per year 3. Invest in commercial enterprises: a) new commercial enterprise: 11/29/1990 b) Troubled Business: (1) loss during the period prior, (2) loss >= 20% of the net worth, (3) maintain existing employees (at least 10 per EB5 unit) for 2 yrs 4

5 EB-5, Cont. Basics 4. Benefit the U.S. economy: Create 10 full-time equivalent positions for 10 qualified US workers / investment unit 5. Investor: engage in the day to day management (unless investor is a limited partner) 6. Investment must be from lawful source of funds and at risk 7. Jobs to be created within the 2-year conditional residency period 8. Invest through a Regional Center or Direct Investment 9. EB5 visa application process: submission of Form I526 with proof of funds, business plan including job creation projection, & transactional documents 5

6 Fifth employment based Preference (EB-5) A US Job Creation Investment Visa EB5 applicant FDI (EB5) US commercial enterprises $1M/$500k per EB5 unit 10 qualified US workers / EB5 unit dependents USCIS grants temporary residency which can be adjusted for permanent residency in 2 years NOTE: EB5 investors and family members are not included in the US job creation count. 6

7 EB5 Offering 7

8 What is an EB5 Offering Package? 1. For-Profit Commercial Enterprise 2. TEA Designation very important 3. Business Plan 4. Private Placement Memorandum 5. Economic Impact Studies or Job Creation Projection When Packaging, consider Security Pledged, Investor Exit, and How EB5 investment will be returned in about 5 years 8

9 EB5 Timing 1. Hypothetical RC 2. RC Application with I924/I526 Exemplar 3. I-526 Petition (See timeline chart) Currently, USCIS posts a processing time of 13.4 months 9

10 Regional Centers 10

11 What is the role of a Regional Center? 1. Business Entrepreneur - putting the deal together 2. Overseas Marketer - promote EB-5 Project Overseas with migration brokers 3. Amateur Immigration Lawyer - stay informed & advocate 4. Administrator - USCIS requirements compliant 5. Business Executive - project oversight 6. Investor Representative - annual/quarterly financial reporting & communication portal between investors and project owners 11

12 Regional Centers 1. Pooling and management of funds 2. Pilot Program: expires on September 30, Status: US Congress has agreed in principle to a 3 year reauthorization of the EB-5 Regional Center Program. 4. Defined: an economic unit, public or private - involved with the promotion of economic growth, including increased export, sales, improved regional productivity, job creation, or increased domestic capital investment 5. Most Regional Center investments do not require a daily management role 6. Investments must be within the boundaries of the Regional Center and must be in an investment cluster approved by USCIS ( see #11) 12

13 Regional Centers, Cont. 7. Less restrictive Jobs Counts: direct, indirectly, or induced 8. Indirect Job Calculations: projected by an econometric report based on reasonable methodologies 9. Indirect jobs may be outside the geographic boundaries of the Regional Center 10. As of June 2, 2014, USCIS had approved approximately 579 RCs in California (2012) vs. 146 RCs(2014) in CA or CA regions in Florida, 76 in New York 3. The State of Vermont operates the Vermont Regional Center 11. Most popular industries: manufacturing, hospitality, healthcare services, educational services, retails, entertainment, and commercial real estate high labor intensive 12. Range of EB5 raise per RC project: $10M - $100M and up 13. EB5 capital ratio: 25%-50% of project cost 13

14 EB5 Direct Investment 14

15 Direct Investment Approach: 1. Jobs are directly created by the US commercial enterprises 2. Does not require an econometric report 3. Does not need a Regional Center sponsorship 4. EB5 visa eligibility not subject to sunset 5. Fewer number of investors per project 6. Investors can be more involved with US commercial enterprise or with limited participation through a LP 7. Investors can invest through a limited partnership or LLC 8. Potential faster USCIS processing time though it is taking much longer now 9. Range of EB5 raise: $500,000 - $5M 10. Good financing vehicle for company owned or franchise multi-stores expansion 11. EB5 portion is 35 75% of total project cost 15

16 Regional Center vs Direct Hire models? Regional Center: To encourage foreign investment in the U.S. economy through the EB- 5 category, Congress created an EB-5 Regional Center Pilot Program ("the Program") in By so doing, Congress permitted U.S. Citizenship and Immigration Services (USCIS) in 2003 to designate qualified applicants as "Regional Centers," eligible to accept EB-5 capital for economic development in the United States. (funds $5 million and up) A Regional Center is a private enterprise/corporation or a regional governmental agency with a targeted investment program within a defined geographic region. RC is able use economist study to project regional economic activities contributed by project investment and the related job creation directly, indirectly, or induced. Direct Employment/Direct Hire: all jobs are created by the EB5 business and supported by payroll tax return filing (usually funds between $500,000 - $5 million) 16

17 Targeted Employment Area 17

18 Targeted Employment Area(TEA) in California Administered by Governor's Office of Business and Economic Development Coordinated by STATE of California Business, Transportation and Housing Agency Based on Calendar Year 2013 Annual Average Unemployment Rates: 11.1% or higher qualified as TEA Published every April but can be updated throughout the year 18

19 EB-5 Statistics 19

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22 Sample EB5 Projects 22

23 Golf Courses Vineyards Almond Farms Grocery Stores Nursing Facilities Dealerships Yogurt Stores Amusement Parks Movie Productions 23

24 LA Live: a $118-million, 23-story tower on Olympic Boulevard: 174-room Marriott Courtyard and a 218- room Marriott Residence Inn open in 2114 EB5 financing: $118 million 24

25 Riverside County: Park Management Contract for the pre-opening and operating capital of a newly constructed sports park complex EB5 financing: $1.5M 25

26 Taking EB5 Projects to Market and Succeed Foreign Investor Perspective 26

27 How does EB5 work? Challenges Which EB5 to invest? Time Involvement SOF / Stress Currency control Settlement Education Language Barrier New country/life Brokers Asia Middle East South America Africa & CHINA Attorneys Economists Regional Centers Consultants Biz Plan Writers SOF I526 NVC I829 American Dreams Interpretation Processing Time SEC PPM / BP Subscription K Escrow / LP Operating K E-Verify US Project Companies TEA/ Job Creation How to Market language & Cultural barrier Interim Funding Being Successful 27 Return of Investment

28 What Makes an EB5 Project Successful? YES NO EB5 Funding to project Job Creation I526 Approval I829 Adjustment On-time Return of EB5 Capital 28

29 Understand the Questions INVESTORS Ask: Is My Investment Safe? TEA is 99% preferred Job Creation --> I526 approvals Package EB5 to be Compliant USCIS SEC Shovel Ready with all permits? US Operator Qualification & History Regional Center Qualification & History Though CIS controls, what is the time-line? Capital Stack? Developer Contribution? Any issues with I829 approval? What guarantees return of AT RISK Investment? 29

30 EB5 Resources 1.USCIS definitions and approved RC listing 2. IIUSA (Invest in USA) - Showcase best EB5 practices and supports Select USA to bring in qualified Foreign Direct Investment 3. EB5 Investors.com 4. American Immigration Lawyers Association

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33 Upcoming EB5 Events To Learn More about EB5, and meet EB5 industry leaders and partners. 33

34 Q & A 34

35 David Hirson & Partners, LLP David Hirson, Esq. Partner Newport Beach, California Direct: Mobile: EB5 Direct Investment, LLC Janet Wang, Principal Provides comprehensive services in coordinating and packaging projects for EB5 raise through direct investment or a Regional Center sponsorship [email protected] Direct: DEC Council Member District Export Council of Southern California "By Appointment of the Secretary of Commerce" 35

36 Disclaimer This presentation has been prepared for informational purposes only. Nothing herein is intended as legal advice. You should not rely upon any information in these pages as a source of legal advice, and receipt of any such information by you does not create an attorney-client relationship. 36