A Preliminary EB-5 Economic Analysis of a Seattle, WA Assisted Living Facility August 1, 2014 Prepared by: Impact DataSource, LLC Economic Consulting, Research and Analysis Austin, TX 1.800.813.6267 www.impactdatasource.com This report is preliminary and should not be submitted to USCIS. The information contained in this report is provided for informational purposes only and does not constitute legal advice. These materials are intended to guide your conversations with experienced EB-5 attorneys and other professionals. You should not act or rely on any information contained in this preliminary analysis without first seeking the advice of an attorney.
Overview Impact DataSource, an Austin, Texas economic consulting, research, and analysis firm, conducted a preliminary economic analysis of the investment in an Assisted Living Facility in Seattle, WA (the Project ). Based on the preliminary information provided, the project has the potential to create 268 eligible permanent jobs under the U.S. Citizenship and Immigration Services (USCIS) EB-5 Immigrant Investor Program. A letter dated July 28, 2014 from the Washington State Employment Security Department has certified the location of the project as being located in a targeted employment area (TEA). Therefore, the location currently qualifies for a $500,000 minimum investment per immigrant investor through the EB 5 program. Based on these specifics, the issuer may be able to raise up to $13 million from 26 foreign investors each making the minimum required investment. Factoring in a 20% job cushion, the possible EB-5 raise would be reduced to $11 million. Projected Employment Impact DataSource estimates that the investment in the Project has the potential to create a total of 133.6 jobs from construction and 134.8 jobs from operations of the Project for a total of 268.4 potential eligible jobs under the EB-5 immigrant investor program. Table 1: Employment Generated by the Project Total Permanent Jobs Construction 133.6 Operations 134.8 Total Employment 268.4 The total of 268.4 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. Impact DataSource 2
Multipliers Since the project is located in Seattle, the calculations rely on RIMS II multipliers for the geographic area of the Seattle-Tacoma-Bellevue, WA Metropolitan Statistical Area (Seattle MSA), which contains the following counties: Pierce, WA; King, WA; and Snohomish, WA. Utilizing an MSA as a geographic impact area is generally considered reasonable as MSAs are defined based on commuting patterns and are meant to represent areas with strong economic ties. A map of this geographic area, along with the approximate location of the project is shown below. The RIMS II multipliers are shown in detail later in the report. Impact DataSource 3
Discussion of EB-5 Eligible Jobs Resulting from Construction Activities Construction Costs Included in Impact Model The job estimates related to construction activity are based on the allowable construction expenditures from the project budget provided in Project Sources and Uses.pdf. To be consistent with USCIS guidance, the estimates for land and certain other soft costs have been excluded from the analysis. The following table summarizes the projected development budget along with the amounts included in the impact model to estimate job creation. Table 2: Summary of Construction Budget and Expenditures Included in RIMS II Model Cost Budget Amount RIMS II Industry Included In Model Land $2,000,000 Excluded $0 New Construction $15,231,221 23 Construction $15,231,221 Utility and Impact Fees $850,000 Excluded $0 Contingency $761,561 Excluded $0 Civil Engineering $350,000 5413 Arch/Engineering $350,000 Mech., Plumb., and Structural $200,000 23 Construction $200,000 Architectural Fee $850,000 5413 Arch/Engineering $850,000 Architectural Inspection $100,000 Excluded $0 Environmental Reports $15,000 Excluded $0 Dev. Fee $1,500,000 Excluded $0 Acquisition Fee $0 Excluded $0 Utility Hookup Fee $100,000 Excluded $0 Lease-up and Marketing $200,000 Excluded $0 Insurance $75,000 Excluded $0 Real Estate Taxes $25,000 Excluded $0 Tax and insurance Escrows $100,000 Excluded $0 Appraisal $14,000 Excluded $0 ACG Legal $10,000 Excluded $0 Accounting $10,000 Excluded $0 Building Permits $200,000 Excluded $0 Title and Recording $20,000 Excluded $0 Total $22,611,782 $16,631,221 Construction Timeframe Construction of the Project is expected to last one year, therefore 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 Impact DataSource 4
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. Methodology The total estimated jobs from construction are calculated based on the construction expenditures of the Project by utilizing the industry-specific final-demand employment multipliers. The finaldemand employment multiplier used in this analysis represents the change in the number of indirect and induced jobs that occurs in all industries for each addition 1 million dollars of output delivered to final demand by the industry. The final-demand multipliers for the relevant industries are shown in the table below. RIMS II Industry Table 3: RIMS II Multipliers for Construction Indirect & Induced Employment 230000 Construction Multiplier 8.6580 541300 Architectural/Engineering 9.1717 Note: The above multiplier reflects the number of indirect and induced jobs created per $1 million of eligible expenditures. The following table provides a summary of the jobs calculations for the project utilizing the construction expenditures. The RIMS II multipliers are based in 2010 dollars, so the relevant construction expenditures are first deflated to 2010 dollars before applying the multipliers. Table 4: Employment Calculations for Construction Expenditures 2014$ Expenditures 2010$ Multiplier Jobs* Hard Construction $15.43 $14.26 8.6580 123.4 Architectural/Engineering $1.20 $1.11 9.1717 10.2 Total 133.6 *Reflects eligible permanent jobs (indirect and induced). Impact DataSource 5
In summary, the construction expenditures of the project have the potential to support 133.6 EB-5 eligible jobs. Discussion of EB-5 Eligible Jobs Related to Operations Assisted Living Operations Calculations The job estimates resulting from the assisted living facility s operations are based on the annual revenue projections of $5,837,270 which were provided by Property Partners, Inc. Methodology The jobs created during operations are based on the facility s revenues by utilizing the industryspecific 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. Table 5: RIMS II Multipliers Operations RIMS II Industry Type II Total Employment Multiplier 623000 Nursing and residential care facilities 26.0122 Note: The above multiplier reflects the number of total jobs created per $1 million of revenue. The revenue method utilizes the final demand employment multiplier and the price-adjusted revenues to determine the total employment. Similar to the construction expenditures shown in the previous section, the revenues must first be deflated to 2010 prices. Table 6: Revenue Method Employment Calculations for Operations Revenues 2016$ Revenues 2010$ Multiplier Jobs* Operations $5.84 $5.18 26.0122 134.8 *Reflects total jobs (direct, indirect and induced) In summary, the revenue projections provided indicate that 134.8 EB-5 eligible jobs could be created as a result of operation of the facility. This estimate relies on the revenue method. Impact DataSource 6
About Impact DataSource Impact DataSource became involved in the EB-5 industry in 2010 as EB-5 began to grow in popularity. Our firm has prepared more than 40 EB-5 economic impact analyses since that time, however, our knowledge and experience in economic analysis and economic impact analysis is much deeper. Over the past 20 years we've done over 2,500 non-eb-5 economic and fiscal impact analyses in over 30 states in nearly all industry groups. If you would like further information such as pricing or references, please contact: Michael Kester, Economist michael@impactdatasource.com 512-861-5202 Comprehensive EB-5 Economic Analysis (Jobs Reports) We produce reports that meet USCIS requirements for regional center or I-526 applications. Impact DataSource provided the economic study for 11 regional center approvals and numerous outstanding regional centers and projects currently being adjudicated in the following areas: Assisted Living Facilities Hotels Multi-family Residential Projects Oil and Gas Drilling and Extraction Projects Restaurants Renovation Projects Solar Installation and Operations And many more. Preliminary EB-5 Jobs Assessment Our preliminary EB-5 job creation reports are a valuable tool to help assist in project planning including determining what percent of the project s capital stack may be composed of EB-5 funds. Our TEA map Targeted Employment Area Map http://www.impactdatasource.com/map is developed using the most recent census tract data from the American Community Survey and most recent calendar year data from the BLS at the county level. This user-friendly, point and click map covers the entire US and is meant as a guide to assist in finding TEA-eligible sites. TEA Analysis / Letter Coordination We have evaluated over 500 sites for TEA-eligibility and have helped clients obtain more than 70 state TEA letters. EB-5 Industry Involvement Impact DataSource is a member of the Association to Invest In the USA (IIUSA) EB-5 editorial committee, offering the economist s perspective for the Regional Center Business Journal and has led economist-related webinars. Impact DataSource 7