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©2012. All rights reserved.
Premier Sponsor:
SO SOMEONE SAID YOU SHOULD BE A REGIONAL CENTER?
EB-5 MECHANICS
Steve Anapoell, Greenberg Traurig, LLPJeff Carr, Economic & Policy Resources, Inc.Kate Kalmykov, Greenberg Traurig, LLP
2
Why is everyone so interested in EB-5 these days?
Capital unavailable from traditional sources
Foreign investors cheap source of capital
EB-5 program previously underutilized
3
Individual EB-5
Investor buys business or starts new business
Must be 10 direct W-2 employees
Few applications
4
Regional Center EB-5
What is a regional center?
95% of all applications
Six-fold increase in 3 years (approximately 180 approved)
Main advantage
□ Indirect employment counts
5
Professionals Required for Regional Center Designation
Immigration Lawyer
Economist
EB-5 Business Plan Writer
Securities/Corporate Attorney
Bank/Escrow Agent
Marketing Firm/Commissioned Agent
6
What entities are involved?
Regional Center Entity – manager of all projects
New Commercial Enterprise – investors subscribe to this entity (Fund)
Job Creating Entity – recipient of the EB-5 funds that creates the actual jobs
7
Regional Center Entity
Applies to USCIS for designation approval
Ongoing administration and compliance responsibilities
Markets for investors
Due diligence regarding investors’ source of funds
Prepares I-526 packages
Markets the region
8
Regional Center Entity
Oversight of I-526 filings
Obtains signed Subscription Agreements and Escrow Agreements
Monitors direct employment
Tracking infusion of capital into job-creating enterprise
Monitors compliance with business plan and foundation facts in economic report
(cont’d)
9
Regional Center Entity
Allocates jobs between investors
Prepares annual reporting (Form I-924A) for filing with USCIS
Prepares I-829 packages
Markets the region
Decides on new projects
(cont’d)
10
New Commercial Enterprise
Limited partnership (or LLC)
Investors make equity investments
Invest (equity or debt) in job-creating enterprise
11
Job-Creating Enterprise
Development project
Borrower in debt approach
12
Recruiting Investors – Securities Laws
Overview of Securities Laws
□ Securities Act of 1933, as amended
□ Securities and Exchange Act of 1934, as amended
□ Investment Company Act of 1940, as amended
□ Investment Advisors Act of 1940, as amended
13
Securities Laws
Securities Act of 1933
□ General Statement of law
□ Regulation S
□ Regulation D
□ Disclosure Requirements
□ Recommended use of PPM
□ Compliance with local laws
14
Securities Laws
Securities and Exchange Act of 1934
□ General Statement of Law
□ Definition of Broker
□ Issuer Exemption under Rule 3a4-1
□ Use of Unregistered Offshore Domestic Finders
15
Securities Laws
Securities and Exchange Act of 1934 (cont’d)
□ Effect of not qualifying for an exemption from Broker-Dealer Registration
□ Civil and criminal penalties
□ Rescission rights
(cont’d)
16
Securities Laws
Investment Company Act of 1940
□ General Statement of Law
□ Is the Issuer an investment company?
□ Available Exemptions
17
Securities Laws
Investment Advisors Act of 1940
□ General Statement of Law
□ Registration (as amended by Dodd Frank)
□ Federal
□ State
□ Anti-Fraud Provisions of Section 206 of the Advisors Act
18
Application to USCIS
Project Business Plan
RC Business-Operations Plan
Offering Memorandum
Subscription Agreement
Economic Report*
□ Estimate of economic and job creation impacts
□ Definition of regional center geography
Marketing Plan
Bank (Escrow Agreement?)
Project preapproval (optional)
19
Documenting TEA
Proof of rural TEA area
□ Non-MSA area per OMB
□ Under 20,000 residents per 2010 Census
Proof of high unemployment TEA area
□ Employment statistics
□ Custom TEA (census track aggregation?)
□ State designation letter
20
Operational Plan
Regional center overview
□ Strategy
□ Industry focus
□ Business structure
Marketing
□ Target market
□ Agents
□ Marketing plan
□ Marketing materials
□ Marketing budget
21
Operational Plan
Recruitment of investors
□ Investor screening
□ Investor subscription process
Regional center funding
□ Operating budget
□ Source of funds
□ Amounts to be paid by investor for overhead
(cont’d)
22
Operational Plan
Administrative oversight
□ Plans for management of regional center
□ Plans for identifying and assessing projects
□ Monitoring projects and job creation
(cont’d)
23
Proposed USCIS Improvements-Mayorkas Proposal
Background of proposal
Overview of suggested changes in proposal
□ Premium processing/accelerated processing for “shovel-ready” projects
□ Added expertise (economists; business analysts)
□ Hearing process
Timing/Prospects for implementation of proposal
24
When is Money Available to Developer?
Investor must invest 100% (usually $500,000) before I-526 filed
Money can go
□ To project immediately
□ To escrow
Released when investor’s I-526 is approved
25
How much Capital can be raised?
Depends on job creation
□ Economist report projects job creation
□ Divide by 10 = maximum number of investors
□ Multiply by $500,000 = maximum capital raise
26
Hot Issues in Regional Center EB-5s
Tenant Occupancy
TEAs/State Designation Letters
Material changes in business plans
Capital investment after job creation/“cause and effect” issues
Timelines/delays
27
What are the advantages and disadvantages of creating a regional center?
28
Advantages
Developers can count indirect and induced employment opportunities, and not just direct jobs, in meeting the ten jobs per investor requirement.
A particular project within the regional center may be pre-approved by USCIS.
Regional center certification provides an aura of legitimacy or endorsement that may help in marketing to foreign investors.
29
Advantages
Regional center designation is a one-time designation allowing future projects to be marketed without incurring delays.
In addition to funding their own projects, regional centers can profit by funding projects developed by others.
(cont’d)
30
Disadvantages
Regional center certification may take a lengthy period of time – six months to one year.
Regional center certification may entail a significant expense, including hiring an economist, hiring a business plan writer, hiring immigration and securities attorneys and other expenses.
Regional center certification is not the same as approval of any particular regional center project.
31
Disadvantages
Regional center certification is no longer a small, privileged group. Over 180 regional centers have now been certified.
Many regional centers have not been able to attract any investors. Newer regional centers find it difficult to compete in their marketing efforts with long-existing regional centers with a track record of many immigration approvals, some with both I-526 and I-829 approvals.
Regional centers have ongoing administrative and filing requirements with USCIS in order to avoid de-certification.
(cont’d)
32
What other options may exist for raising capital under the EB-5 program?
Having project “adopted” by certified regional center
Purchasing certified regional center
Pooled investment with individual EB-5 petitions