"EB-5 Visas and the Ramifications for Regional Development"

Economic Consulting Group, LLC May 9, 2012

The ECG Team

• • • • • • Riley Moore Lorrie Brown Lizbeth Martin-Mahar Hart Hodges Dave Wallace Kari Qvigstad 2

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Employment-Based Immigration - Fifth Preference (EB-5) EB-5 Visa

– Started in 1990 – Invest $1 million or $500,000 in a targeted employment area (T.E.A.) – Need to directly create jobs for at least 10 U.S. workers •

EB-5 Regional Pilot Program (Regional Center)

A Regional Center (RC) is defined as "any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment.

– – – – – Pilot program started in 1992 (extended until September 30, 2012) Invest $1 million or $500,000 in a targeted employment area (T.E.A.) Need to either directly or indirectly create jobs for at least 10 U.S. workers Investor can be limited partner 3,000 EB-5 green cards each year are held for people who invest in designated "regional centers.“ 3

USCIS RC EB-5 Homepage

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“It should surprise no one that citizens of other countries are eager to invest in the U.S. economy. And along with the positive message a healthy and productive program like this sends to investors around the world, the core purposes of the EB-5 Regional Center Program are to generate capital investment and create jobs in communities around the United States. I want to underscore that both of these benefits are

accomplished at no cost to taxpayers, and are not reliant on

what is currently a very restrictive credit market. of 10 new jobs.

tangible benefits for Americans.

Under the program, in order to become a non-conditional lawful permanent resident, a foreign investor must prove the creation

The job creation requirement is central to the program, and ensures that foreign investments translate into

We can all acknowledge that the issue of immigration is a difficult one. But I view the Regional Center program as less about immigration than about job creation and capital investment in American communities”.

Senator Patrick Leahy (D-Vt.), Hearing On "Promoting Job Creation And Foreign Investment In The United States: An Assessment Of The EB-5 Regional Center Program" July 22, 2009

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United States not Unique

Immigration through investment is not unique to the United States. Other countries with similar programs: – Canada – Australia – New Zealand – United Kingdom 6

EB-5 RC Options

• New commercial enterprise and create new full-time jobs • Existing and troubled enterprise and save full-time jobs 7

Complicated and detailed process

Source: http://www.whicheb5.com/flow-chart-eb5-visa-application.php

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Program of Contradictions & Limited Transparency

• • • • EB-5 is an economic development program that is administered by a federal agency that is mainly focused on “immigration enforcement” Continues to evolve and limited transparency Regional center pilot program still not permanent and continues to be repeatedly extended for three year periods (extended again until Sept. 2012) Up until recently, review of RC’s economic impact reports were conducted by non-economists 9

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More Recent Local Coverage

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Total EB5 Visas Issued, by Category, FY06-FY10

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

FY06 FY07

EB-5 - $1M Regional Center - $1M

FY08 FY09 FY10

EB-5 (TEA) - $.5M

Regional Center (TEA) - $.5M

Source: U.S. Department of State: Report of the Visa Office 12

Total EB-5 Visas Issued

*

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 158 FY05 744 FY06 806 1,360 FY07 FY08 4,218 1,885 FY09 FY10 3,463 2,405 FY11 FY12** * Estimate of visas issued to the investor and dependents ** As of March 2012, Source: U.S. State Department 13

Top 5 EB-5 Countries Percentage of Total Visas Issued Rank 1 2 3 4 5 FY2006

Country S. Korea

China

Taiwan Canada* U.K.

% 47% 12% 8% 6% 5% Source: U.S. Department of State, Visa Office * Tied with Netherlands at 6%

FY2008

Country S. Korea

China

U.K.

Taiwan Canada % 48% 25% 8% 3% 2%

FY2009

Country

China

S. Korea U.K.

Taiwan Canada % 47% 21% 8% 4% 2% 14

Top 10 Countries Issued EB-5 Visas

1) People’s Republic of China 2) Republic of South Korea 3) Great Britain/Northern Ireland 4) Taiwan 5) India 6) Iran 7) Mexico 8) Canada 9) Russia 10) South Africa Source: U.S. Department of State: Report of the Visa Office # 772 295 135 94 62 55 50 45 41 34 % 41 16 7 5 3 3 3 2 2 2 15

EB-5 Visas Issued, By Region, FY06-FY10

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Africa Asia Europe North Am.

Oceania South Am.

FY06 14 610 124 45 0 9 FY07 12 649 105 16 1 10 Source: U.S. Department of State: Report of the Visa Office FY08 6 1,188 192 40 2 15 FY09 70 3,340 571 142 16 79 FY10 58 1,358 289 111 24 45 16

Economic Impact Analysis Steps

1) Identify the targeted area of the proposed regional center 2) Identify the new expenditures that are being introduced 3) Identify sectors affected 4) Incorporate transaction value dollars adjusted for year of the model 5) Run the input/output model and evaluate the change in employment, output, value added and labor income by industry sectors 17

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Some Drivers for Direct Jobs

• Business plan • Square footage (and expected use) • Projected business revenue • Average employment per industry 19

Components in the Economic Report

• • • • • Defining the region: characteristics How the regional center investments will affect the regional center’s economy – Direct, indirect and induced employment, output & value added impacts Assumptions behind the economic impact results for the proposed project Demonstrate that the proposed project activity results in new jobs Competition with existing businesses 20

Latest USCIS Issue: Tenant-Occupancy Methodology

• • USCIS has clamped down on allowing the counting of future tenants jobs towards the regional center’s direct job count USCIS is only counting those jobs resulting indirectly from construction activity and applicable building management 21

Explosion in Supply of Regional Centers

250 218 200 150 100 50 0 2007 11 2008 20 * As of March 2012, Source: USCIS 2009 45 2010 77 2011 125 2012* 22

States with 5 or more RCs*

State California Florida Texas Washington New York Georgia Michigan Nevada Arizona Hawaii Illinois * As of March 2012, Source: USCIS # 58 20 14 13 10 6 6 6 5 5 5 % 27 9 6 6 5 3 3 3 2 2 2 23

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States currently with no RCs*

Alaska Arkansas Connecticut Delaware Minnesota Nebraska New Mexico Rhode Island West Virginia * As of March 2012, Source: USCIS 25

13 Regional Centers in Washington

Aero Space Port International Group (ASPI Group) Regional Center American Life Ventures Everett, Washington American Life, Inc. - Lakewood Regional Center American Life Seattle RC | Gold Rainbow | Freedom Fund American Life Ventures, Tacoma, Washington Eastern Washington Regional Center Farm for America Regional Center Path America Sonoco, LLC Seattle Regional Center Twin Development LLC Regional Center Washington Regional Center Western Washington Regional Center LLC Whatcom Opportunities RC Source: U.S. Citizenship and Immigration Services 26

Regional Centers: Public vs. Private

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Top Regional Center Firms/Agents American Life, Inc.

Henry Liebman

Can Am Enterprises, LLC

Tom Rosenfeld

Invest in the USA

Stephen-Yale Loehr Source: U.S. Citizenship and Immigration Services 27

New Kid on the Block with New Paradigm?

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Introducing 520 Bridge Project in Shanghai

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Other Issues & Patterns

• • Priced too low……as RMB strengthens the cost of entry becomes more affordable…..cost of apartment in Shanghai ~$600K…..get green card for whole family for $500K Trend towards investment following students studying abroad (based on discussions with agents in China)….universities can be drivers 30

Conclusions

• • • Supply vs. Demand: Big increase in RCs in recent years but RCs need to assess demand USCIS moving towards more transparency and permanency Transition from private to public projects if current policies stay in place 31

THANK YOU QUESTIONS?

Reminder Pacific Northwest Regional Economics Conference Seattle Westin May 17-18 www.pnrec.org