Transcript Nuts & Bolts of the EB-5 Immigration Process

Introduction to EB-5 Financing
1
SEPTEMBER 17, 2012
AREAA NEW JERSEY CHAPTER MEETING
LAW OFFICES OF JULIA PARK, LLC
www.juliaparklaw.com
Green Card Waiting Times
2
 Family-based petitions
 Marriage: 6 months*
 Child over 21: 6 to 9 years
 Brother or sister: 10 years
 Employment-based petitions
 EB-1 (extraordinary ability; multinational exec): 6 months
 EB-2 (higher degree): 1 – 2 years (add 4-5 years if from China
or India)
 EB-3 (college degree): 7 – 9 years
 EB-3 (skilled worker): 8 – 11 years
 EB-4 (religious workers): 6 months
* Approximate time frame. DOS releases a “visa bulletin” every month. Often front page news for ethnic
newspapers.
www.juliaparklaw.com
What is the EB-5 Visa?
3
 The EB-5 visa category, introduced in 1990, allows a
foreign national to invest $1 million in a “new
commercial enterprise” that will benefit the U.S.
economy and create at least “10 full time jobs”.
 In 1992, the Regional Center Pilot Program allowed the
required investment to be reduced to $500,000 if made
in a “rural area” or a “targeted employment area (TEA)”.
 Misconception: Regional Center (RC) = $500,000 and
Self-investment = $1 million

LOCATION of the investment determines the investment
amount.
www.juliaparklaw.com
Why the recent boom?
4
 Quite popular in the early 90’s but legacy INS
implemented stringent requirements in 1998, even
retroactively changing the rules.
 2003 and onward, the EB-5 slowly regained ground
with the current recession highlighting the
attractiveness of EB-5 capital as an alternative
funding source.
 Canada recently doubled the investment amount for
its investment visa program making EB-5s more
attractive.
www.juliaparklaw.com
EB-5 Regional Centers (1)
5
 Regional Center Pilot Program began in 1993;
extended very 3 years; just extended by Senate last
week!
 Government designated economic entities, either
public or private, that promotes economic growth.
 Virtually all RC projects are located in Rural Areas or
TEAs.
 Currently more than 90% of EB-5 applications are
made through RCs.
www.juliaparklaw.com
EB-5 Regional Centers (2)
6
 Currently more than 220 approved RCs; many more
pending approval.

Note that not all RCs currently have projects.
 Lots of competition among RCs to attract investors:
More options for investors.
 No centralized location to check current projects.
www.juliaparklaw.com
Examples of RC Projects (1)
7
 Solar Power Project (California)
 $2.2 billion total project cost
Government guaranteed loans: $1.6 billion
 Equity partner I: $168 million
 Equity partner II: $300 million
 Equity partner III: $130 million (of which $90 million will be EB-5
Loans)

 Upgrade of regional mass transit payment system
(Pennsylvania)

$207 million total cost
Equity: $32 million
 EB-5 Financing: $175 million (in 3 separate tranches)

www.juliaparklaw.com
Examples of RC Projects (2)
8
 Brooklyn Navy Yard industrial park (New York)
 $ 141 million total cost
Government funding: $81 million
 EB-5 Financing: $60 million

 Addition of restaurant and bar to W Hotel (Los
Angeles)


$14 million EB-5 Financing
Total cost?
www.juliaparklaw.com
Examples of RC Projects (3)
9
 Construction of Marriott (Los Angeles)
 $118 million EB-5 Equity Financing
 Medical center in Flushing
 Hotel in Times Square
 Hotel in lower Manhattan
 Gold mine
 Turkey farm
 Dairy farm
www.juliaparklaw.com
EB-5 Investment Structure (1)
10
 EB-5 investment must be “at-risk” equity
investments – debt does not qualify
 Most Regional Center investments are structured as
debt funds in which the foreign investor takes an
equity position. These funds then loan the pooled
funds to the borrower.
www.juliaparklaw.com
EB-5 Investment Structure (2)
11
Regional Center
Investor
A
C
RC Fund (Lender)
B
D
Developer
(Borrower)
A: Invest $500K
B: Lend pooled investment (Generally 5-year collateralized term loan)
C: Interest payment generally 1%
D: Interest payment generally 5% (no prepayment)
www.juliaparklaw.com
Regional Center Job Creation
12
 USCIS allows Regional Center projects to count both
direct and indirect jobs.
 Economic models such as IMPLAN and RIMS II are
used to project anticipated job creation based on
revenue or expenditure.
 The borrower must expend funds (in an expenditure
model) according to the submitted business plan.
Funds cannot be diverted to non-job creating
activities or the investor will not get a permanent
visa after 2 years.
www.juliaparklaw.com
The Visa Process (1)
13
1. Prep
State
2. I-526
Stage
3. AOS or
Consulate
• Choosing a Regional Center Project
• Preparing I-526 application package
• Committing the investment funds in escrow account
• USCIS reviews immigrant application (approx. 5 - 9 months)
• Derivative children must be under 21 years of age
• Reasons for Denial: Source of funds (note: gifts are ok); Path of funds
•
•
•
•
I-485 Adjustment of Status (AOS) stage if investor is already in the U.S.
Consular processing if overseas
6+ month process
Total Time Period to Conditional GC: approximately 12 months
www.juliaparklaw.com
The Visa Process (2)
14
• If the I-526 is denied, the escrow funds are released back to
4. Conditional the investor.
2-year GC
• Filed during the 90 days period before 2 year anniversary of
green card.
• Must show that investment was sustained.
• Must show that 10 jobs were created.
5. I-829 Stage • If denied, cannot be appealed.
www.juliaparklaw.com
The $500,000 Investment: TEAs and Rural Areas
15
 Rural Area



(1) Not located within any standard metropolitan statistical area (MSA) AND
(2) Not located within city/town with a population of 20,000 or more based on the most recent
census.
83% of USA = MSA: Virtually the entire states or Maryland, Massachusetts, Rhode
Island and New Jersey is disqualified.
Bills being introduced to eliminate MSA prong.
 TEAs

(1) The area (MSA or county) has experienced an average
unemployment rate of 150% or more of the national
average (based on Department of Labor statistics)
OR
(2) Letter from State authority (ex. NY EDA) certifying that the
particular area has been designated a high unemployment
area.
www.juliaparklaw.com
Busy Two Years for the RC
16
 If Regional Center project is not successful investors risk deportation


Failure to become fully subscribed and project never happens
Unexpected economic downturn
 Job Creation target not reached: 10 jobs must be created within 2.5
years of the I-526 approval (June 2009 memo), if not must be able to
show that the jobs can be created within a “reasonable period of time”.


Construction jobs will count only if they last at least 2 years.
What about big scale projects that take longer than 2.5 years? (Discretion is there
but too early to say.)
 A “material” change in the business plan: December 2009 memo states
that a NEW (not AMENDED) I-526 petition is required: no remedies
for aged-out children or ex-spouses.

Inconsistent with other visas; no law or Regulations requiring this; potential for
litigation
www.juliaparklaw.com
RC EB-5s vs. Direct EB-5s
17
 Similar structure and rules but can only count direct
jobs so size of capital raise is smaller
 Difficult to rely on existing migration consultant
infrastructure due to small economies of scale
 Depending on the project, investor could have more
control over ultimate job creation
 USCIS currently fixated on job creation
methodologies which is causing delays, so direct EB5s seeing a slight advantage in processing times
www.juliaparklaw.com
In Conclusion
18
 EB-5 is a wonderful alternative for relatively wealthy
foreigners who have no other ways to obtain
greencards.
 EB-5s are an attractive source of funding for projects
that require investment in otherwise dismal
economic times – but competition is fierce.
 The investor must clearly understand the importance
of due diligence and the risks involved.
 The borrower must clearly understand how the funds
can be used.
www.juliaparklaw.com
Thank you!
19
QUESTIONS?
PLEASE CONNECT WITH ME ON LINKEDIN.
(“JULIA YONG-HEE PARK”)
[email protected]
349 FIFTH AVENUE
NEW YORK, NY 10016
www.juliaparklaw.com