Raising capital through the EB-5 Immigrant Investor Program can be an excellent way for developers to fund their projects. While projects can receive direct EB-5 investments, many developers choose to sponsor their projects through regional centers because of a number of distinct advantages—particularly the favorable method for calculating job creation that usually results in a higher amount of potential EB-5 capital.
Some developers choose to apply for their own EB-5 regional center designation with United States Citizenship and Immigration Services (USCIS). Due to the long processing times and high costs involved, however, many developers instead choose to purchase, collaborate with, or rent regional centers.
Determining if Renting or Affiliating is the Best Option
Regional center investments and projects hold many benefits for investors and developers alike, but starting a new regional center is time consuming and expensive. Gaining approval can take up to two years, and the costs of the application and related expenses can run into tens of thousands of dollars. Filing the application for designation of a regional center costs $6,230, and this amount does not include the additional costs of preparing the required supporting documentation. The risk also exists that USCIS could deny the application for designation as a regional center, resulting in wasted time and money.
Buying an existing regional center may seem like a suitable solution, but this strategy has problems of its own. First, few regional centers are for sale. Second, even if a buyer can find a suitable regional center, the purchase process can be complicated by, for example, limitations related to industry and regional coverage, the need to assume existing project liabilities, and compliance and risk management issues.
Consequently, many entrepreneurs who want to attract EB-5 capital prefer to rent regional centers. Renting a regional center allows a developer to benefit from regional center sponsorship without the complications arising from establishing a new regional center.
The Benefits of Renting an EB-5 Regional Center
The most significant benefits of renting a regional center are saving time and money. While some developers, especially those who intend to focus on a specific region, are willing to wait and invest in establishing a new EB-5 regional center, this option does not suit everyone.
Additionally, if a developer wants to develop a limited number of projects in a particular area, it does not make sense to establish a new regional center. This is especially true if several regional centers already operate in the target area.
Regional center investments are attractive to entrepreneurs who want to participate in the EB-5 program, which makes it easier to raise capital from EB-5 investors. One of the main advantages of regional center investments is that they allow investors to take advantage of direct, indirect, and induced job creation to meet the EB-5 program requirement of creating 10 full-time, permanent jobs for U.S. workers. Additionally, most regional centers operate projects in targeted employment areas (TEAs). Therefore, projects typically qualify for the lower $500,000 investment amount.
Consequently, developers who rent regional centers not only save on the resources required to enjoy the advantages of regional center EB-5 project sponsorship but typically also have the ability to begin raising capital immediately. Moreover, in many cases, developers can benefit from regional centers’ marketing and investors networks, although it is important to confirm whether individual center operators offer these types of supplementary services.
The Basics of Renting an EB-5 Regional Center
Renting a regional center involves partnering with the operator of an existing regional center on an EB-5 project. Many regional center operators are open to partnering on viable projects that fall within the scopes of their operations, as this provides an additional income stream for these centers. While USCIS would still have to approve the proposed project, the application process is much faster and easier than the application process for establishing a regional center.
Regional center rental agreements typically involve either the payment of a direct fixed fee or a percentage of the proposed project’s profits to the regional center operator. The developer’s entity, not the regional center, is usually responsible for all project costs and liabilities and for all insurance costs.
In exchange, the regional center sponsors the project, which grants it the benefits derived by regional center EB-5 projects. Additionally, the regional center may be able to assist with marketing the project through its existing marketing plan and network, and it may have prequalified investors who are ready to invest in the project.
Regional Center Rental with EB-5 Affiliate Network
Developers who want to rent regional centers must do careful research to find both centers and agreements that suit the requirements of their EB-5 projects. The team of experts at EB-5 Affiliate Network is ready to help, starting with finding a suitable regional center for your project within its extensive network. Contact us today to learn more about the services we provide.