Benefits of Renting an EB-5 Regional Center
Raising capital through the EB-5 Immigrant Investor Pilot 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 which 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 costs involved, however, many developers instead choose to purchase, collaborate with, or rent regional centers.
Determining if Renting or Affiliating is the Best Option
The process of preparing Form I-924, Application for Regional Center Under the Immigrant Investor Pilot Program, can take months, and after the application is submitted, the USCIS approval process can take more than a year. For some developers, this rather lengthy process may be fine; for others, this is unacceptable.
Cost is another concern. While filing for regional center designation itself costs $6,230, the additional costs to prepare the necessary documentation (e.g., comprehensive project business plan, economic report, transactional documents, etc.) can become prohibitive.
Renting a regional center, on the other hand, can be a great way for a developer to enjoy the benefits of sponsoring its project through a regional center while avoiding the time and cost involved in establishing a new regional center.
For developers who decide to rent a regional center, determining which center is best-suited to meet their projects’ particular needs requires them to identify potential regional centers, conduct careful due diligence, and understand the rental terms before ultimately signing a contract.
Identifying Potential Regional Centers
Each regional center is approved by USCIS for a defined geographic scope and one or more specific industry sectors. So, developers must first identify which regional centers possess the necessary geographic and industry scope to sponsor their projects. To that end, a developer can simply ask a regional center for a copy of its USCIS approval letter, which contains this basic but important information.
To view a full list of EB5 Affiliate Network’s fifteen (15) USCIS approved regional centers and their respective geographic scopes please click here.
Conducting Careful Due Diligence
Once a developer has identified a regional center with the proper scope for its project, it should conduct extensive due diligence on that regional center before proceeding any further.
Developers should only consider reputable regional centers with strong track records of success, professional management, and reduced liability.
The best situation is one where the regional center is also sponsoring its own active EB-5 projects and is not strictly a “rent-a-center”. The key here is that as a project sponsor, it is better to have a regional center with aligned incentives of remaining in compliance with the USCIS for the duration of your project’s sponsorship. As part of their due diligence, developers should ask if a regional center’s investors have had any I-526 or I-829 petitions denied and, if so, why.
Furthermore, legal compliance is essential. Regional centers must comply with both state and federal laws spanning numerous areas of legal practice. As a result, developers should ask potential regional centers what their procedure is to remain in compliance with all laws and USCIS policies.
Basic EB-5 Regional Center Due Diligence
- The regional center’s USCIS I-924 application
- The backgrounds of the regional center’s principals
- Any current or pending litigation against the center
- The regional center’s project offerings and the historical rate of success of those offerings
- The compliance procedures employed by the regional center for the projects it sponsors or affiliates with
Understanding the Rental Terms
Upon identifying a potential regional center, conducting comprehensive due diligence, and deciding to pursue that particular center, developers next must consider the regional center’s contract terms.
Key Contractual Considerations for Renting an EB-5 Regional Center:
- Cost – Since one of the primary motivations for renting a regional center is lower costs, one of the most important considerations for developers is the cost of renting the regional center. Developers should ask the following questions: Does the regional center charge upfront fees? Does the regional center charge a fee per EB-5 investor? Does the regional center require equity in the project? Does the regional center require a certain amount of job cushion?
In order to determine whether a regional center’s costs are practical, a developer should conduct a comprehensive cost-benefit analysis. Regional centers that require large upfront fees and/or equity in the project may not prove profitable. Developers should carefully weigh their options to ensure their projects will yield sufficient profits.
- Obligations – Before signing a contract to rent a regional center, developers should understand their obligations and the obligations of the regional center. Developers should ask the following questions: Who is responsible for completing required project-specific documentation? Does the regional center provide fund administration?
- Oversight – Since compliance ought to be one of the key factors in choosing a regional center, developers should ask for details regarding oversight. The level of oversight performed by the regional center will indicate how seriously it takes compliance.
- Competition – For regional centers commonly engaged in renting their services, developers should request information about any other projects sponsored by the regional center that might represent competition.
- Indemnification – Developers should ensure their agreements with regional centers include a clause that indemnifies them against past liability.
Completing the EB-5 Regional Center Rental Agreement
Once the terms of the rental agreement are clear, a contract can be drafted and signed. Developers should carefully review the contract before signing to ensure that the language of the document reflects their understanding of the agreement—and that making this agreement represents the interests of the developer. The agreement may be structured in a variety of ways, but common structures include licensing or sponsorship agreements.
Under the right contract, renting or affiliating with a USCIS approved EB-5 regional center can be a cost-effective way for developers to obtain EB-5 capital for their projects without the additional expense and delay of setting up a new EB-5 regional center.