Projects under the EB-5 Immigrant Investor Program can receive direct EB-5 investments from foreign investors. Many project developers, however, choose to sponsor projects through regional centers because of the numerous advantages sponsorship offers, including a more favorable method for calculating job creation. EB-5 investors who invest in a project through a regional center can more easily meet USCIS job creation requirements because EB-5 projects are allowed to include direct, indirect, and induced jobs when calculating job creation figures.
Project developers can obtain EB-5 regional center sponsorship in two ways: (1) by applying for EB-5 regional center designation and establishing their own regional center or (2) by renting or affiliating with an existing regional center. Applying for regional center designation can be a lengthy and costly process. For this reason, many developers choose to rent or affiliate with an existing regional center as a cost-effective way of obtaining EB-5 capital for their projects.
Project developers who choose to rent a regional center must identify potential regional centers with the correct geographic scope, conduct extensive due diligence, and carefully review the terms of the rental or sponsorship agreement before signing the contract.
Identify Potential Regional Centers
Each USCIS-approved regional center is limited to a defined geographic scope. A project developer must find a regional center with a geographic scope that includes the location of the EB-5 project.
Newer EB-5 regional centers tend to have smaller geographic scopes than older regional centers because the geographic regions approved by USCIS have become smaller in recent years. While the geographic scope of older regional centers can span an entire state or even multiple states, newer regional centers usually have geographic scopes that span a few counties.
A project developer should ask a regional center for a copy of its USCIS approval letter to confirm its geographic scope.
USCIS uses the North American Industry Classification System (NAICS) to classify businesses. Each regional center is preapproved to operate in one or more industry sectors, which are defined by NAICS codes. Job creation is also usually determined at the NAICS code level.
Formerly, the NAICS code classification of an EB-5 project had to fall within the approved industry scope of the regional center. According to the May 30, 2013, USCIS Policy Memorandum, however, a regional center can sponsor any EB-5 project with any NAICS code classification. A project only needs to be located within the approved geographic scope of the regional center.
Conduct Due Diligence
A project developer must next interview and conduct due diligence on EB-5 regional centers that possess the required geographic scope. Project developers should seek regional centers with strong track records and experienced management. The project developer should consider each potential regional center’s reputation, track record, available services, and applicable fees.
Ideally, an EB-5 regional center should be actively sponsoring its own EB-5 projects, meaning the regional center will be aligned with the project developer’s goal of remaining in compliance with USCIS. To this end, project developers should ask each regional center what procedures it has in place to ensure that the projects it sponsors are in compliance with all laws and USCIS policies.
Developers should also ask the following questions while assessing regional centers:
- How many projects has the regional center engaged?
- Has the regional center ever received a Notice of Intent to Deny from USCIS?
- What is the regional center’s rate of approval for I-526 and I-829 petitions, respectively?
- Is there any pending litigation against the regional center or its owners?
Additionally, developers should ask
- about the credentials of the regional center owners and request copies of their CVs or resumes,
- for information on any other projects sponsored by the regional center that might present competition to the EB-5 project,
- about the regional center’s product offerings and rate of success related to these offerings, and
- for clarification on the compliance procedures related to the projects sponsored or affiliated with.
Finally, developers should check the regional center’s I-924 application.
Review the Terms of the Rental Agreement
Before signing an agreement with a regional center, the project developer must fully and carefully review the document to ensure his or her understanding of its key terms. Regional center agreements can be structured in numerous ways; licensing or sponsorship agreements are common.
Developers should conduct a cost-benefit analysis to determine whether a regional center’s costs are practical for the EB-5 project. Project developers should also be certain they understand their obligations and those of the regional center. For instance, it should be clear which party conducts fund administration or completes specific project documents. Finally, developers should review the agreement for clauses that indemnify them against past liability of the regional center.
By following these crucial steps, project developers can have confidence in selecting a qualified and experienced regional center that will ensure sufficient EB-5 project profits and overall compliance.
EB5 Affiliate Network Regional Centers
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.
EB5AN has obtained USCIS approval for 14 regional centers, and our regional centers provide coverage across more than 20 states and Washington, D.C. Additionally, we maintain a national affiliate network of approved EB-5 regional centers. Consequently, wherever your project is located, working with us means that you will be able to begin raising funds for your project immediately.
Renting an EB-5 regional center can be a fast, cost-effective route to securing EB-5 capital for a project. Contact EB5 Affiliate Network’s team of experts today to discuss your project and regional center rental needs.