Sam (00:20):
Hi everyone. This is Sam Silverman. Thank you for joining us for our EB-5 job creation basics webinar. Today, we’re going to walk through how job creation works for an EB-5 project and also talk about how to utilize our free EB-5 job calculator on our website so you can get an idea of how job creation is calculated for a project utilizing construction, costs, ongoing expenditures and revenue generation from a project. So, before we dive into the slides here, please answer these quick two questions, and then, we’ll get going. Thank you.

Sam (02:27):
We’re having a little bit of technical difficulty. Can people hear me on the line? Hi everyone. This is Sam Silverman today. We’re going to cover a number of topics related to EB-5 job creation for a project. So, to begin, we’re going to give a little bit of context around how job creation is calculated for project utilizing construction, costs, expenditures, and revenue creation. And then, we’re also going to spend a couple of minutes walking through our free job calculator that’s available on our website, so you can see exactly how it’s done for a sample hotel project. Okay, so let’s first start with a very short 30-second video, and then we’ll dive into the slides next.

Video:
Sam and his team are by far the most open and willing to provide information of any of the people we talked to. Very accessible for a company that does so much and so much all over the country that an attorney like me can have direct access to the managing partners and immediate replies.

Sam (07:01):
Great. Thank you for watching. And now we’ll jump into the slides. These sides are also available and can be downloaded as a handout within the webinar platform here as well.

Sam (07:31):
Great. Okay, so, we’ll start on the basics of job creation. So, in order for an EB-5 investment to qualify under the program, each individual investor’s capital contribution, either $500,000 or $1 million, must create a total of 10 new jobs—existing jobs don’t count. So, if the business already has some jobs when the investor’s investment comes into the business, you can’t get credit for those existing jobs. So, when you look at the two options that most investors have—going into either a direct project, meaning a project not sponsored by a regional center, or a regional center project, the key difference between the two options is that in a direct project, you’re only able to count new W-2 employees—full-time actual employees on site. And you have to have 10 of them that are employed for at least two years in order to qualify as direct employees and have a direct EB-5 project. Under the regional center option, you’re able to count the term “employees” as direct, indirect, or induced jobs, meaning that you can get credit for cost expenditures such as capital spent on hard construction costs and soft construction costs, and also for revenue generation, such as accommodation revenue from building a hotel and having the hotel operate and create revenue under the accommodation category, essentially.

Sam (09:19):
So, when we look at how the jobs are actually done, there’s a reason why over 90% of the projects that are done using EB-5 capital are done using a regional center. There’s typically significantly more jobs that can be counted using a regional center sponsorship job creation model. And what this does is it effectively reduces the immigration risk that an investor faces, since there’s more jobs being created, and those jobs are going to be predicated based on capital being spent and revenue being created, which is going to be easier to track and to document than trying to hire 10 in-person full-time employees and keep them employed for at least two full years. Typically, for most project sponsors, it’s easier for them to just track construction, expenditures, and revenue creation, which they’re going to be doing anyway, typically for a senior lender or for an accounting firm for their audited financials. So, it’s a lot less work to do that. Also, if it’s a business where there aren’t a lot of W-2 employees but there’s a lot of capital being spent or a lot of revenue being generated, like an oil and gas project or some large manufacturing project or a hotel project, then you’re going to be able to create a lot more EB-5-eligible jobs using a regional center sponsorship model. So, I’ll let my partner Mike jump in—he has a few things to say as well.

Mike (11:03):
Hi everyone. Thanks for joining us on the webinar. This is Mike Schoenfeld, one of the managing partners of EB5AN. So, as Sam mentioned, well over 90%—actually over 95%—of investors go through the regional center program. Just in terms of job creation, this is the much cleaner way to track job creation for USCIS rather than trying to track the individual employees. And there’s a reason why almost all projects go through the regional center program. So, the way that USCIS looks at this job creation and the way they think about it as you first submit the job study with an I-526 petition submission for the individual investors—so, you’ll submit the job study that says how many jobs are to be created and how these jobs will be created as part of this new business. Then, that EB-5 capital actually goes into the project, and the jobs are created over a two-year period.

Mike (12:07):
After that two years, the investors file their I-829 petition, which is to remove the conditions on their green card. And this is the time when you need to prove the job creation. And when you go through the regional center model, the regional center helps track the job creation and can present the costs and the revenue that was used to create the jobs. So, at the end of the period, you take this initial job study where you predicted what was going to happen, you then tell USCIS what actually happened—hopefully according to the plan—and with that, assuming you followed the plan and the business was successful, all of the jobs were created, then all the investors will end up with their green cards.

Sam (12:54):
Great. So, we’ll move through the slides now and keep the discussion going. So, again, when we’re looking at a typical EB-5 project, there’s usually some kind of a construction component and a revenue generation component. So, when we look at how we’re going to get the 10 eligible jobs, we’re going to be able to count both expenditures on the construction side—typically hard and soft cost expenditures—and then revenue creation—so, new revenue generated that we can tie to the EB-5 investors investment into the project. So, the sum of those two, construction jobs and revenue jobs, are going to give us the total EB-5-eligible job creation in a particular project.

Sam (13:48):
So, when we look at the actual data that goes behind the job estimates for a traditional real estate project, we’re going to be looking at the construction cost breakdown. Typically, when we do an economic impact study, we’ll want to have a GMAX contract, which is basically a detailed, line-by-line item cost expenditure projection. It shows how the total project cost is going to be spent on different construction line items. Then, on the revenue side, we’ll typically have a pro forma that details out all the major assumptions for the revenue build of the particular project. So, for a hotel, that would be occupancy, average daily rate, other incidentals, and other items that would add to the total revenue generated by the project. It’s the same overall process for non–real estate projects. We want to have as much evidence as possible to validate that the cost and revenue assumptions incorporated in the business plan and the economic report are viable and are reasonable in terms of how the calculations are actually done.

Sam (15:06):
The math is actually quite simple. RIMS II and IMPLAN are the two data providers that are typically categorized as input–output multipliers, which means that for every dollar you spend on construction, you’re getting a certain amount of job credit for that particular dollar that’s spent. So, the numbers are going to vary by geographic area of the country. For example, $1 spent in Miami, Florida, is going to be a different number of jobs than $1 spent in New York City, right? And obviously, it’s going to vary as well if that dollar is spent on construction versus if it’s spent on land development or if it’s spent on manufacturing equipment. So, the numbers are going to vary. The multipliers are going to vary based on geographic area and also on industry code or NAICS code—the type of expense that the money’s being spent on.

Sam (16:13):
So, when we look at what can actually be included when we go to calculate EB-5 jobs, we’ll start with construction. So, what types of expenses can be included? Hard construction costs, soft construction costs, architecture engineering, FF&E, demolition, horizontal development. We’re not going to get any credit for land acquisition. Land doesn’t create any jobs. So, there’s no job creation from the land expenditures. From an operation side, all new revenue associated with the project is going to be eligible, and it’s just going to be categorized into different line items, which are going to each have a different multiplier. So, for doing, let’s say, a hotel, there’ll be room revenue, food revenue, et cetera—these can each be included. If it’s a situation where there is an existing business—for example, a hotel that was at $2 million, and now we project it’s going to be up to $5 million in revenue as a result of the EB-5 renovation or investment capital, then that incremental increase of $3 million is going to be considered new revenue and can be counted for EB-5 job creation purposes.

Sam (17:30):
So, that’s kind of where the jobs are coming from. Things that aren’t going to be able to be counted include, as I mentioned, land costs, and then things like contingency budgets—interest reserves are not going to be counted. From an operation side, things like tenant occupancy, where you’re buying an existing building or you’re building an existing or new building, let’s say, and then you’re leasing it out to a tenant—you’re not going to get credit for the tenant jobs that are created, right? You’re only going to get credit for your business, which, in that example, is you building that office building or building that retail space, not operating the coffee shop that’s going to be renting from you, right? So, you always want to think about jobs as only coming from the part of the business that you’re doing, not from somebody else’s business that is renting space, which is the most common example.

Sam (18:31):
Okay. So, to better visualize this, when we look at job creation by cost type and by revenue type, each of the different components—direct, indirect, and induced—they total up by line item. So, when we look at hard construction, engineering, revenue, food, and beverage, there’s a different relationship, or different ratio, between direct, indirect, and induced for each type of cost. The most important thing to realize is that indirect, direct, and induced jobs all count the same for EB-5 purposes. So, the breakdown doesn’t really matter. What matters is the total number of direct, indirect, and induced jobs that are coming from that line item of cost expenditure or new revenue creation in the project.

Sam (19:25):
So, for example, to kind of illustrate the trickle, let’s consider the impact of construction expenditure. When we see a building costing $25 million dollars in hard costs, we’re going to create jobs through the trickle-down effect. There’s going to be jobs from suppliers, transportation jobs, local money spent—you know, infused into the economy. That’s kind of the idea behind the indirect and induced jobs that boost up the job numbers. So, as an example, if we look at South Florida and we’re spending $1 million on hard construction expenditure, that’s going to create an estimated 16 jobs, which is the sum of the direct, indirect, and induced jobs, totaling up to 16 EB-5-eligible jobs for every $1 million spent. So, if we say that this project is going to cost $25 million just for the hard construction costs, then it’s basically simple math of spending $25 million and getting 16 jobs per every million. So, this whole project, assuming we spend all $25 million and it gets billed without coming in extremely ahead of budget, is going to create 400 new jobs that are going to be eligible, right?

Sam (20:48):
400 new jobs at 10 jobs per investor, right? That means 20 investors, or $10 million, would be the maximum amount of EB-5 capital this project could support. So, as we mentioned earlier, most projects choose to go the regional center route for a couple of main reasons. One is favorable job creation—more jobs in almost all cases. Two, it’s easier to track the jobs. Three, documentation is typically a lot less burdensome for the project sponsor. And then, lastly, these things in total result in lower immigration risk and less of a paperwork burden for the project sponsor. Great. So, I’ll let my partner Mike jump in and talk to you about the job calculator that we’ve put together that we’re going to demo shortly on a specific project.

Mike (22:07):
And hopefully everyone on the call was able to join our last webinar, where we went through what a targeted employment area (TEA) is and showed our other free tool, the TEA map. Similar to the TEA map, we developed this job calculator internally for ourselves and to help our clients. We would quite often have a phone call come in and have a client on the spot ask about how many jobs we thought they would be able to create from this project after giving us a few rough numbers and where the project’s located. And after going through this, we built a tool so that we could instantly calculate the approximate job creation, and we decided to make this tool public and free to access for everyone else. So, please note that this is a back-of-the-envelope calculation. You need to go through and do the full analysis of byline items, every cost in the project, in the operational revenue, and really select the geographic area of impact carefully for the multipliers that you’re going to use. But for a quick and dirty calculator, this is the best in the industry to give you the 80% answer immediately. And we’ve made it completely free online for you to use when you’re thinking about how you want to structure your project and see how EB-5 could fit into the capital stack for the project.

Sam (23:36):
Great. So, on the chat feature on the webinar, I’ve sent a link to pull up our job calculator directly, and then you can follow along live with us on the calculator as we plug in some variables for a potential project.

Mike (24:01):
And one thing to note on here that we didn’t cover earlier is that the construction timeframe for a project is very important, since the job creation period means sustaining jobs for two years. The way that USCIS looks at construction jobs is if construction lasts for over 24 months, you’re able to include the direct, indirect, and induced jobs that we discussed earlier. If construction lasts for a shorter period of time than the two full years, then you are able to count the indirect and induced jobs from the project but not the direct jobs because there were not direct people employed for those two years working on the project. So, this is important to note, and I would say that occasionally we see project sponsors try and get creative and extend their construction timeline to be over 24 months, even though, realistically, it should not be. And we would highly caution against that because you’re putting the investors at risk in the event that construction does not take that long and there’s not enough job creation because it was shorter. So, I would highly advise that you think about the construction timeline and be very conservative with the amount of time that you’re using.

Mike (25:24):
And I believe Sam sent that link out and has the calculator pulled up. So, we’ll be able to go through and run a live estimate now of job creation.

Sam (25:38):
So, before we pull up the calculator, please take a look at the slide that’s shown here on the way the calculator is built. You’ll first enter the project address here at the top. And what’s happening in this calculator is, from doing projects all over the country, we’ve built a database of all of the RIMS II multipliers and designed it by location. So, when you enter the project address, it pulls data from our database of multipliers that we’ve built, and then it takes that information and then multiplies it by the hard and soft construction costs and incorporates the projected revenue by the NAICS category code. And then, it runs the numbers and gives you a live calculation on a best estimate of how many jobs your project would create. So, if everyone could please click on the link that was put into the chat window there, you can follow along as we go the calculator. So, this is the calculator. So, we’ll first start with a project in South Florida. We’ll say we’re going to 100 Los Olas Boulevard in Fort Lauderdale, Florida. So, the state we’ll go to is Florida, and I believe this zip code is… let me double check.

Sam (27:33):
33301. Great. Okay. And then, for hard construction, let’s say $17 million, and let’s say that this project is going to be less than 24 months. And then, for soft construction, let’s say $3 million, and let’s say that that’s on architecture and engineering. And let’s say we have another—we’ll click “add soft category.” Let’s say we have another $1 million on furniture, fixtures, and equipment or assets, right? So, we’ve got two different soft costs—architecture for $3 million and furniture and fixtures for $1 million. And then, projected revenue—let’s say the hotel is going to generate $3 million of revenue once opened, and that’s going to be under “hotel or accommodation” for revenue.

Mike (28:28):
And it’s the annual stabilized revenue at about year two. Each project is going to be a little different, and that’s calculated during the full economic impact analysis, but a good rule of thumb is to go to year two of operations and use that annual figure for revenue.

Sam (28:49):
And let’s say that in addition, we think there’s going to be $500,000 worth of food and beverage. So, we’ll go here, and we’ll go add in “food and beverage.” Actually, sorry, it would be under “restaurant and bar.” So, $500,000 in revenue from the restaurant and bar on site in the hotel, run by the hotel, and then $3 million in hotel revenue from accommodation. And then, we’ll click “calculate EB-5 jobs.” Okay. So, now we’ll scroll down and get to the results. So, this project creates a total of 236 jobs. Of that, 137 or so are from hard construction, 37 are from soft construction, and then 62 are from the projected operational revenues. That means the total maximum number of EB-5 investors is 23. And if we’re in a targeted employment area, that means $11.5 million of EB-5 capital would be the maximum, or if we’re in a non-TEA, then $23 million would be the maximum. So, what’s important to note here is that as you can see, the vast majority of these jobs are coming from hard construction, right? And then, the second-largest group is projected operational revenue, right? So, typically, hard construction is going to be the best indicator for how many jobs a particular project will create. Also important to note is that these 137 jobs here are based on $17 million, and it’s less than two years in duration, right? So, $17 million spent on hard construction for than two years is 136.9 jobs.

Sam (30:57):
Right—now, let’s go back to the calculator. And just as an example, let’s rerun the numbers again. So, 100 Los Olas Boulevard—you don’t have to do this. I’m going to go through this pretty quickly here.

Sam (31:23):
So, now let’s try the same $17 million, but instead, now let’s put it as “24 months or longer” and see what the difference is. So, now if we increase it to more than two years in expenditures, now it’s telling us there’s 270 jobs from our construction, which is essentially double or a little bit less than double, right? So, in most areas, there’s a significant jump. When you look at less than two years of construction versus two years, in this case, it’s almost a 100% increase. And again, this is an estimate, right? But it’s just an illustration of how important it is to really understand what the construction timeline is on the project, because you’re going to create a lot more jobs if it’s more than two years in total for the construction timeline period, right? So, that’s just something to be aware of and really understand and work with a professional to understand. You know, say your construction timeline is close to two years—what is the exact starting day that you can count from? And what’s the exact ending day? Typically, it starts with, you know, shovel in the ground, dirt moving on site, and ends with, you know, certificate of occupancy and people are able to move in and stay in the hotel or be able to sell off the condo units, if it’s a condo project.

Mike (33:01):
When you think about revenue and operations, we use a hotel as an example—that’s a very common EB-5 project. Other industries that generate a lot of job creation similar to a hotel would be assisted living facilities. Restaurants also generate a lot of jobs. Anything that’s labor-intensive and where there’s a lot of people working typically has a higher multiplier associated with it, which would make sense. And as Sam mentioned, hotels are one of the most common EB-5 projects, and we’ve seen them ranging from very small hotels all the way up to 300-key-plus hotels.

Sam (33:50):
Great. So, we’ve got just a couple more slides to go through, and then we’re going to open it up for questions. So, to use the job calculator in the future, you can use that direct link that I provided and save that, or you can also just go to our website, eb5affiliatenetwork.com, click on “Job Tool,” and then click on the “Access Our Free EB-5 Job Calculator” button. And now, we’re going to take a look at an actual economic report exhibit, and Mike will walk through this and explain how these different columns sum together and how you can see how each of the different job components totals up for each line item of revenue and of cost expenditure.

Mike (34:41):
So, if you look at this slide, this is taken from an actual economic impact report. The numbers were changed to protect the confidentiality of the project, but the calculation style is exactly as it really would be. There’s a lot of numbers on the page, and I’ll try and go through and clarify anything that isn’t clear looking from the numbers. So, as you start to go down the rows, you’ll see each of the different cost categories listed: hard construction, purchase of FF&E, architect and engineering, and consulting services. Since this project is a smaller development project and will take under two years, we’ve noted that these are all under 24 months. Therefore, you’re going to be able to include only the indirect jobs. So, walking across the columns here—the actual expenditures that were expected are in the second column of the expenditure—2016, in millions. You then have to look at the multipliers that are being used.

Mike (35:52):
The U.S. Bureau of Economic Analysis releases new multipliers every few years, and you need to adjust the actual cost and the revenue to the dollars that the multipliers would be in. So, you reduce or increase based on the consumer price index or the producer price index. Then, you take the number from 2013, column A, which is the actual dollars in the year of the multiplier, and you multiply it by the total jobs per million, “final demand,” this column, B, which is the multiplier that Sam has been referring to the whole time, and that will get you the total number of jobs that would be created by that line item. So, for example, on hard construction, there’s $23 million of expenditure. The multiplier is 15.1. So, simply multiplying those two together gives you the total number of jobs, which is in the “total” column a few over, which is 346.3.

Mike (37:04):
Since this project lasts for under two years, there’s a little bit more math involved that you need to go through, which is removing the direct jobs and just counting the indirect and induced jobs. And we’ve shown the math on how that works here. I’m not going to go all the way through exactly how the multipliers tie in—that’d be a much longer discussion—but this is just an example of the evidence that’s provided to USCIS. So, if you look at the last column, the project total, you’ll see that this is only using the indirect jobs, since the construction lasts for less than 24 months. And when you add up all the different rows of hard construction, FF&E, architecture and engineering, and consulting services, we ended up with 212 jobs that will be created through the construction of the project. If this was a bigger project and construction was taking longer than in 24 months, you would end up with 408 jobs.

Mike (38:04):
And as I mentioned earlier, it’s very important to have the timeline, right? Because the worst thing that could happen is you tell an investor that it’s going to take longer than 24 months, they count on the direct jobs, and then it takes less than 24 months, and you end up with an investor without a permanent green card. So, that’s a part of the analysis that goes into the economic report. Going down to the bottom, we’re showing the typical revenue categories that you may have for a hotel. If you go down the rows, you have the accommodation revenue, which is the core driver of the hotel, and then a few of the other services—the restaurant and the parking garage—which will generate a little extra revenue, and very similar to what we did above, you go through and, in the column for the 2016 accommodation revenues, you can see that there’s $9.4 million that’s estimated to be generated per year from this hotel once it stabilized.

Mike (39:01):
We then deflated down to those same dollars that they would have been in 2013, which is $9.3 million of revenue. You then go across, and that $9.3 million is multiplied by the correct multiplier of 15.9 jobs per million dollars of revenue generated from the hotel. And you end up with, in the total column, 148 jobs created from the accommodation. And then, as you go through, you’ll see that we do the same thing for the restaurant and the parking garage and end up with 173 operational jobs being created. When you combine those two together, you end up with a total of 386 total jobs. So, that would be 38 EB-5 investors, or around $19 million in EB-5 capital that could be raised. I would say it’s very common that you would want to leave a pretty substantial cushion and buffer just in case the economy turns and the hotel doesn’t produce as much revenue as expected or, in the very unexpected event of coming in under budget on construction—I don’t know if that’s ever happened, but if that did happen, then you may not have as many construction jobs as you originally anticipated.

Sam (40:32):
Great. So, we’ll now open it up for questions. There’s a button on your screen that should allow you to type in a question. So, if there are any questions from anyone, please send them over, and we’ll try and address all of them here. If not, we can follow up individually via email as well. Okay. So, we’ve got a couple of questions coming in. So, first question—“How long does it take to get project eligibility approval from USCIS?” So, the short answer for that is that most projects don’t end up getting pre-approval from USCIS before bringing in EB-5 investors. Usually, a project will complete its project documents—the I-526 templates, the set of materials that are needed for an investor to subscribe to the project—and then, once that’s done, that project would join or become sponsored by a regional center.

Sam (41:40):
And then, it would be eligible to file I-526 applications for individual investors. Once they file, it’s about 15 to 16 months, currently, as the estimated approval time for a new I-526 investor. And so, as part of that application, the investor is getting approved individually, and USCIS is approving the project at the same time, right? So, that application consists of the individual investor as a person and spouse and children under 21 and the project information as well. So, that’s when USCIS is going to really sign it approve the project—when each investor individually is filing their application. And then, the government reviews both of them at once. There is another application option, called a I-924 exemplar, where you file the project paperwork, but instead of including an individual investor’s information with that project paperwork, you just file the project itself and ask the government to pre-approve the project. So, that’s possible. It’s not done as commonly because it takes about a year and a half or so to get that approved. And so, most commonly, once the documents for a project are completed, then individual investors would immediately start filing those documents with USCIS, and that’s the first time USCIS would approve the project attached to an individual investor’s petition.

Mike (43:29):
Historically, it was more common for projects to file exemplar applications when USCIS would process them in six to eight months. It made sense. At this point, with the current processing times of a year and a half, no project sponsor can file the documents and sit and wait for a year and a half before going and soliciting investors. Very few projects have that much foresight. Occasionally it will happen, but more often, financing comes in as it’s needed, and that’s when it’s thought of. So, you don’t see as many projects with exemplar pre-approvals or as many projects submitting them, because they know that USCIS is going to adjudicate the investor’s petition in parallel with the project petition.

Sam (44:20):
Great. Okay. We’ve got a few other questions: “So, with the RIMS II calculator, is actual job creation less than what is calculated?” Um, let’s see.

Sam (44:39):
So, the way our job calculator is built is it’s pulling the most relevant RIMS II job multiplier that we have based on where the project is located. So, the main disclaimer is to be aware that with the job calculator, the job calculation will be close but it’s not going to be exact, so it could move up a little bit, or it could move down a little bit. So, it’s an 80% accurate answer. So, to get the exact answer, we have to purchase the exact set of RIMS II data that would fit your project. It’s going to be based on geographic location. For a more accurate estimate, you’d need the current exact geographic RIMS II data, and then you’d have to take the construction budget and the revenue projection and run the numbers, and that set of numbers would be exact right. That’s going to calculate exactly how many jobs the project will create.

Sam (45:46):
Before you go ahead and finalize exactly how many EB-5 investors your project is going to support, you’ll want to get the exact calculation first. So, before you go ahead and do that, I’m going to put a link into the chat box that allows you to purchase that report so that you can get the exact calculation, after you’ve already decided generally there’s enough jobs for what you’re trying to do for EB-5 to work.

Sam (46:28):
Next question… job creation report services. Yes. So, in addition to providing sponsorship for projects under our regional center network—we have 14 regional centers that cover more than 20 states—we also put together the complete set of EB-5 project documents needed for an investor to actually file their I-526 petition. So, that means their business plan, their job creation report, PPN, subscription agreement, loan agreement, note equity pledge form—all the pieces of the puzzle that are required for an individual project to be qualified for investment. So, once that set of documents is completed, then each EB-5 investor in the project… let’s say there are 10 investors.

Sam (47:24):
Each investor files that same petition, that same set of documents with government, to get their green card approved. Okay, let’s see what else we’ve got… “Who specifically calculates the RIMS II data?” So, the RIMS II data is published by a division of the U.S. government, and it’s updated roughly every two years. So, the latest data [as of 2018], I believe, is based on 2015. It’s basically updated every couple of years. So, you want to make sure you’re using the latest available data. Let’s see… “Are farms a viable option for EB-5?” Yes. As long as the business supports new job creation, either through revenue creation or through cost expenditures, then yes, it is eligible. We’ve seen projects ranging from a flight school, to a lumber factory, to a nutrition supplement company, to a call center company, to hotels, to condominium projects. There’s really no restriction on the type or function of the business. It’s only based on whether the capital is at risk and whether there at least 10 new EB-5-eligible jobs being created for each investor.

Mike (48:49):
For the example of a farm—and this goes for all businesses—what you would want to make sure is that the majority of the purchase price is not in the land or the majority of the capital is not just going towards a land purchase, because that doesn’t create jobs. So, as long as the land was very cheap and you were spending a lot of money on labor and supplies and fertilizer, there’s going to be job creation, but in any project where land or an existing asset is the majority of the capital expenditure, it’s going to be much harder to meet the job creation requirements to have EB-5 serve as a meaningful part of that capital stack.

Sam (49:32):
Great. So, one person had a question— “What was the name of the form to pre-approve a project?” It’s called an I-924 exemplar form. So, I’ve typed that in the chat box as well there. “Where does IMPLAN data come from?” IMPLAN is a private company, but it’s very similar to RIMS II, and it’s input–output multipliers. If you just Google IMPLAN, you can see the provider and how they do their system. “Let’s see an example of a restaurant project.” We’ve done a number of different restaurant projects. One example is an individual location where one investor wants to open up, let’s say, a Subway. And so, they’re going to invest capital and spend money on the renovation of the space. And then, the new Subway is going to generate some amount of revenue.

Sam (50:27):
That’s one option for one investor. We’ve done a number of franchise restaurant expansions, where you’ve got someone who owns a lot of, let’s say, McDonald’s units and wants to build 10 more units. So, they’ll create an EB-5 fund and have a number of investors invest into the fund. And then, the fund will open up, let’s say, five more units at one time. So, those are the two most common EB-5 restaurant options that we see. Let’s see… someone has a hotel and they’re converting it from one brand to another, and they want to know if it would qualify as an EB-5 direct project. So, for a direct project, you’re only able to count W-2 employees. And if it’s already an existing hotel that’s operational, then the only jobs you could count would be new W-2 employee jobs that you would hire after you make the investment. So, it was already an operational hotel—you’re probably not going to hire 10 new people unless the hotel’s expanding in size significantly or changing the service level. So, probably not. You’d want to do it as a regional center project so you’d be able to count the increase in revenue that would likely come as a result of changing the brand.

Mike (51:55):
We’ve helped structure several hotel rebranding projects, where they closed down, spent non-construction expenditures, reflagged the hotel, and opened it again. I would say that as a direct project, this is a very bad example because of how messy it would be to try and show 10 new W-2 jobs and prove that they weren’t previously working there or serving a similar role, but from a regional center perspective, you are able to count the increase in operations. So, if the hotel was producing $2 million in revenue a year and after you changed the flag, you’re producing $4 million in revenue a year, you get the extra job creation from that $2 million in additional revenue and from all of the construction dollars that you spent on changing the rooms and redoing everything. So, a hotel reflagging project could be a very good project depending on the purchase price of the existing hotel, but the regional center route is the only way that that’s really going to work—direct does not work for that type of project.

Sam (53:05):
Great. And we have one other question about the investment amount. It’s either $500,000 or $1 million. It’s going to vary based on whether you’re in a targeted employment area. We have a targeted employment area map that covers the whole country and shows you exactly what areas qualify for high-unemployment, and those areas have a reduced $500,000 investment threshold. Otherwise, you’d have to put in $1 million as an EB-5 investor. So, I’ve shared a direct link to our free TEA map in the chat box so you can check that out and see exactly whether or not a specific area could qualify as a targeted employment area.

Sam (53:52):
Two other quick questions: “The $500,000, can it be a loan from the bank?” So, there’s a couple of follow-up questions that we need to know here, but generally, you can take a loan, or you can receive a gift, or you can accumulate money from working at a job. The only real requirement for a loan is that the loan itself cannot be secured against your interest in the EB-5 project. In other words, if you own a house and you took a loan on the house and the house was the collateral for the loan, then you can take that $500,000 and put it into an EB-5 project, but you could not borrow $500,000 against your interest in an EB-5 project and then just have the loan’s collateral be your interest in the EB-5 project. So, in most cases, that’s likely not the case. So, generally, yes, that should be okay, but you’ve got to check with your immigration lawyer about your source of funds.

Sam (55:00):
Okay. “Can an investor invest $1 million in a TEA area?” Yes. So, the $500,000 is a minimum number to invest in an EB-5 project, if it’s in a targeted employment area. Of course, you can invest $1 million, or $5 million… there’s no maximum. It’s just a minimum. So, $500 is the minimum, and you have to be in a TEA area. And the last question we’ll do is… “What percentage of project investors are available at $500,000 versus $1 million?” There’s currently no differentiation in terms of visas allocated by TEA versus non versus non-TEA. That’s something that’s being considered in legislation in the future, but currently, there’s no preferential treatment in terms of processing time, et cetera. So, there’s not going to be a difference there.

Sam (56:14):
Okay. So, we’re out of time, but I’m going to put a link in the chat box. If you have other individual questions, you can schedule a time on my calendar to speak directly about any follow-ups. We also work on a number of individual EB-5 projects as well, and I’m going to include a link to those as well.

Sam (56:53):
And so, this is only the second webinar that we’ve done. So, when I close it out in a second here, we would really appreciate it if you could fill out the survey that’s going to follow once this webinar closes. So, thank you very much for your attendance. I hope this was helpful, and you can use schedule link there to set up a time to talk if there are other questions. You can also email us directly, and I’m going to put my email in there as well—sam.silverman@eb5an.com. And then, please just take one minute and fill out this quick survey. That way, we can make this even better the next time around. So, thank you all for your attention.