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SO SOMEONE SAID YOU SHOULD BE A REGIONAL CENTER?

EB-5 MECHANICS

Steve Anapoell, Greenberg Traurig, LLPJeff Carr, Economic & Policy Resources, Inc.Kate Kalmykov, Greenberg Traurig, LLP

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Why is everyone so interested in EB-5 these days?

Capital unavailable from traditional sources

Foreign investors cheap source of capital

EB-5 program previously underutilized

3

Individual EB-5

Investor buys business or starts new business

Must be 10 direct W-2 employees

Few applications

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Regional Center EB-5

What is a regional center?

95% of all applications

Six-fold increase in 3 years (approximately 180 approved)

Main advantage

□ Indirect employment counts

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Professionals Required for Regional Center Designation

Immigration Lawyer

Economist

EB-5 Business Plan Writer

Securities/Corporate Attorney

Bank/Escrow Agent

Marketing Firm/Commissioned Agent

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What entities are involved?

Regional Center Entity – manager of all projects

New Commercial Enterprise – investors subscribe to this entity (Fund)

Job Creating Entity – recipient of the EB-5 funds that creates the actual jobs

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Regional Center Entity

Applies to USCIS for designation approval

Ongoing administration and compliance responsibilities

Markets for investors

Due diligence regarding investors’ source of funds

Prepares I-526 packages

Markets the region

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Regional Center Entity

Oversight of I-526 filings

Obtains signed Subscription Agreements and Escrow Agreements

Monitors direct employment

Tracking infusion of capital into job-creating enterprise

Monitors compliance with business plan and foundation facts in economic report

(cont’d)

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Regional Center Entity

Allocates jobs between investors

Prepares annual reporting (Form I-924A) for filing with USCIS

Prepares I-829 packages

Markets the region

Decides on new projects

(cont’d)

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New Commercial Enterprise

Limited partnership (or LLC)

Investors make equity investments

Invest (equity or debt) in job-creating enterprise

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Job-Creating Enterprise

Development project

Borrower in debt approach

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Recruiting Investors – Securities Laws

Overview of Securities Laws

□ Securities Act of 1933, as amended

□ Securities and Exchange Act of 1934, as amended

□ Investment Company Act of 1940, as amended

□ Investment Advisors Act of 1940, as amended

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Securities Laws

Securities Act of 1933

□ General Statement of law

□ Regulation S

□ Regulation D

□ Disclosure Requirements

□ Recommended use of PPM

□ Compliance with local laws

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Securities Laws

Securities and Exchange Act of 1934

□ General Statement of Law

□ Definition of Broker

□ Issuer Exemption under Rule 3a4-1

□ Use of Unregistered Offshore Domestic Finders

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Securities Laws

Securities and Exchange Act of 1934 (cont’d)

□ Effect of not qualifying for an exemption from Broker-Dealer Registration

□ Civil and criminal penalties

□ Rescission rights

(cont’d)

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Securities Laws

Investment Company Act of 1940

□ General Statement of Law

□ Is the Issuer an investment company?

□ Available Exemptions

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Securities Laws

Investment Advisors Act of 1940

□ General Statement of Law

□ Registration (as amended by Dodd Frank)

□ Federal

□ State

□ Anti-Fraud Provisions of Section 206 of the Advisors Act

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Application to USCIS

Project Business Plan

RC Business-Operations Plan

Offering Memorandum

Subscription Agreement

Economic Report*

□ Estimate of economic and job creation impacts

□ Definition of regional center geography

Marketing Plan

Bank (Escrow Agreement?)

Project preapproval (optional)

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Documenting TEA

Proof of rural TEA area

□ Non-MSA area per OMB

□ Under 20,000 residents per 2010 Census

Proof of high unemployment TEA area

□ Employment statistics

□ Custom TEA (census track aggregation?)

□ State designation letter

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Operational Plan

Regional center overview

□ Strategy

□ Industry focus

□ Business structure

Marketing

□ Target market

□ Agents

□ Marketing plan

□ Marketing materials

□ Marketing budget

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Operational Plan

Recruitment of investors

□ Investor screening

□ Investor subscription process

Regional center funding

□ Operating budget

□ Source of funds

□ Amounts to be paid by investor for overhead

(cont’d)

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Operational Plan

Administrative oversight

□ Plans for management of regional center

□ Plans for identifying and assessing projects

□ Monitoring projects and job creation

(cont’d)

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Proposed USCIS Improvements-Mayorkas Proposal

Background of proposal

Overview of suggested changes in proposal

□ Premium processing/accelerated processing for “shovel-ready” projects

□ Added expertise (economists; business analysts)

□ Hearing process

Timing/Prospects for implementation of proposal

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When is Money Available to Developer?

Investor must invest 100% (usually $500,000) before I-526 filed

Money can go

□ To project immediately

□ To escrow

Released when investor’s I-526 is approved

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How much Capital can be raised?

Depends on job creation

□ Economist report projects job creation

□ Divide by 10 = maximum number of investors

□ Multiply by $500,000 = maximum capital raise

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Hot Issues in Regional Center EB-5s

Tenant Occupancy

TEAs/State Designation Letters

Material changes in business plans

Capital investment after job creation/“cause and effect” issues

Timelines/delays

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What are the advantages and disadvantages of creating a regional center?

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Advantages

Developers can count indirect and induced employment opportunities, and not just direct jobs, in meeting the ten jobs per investor requirement.

A particular project within the regional center may be pre-approved by USCIS.

Regional center certification provides an aura of legitimacy or endorsement that may help in marketing to foreign investors.

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Advantages

Regional center designation is a one-time designation allowing future projects to be marketed without incurring delays.

In addition to funding their own projects, regional centers can profit by funding projects developed by others.

(cont’d)

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Disadvantages

Regional center certification may take a lengthy period of time – six months to one year.

Regional center certification may entail a significant expense, including hiring an economist, hiring a business plan writer, hiring immigration and securities attorneys and other expenses.

Regional center certification is not the same as approval of any particular regional center project.

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Disadvantages

Regional center certification is no longer a small, privileged group. Over 180 regional centers have now been certified.

Many regional centers have not been able to attract any investors. Newer regional centers find it difficult to compete in their marketing efforts with long-existing regional centers with a track record of many immigration approvals, some with both I-526 and I-829 approvals.

Regional centers have ongoing administrative and filing requirements with USCIS in order to avoid de-certification.

(cont’d)

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What other options may exist for raising capital under the EB-5 program?

Having project “adopted” by certified regional center

Purchasing certified regional center

Pooled investment with individual EB-5 petitions