Foreign investors interested in participating in the EB5 Immigrant Investor Program may do so individually, by investing directly in a business that meets the criteria established by the United States Citizenship and Immigration Services (“USCIS”), or collectively through an EB5 Regional Center. The Regional Center offers greater flexibility to the foreign investor which contributes to its popularity – over 90% of the EB5 petitions filed are Regional Center petitions.
The Regional Center is a USCISapproved entity – either public or private – formed to promote economic growth by offering capital investment opportunities in designated geographic areas for a defined group of industry categories. Often times they are formed with a specific project in mind, in which the Regional Center may have an economic interest either as a consultant to, or through an equity interest in, the developer of the project.
The responsibilities and obligations of the Regional Center may vary significantly. In the most basic case it may simply serve as a sponsor in order that a project may receive the benefits of being associated with a Regional Center. In essence the entity that is seeking the EB5 financing, known as the New Commercial Enterprise (“NCE”), pays a fee in order to rely upon the Regional Center’s status in connection with its fundraising efforts, but with limited other services provided.
It is more often the case that the Regional Center will play an integral role in the fundraising process, which begins with the identification of attractive projects to pursue. Determining whether a potential project is worth considering requires a preliminary review of several key elements, including the parties involved (the project owner, developer), the competitive climate (is there a market for the business), and the viability of the financing arrangements.
Once a Regional Center has agreed to sponsor a project, it must then carefully review the offering materials to make sure that they are both accurate and complete. Specific detail about the overall financing structure, the nature of the investment and the project itself, including the credentials of the Developer, also known as the Job Creating Entity (“JCE”), must be evaluated against all available data. Often times the Regional Center will work with third parties, such as economic analysts and securities attorneys, to verify the overall documentation package.
Another major function that most Regional Centers perform is the marketing of the offering to potential investors. In addition to preparing effective promotional materials, the ability to network with individuals both in the United States and abroad is crucial to the ability to secure funding for the project. When dealing with agents it is critical that the Regional Center be able to manage the integrity of the transaction and the fees charged for securing investors.
In conjunction with the bank that will serve as the escrow agent for the capital contributions, the Regional Center will typically verify that the potential investor meets the EB5 Immigrant Investor Program qualifications. This includes tracking the status of the I526 filings with the USCIS and determining when the money is either approved for release from escrow to the NCE (or returned in the event that the potential investor’s petition is not approved). Ultimately, the Regional Center will also need to keep a database with contact information and significant dates for future updates and ongoing USCIS reporting requirements.
The final major role that the Regional Center typically performs is the tracking and documentation of the job creation information. By working closely with the JCE, the Regional Center will collect and provide the necessary proof to the USCIS to establish that the required jobs have been created as a result of the qualifying investments. It must also file the I924A supplemental form annually to remain eligible to maintain its Regional Center designation.