Diamond USA Canada Visa Group

Diamond Group Investment

USA Canada

Regional Center Compliance & Administration

The hot trend in EB-5 development projects in 2013 was hotels, resorts, and casinos, with these types of projects contributing millions of dollars and hundreds of jobs to the United States economy. But as other sectors have been growing, the kinds of projects we see utilizing the low cost benefits of EB-5 funding has started shifting. The increase in non-hospitality developments last year shot up substantially. Data gathered from NES Financial’s involvement in over 300 EB-5 projects, the most of any EB-5 service provider in the industry, was presented at our 2015 EB-5 Innovation Summit seminar series and highlighted the facts around this new trend.

The number of mixed use developments increased more than 300% from 2013 to 2014, as more and more cities saw a growing demand for them. With vacancies falling and rents rising in a large number of submarkets, demand for these types of buildings is expected to remain at post-recession highs for at least the next two years. According to CoStar’s “State of the U.S. Office Market 2014 Review and Forecast”, net absorption increased 42% from the previous year.

Due to this high demand for mixed use developments, EB-5 issuers may find it easy to market them to investors overseas.

When it comes to target raise amounts, projects associated with the energy sector increased the use of EB-5 funding in their capital stack 440% over the previous year, by far the most of any other sector. This in turn contributed hundreds of jobs to the United States economy.


Regulators and investors alike look for compliance in EB-5Regional Center Compliance & Administration


A designated regional center receives the benefit and thus a privilege to operate a specific use or uses as conferred by the USCIS. Not all regional center designation applications are approved. As such, the receipt of regional center status is a much coveted benefit to the sponsor and their investors.

In order to preserve its qualification, the regional center must be prepared to file an annual report with the USCIS which will provide required information pertaining to each investor including the names, nationalities, and investment amounts. The annual compliance report will allow the USCIS to monitor the progress of the program, and to assess any dangers of over concentration in one area of the world, or flaws in the recruitment of certain investors. The EB-5 program collaborates with the United States of America’s goal to constantly seek diversity, even amongst its wealthier immigrants.

Failure to file the report on time may oblige the USCIS to revoke the Regional Center status of a specific pre-approved center. Aside from the legal liability of the sponsor for this oversight, it places the investors in serious jeopardy of not being able to file the I-829 lifting of conditional residency.

Choosing a Regional Center

Your EB-5 Investment in a Regional Center

Over the years, the number of regional centers across the United States has continued to increase. Each contains an economic plan and a business plan, evidencing its unique goal and a vision.

That said, it is important for the investor, prior to investing, to consider the project on its own economic merits, not-with-standing the U.S. residency benefits. As such, it is important for the investor to consider the following factors when determining whether to invest in a given regional center:

The investment must be relatively safe, even if there is a deemed ‘risk’ component;
The returns from the project during its exploration must be reasonable and reflect market conditions ;
The sponsor should have already made a size able financial commitment of his own to the project and thus have a vested interest in the success of the project;
There must be a realistic expectation of return of principal at the end of the process or a stated and clear exit strategy;
The conditional residency process must be clear and unencumbered.

It is only if when one can answer ‘yes’ to all these issues, that an investor will feel comfortable in determining that a particular regional center is for him or her. Each investor is also encouraged to visit the site and meet with its principals.

The EB-5 industry is seeing a shift in the distribution of projects


The hot trend in EB-5 development projects in 2013 was hotels, resorts, and casinos, with these types of projects contributing millions of dollars and hundreds of jobs to the United States economy. But as other sectors have been growing, the kinds of projects we see utilizing the low cost benefits of EB-5 funding has started shifting. The increase in non-hospitality developments last year shot up substantially. Data gathered from NES Financial’s involvement in over 300 EB-5 projects, the most of any EB-5 service provider in the industry, was presented at our 2015 EB-5 Innovation Summit seminar series and highlighted the facts around this new trend.

The number of mixed use developments increased more than 300% from 2013 to 2014, as more and more cities saw a growing demand for them. With vacancies falling and rents rising in a large number of submarkets, demand for these types of buildings is expected to remain at post-recession highs for at least the next two years. According to CoStar’s “State of the U.S. Office Market 2014 Review and Forecast”, net absorption increased 42% from the previous year.

Due to this high demand for mixed use developments, EB-5 issuers may find it easy to market them to investors overseas.When it comes to target raise amounts, projects associated with the energy sector increased the use of EB-5 funding in their capital stack 440% over the previous year, by far the most of any other sector. This in turn contributed hundreds of jobs to the United States economy.


Regulators and investors alike look for compliance in EB-5


The changes brought on by rapid growth in the EB-5 industry have been a frequent topic of discussion at the NES Financial EB-5 Innovation Summit and other industry events. In the last six years, the number of visas granted through the EB-5 investor program annually have increased 700%. And as EB-5 funding has gained popularity in the mainstream capital raise process, the number of projects seeking foreign investors have increased dramatically as well. Many now estimate that for every one EB-5 program investor, there are ten projects looking for funds. As a result, it’s more important than ever to ensure EB-5 projects appeal to investors’ demands.

The increased exposure of the EB-5 program has drawn the attention of many of the U.S.’ regulatory bodies, including Congress and the SEC, forcing issuers to invest more time and effort into maintaining compliance for their offerings. Additionally, EB-5 offerings must accommodate the regulatory requirements of the countries their investors are emigrating from, adding yet another layer of complexity to the process.

Between legal requirements, both domestic and international, investor diligence, and the reporting and documentation demands of the immigration process itself, it’s easy to become mired in administrative complexities. Not only must funds be accounted for properly, but the Regional Centers or EB-5 project developers must also manage communication with the investors, their agents, and their attorneys, coordinate and file immigration documentation, and manage investor exit strategies, all while simultaneously executing the project itself.

NES Financial’s EB-5 Solutions allow issuers to streamline these reporting and accounting processes to devote their full attention to the capital raise and project development. When good projects fail due to inadequate reporting, no one wins. NES Financial’s Solutions offer issuers the confidence that their reporting needs are being met so that their attention can be focused on ensuring project benchmarks are met.

 

Congratulations to the newly approved EB-5 Regional Centers!

March 4, 2015 / By Reid Thomas Executive Vice President NES Financial

NES Financial would like to congratulate the following EB-5 Regional Centers on their USCIS approval:

BLT TriState Regional Center LLC
EB5 United West Regional Center, LLC
Encore Alabama/Florida Regional Center
Front Range Regional Center, Inc.
R.E.E.N. Regional Center
Live in America – Chicago Regional Center, LLC
Live in America – Colorado Regional Center, LLC
Live in America – Indiana, Michigan, Ohio Regional Center
Live in America – South Regional Center, LLC
Lubert-Adler Northeast Regional Center, LLC
Midwest Regional Center, Inc.
North American Center for Foreign Investments, LLC
Northeast Monument Regional Center LLC
Pacific Investment & Immigration Regional Center
The New Mexico Regional Center
S. Immigration Recovery Fund NY, LLC
USCFID New York LLC
West Penn Regional Center

As a new EB-5 Regional Center, it’s important to put the right team and processes in place before taking your projects to the market. That’s why many Regional Centers choose our Intelligent EB-5 Solutions. The NES Financial product suite streamlines the management of investor funds and reduces the administrative burden for Regional Centers, allowing you to focus on raising capital and generating new jobs. NES Financial’s suite of Solutions for EB-5 investments provide the highest level of funds security, transactional transparency, and compliance for you and your investors.

In developing and operating a designated regional center, the regional center seeks to exploit a specific use for its benefit and those of foreign investors. In doing so, the regional center ascertains the target market and demographic to which the regional center will deliver its services. The following is a sample of the uses that a regional center may chose in modeling its projects:

Film & TV Production
Health Services
International Traffic & Cargo
Manufacturing & Research
Commercial Office Space
Hotel, Leisure Resort
Higher Education
Trade Schools/ Culinary Schools
Airport & Seaport Operations
Technology and technology transfers
Tourism
Transportation
Mixed Hotel, Office, Retail & Residential space
Conference Centers & Exhibition space
Light & Heavy manufacturing
Cruise Line support
Renovation of obsolete buildings
Performing Arts
Historical sites & similar Institutions
Mixed use : Real Estate
Construction and renovation
Harbor facilities
Gaming & Casino sector
Marine Sector
Apartments & Condominiums
Air Cargo
Banking/ Lending
Warehouse Distribution
Mining and exploration

Regional centers are presumed to require a $1 million investment per investor family, unless the project is situated in a Targeted Employment Area (‘TEA’). This ‘TEA’ can be located either in a rural area where the population is determined to be 20,000 or less, or, where the unemployment of the defined area is no less than 150% of the national average. For example, there are many resort projects which are located in mountain areas, where the local population did not exceed 20,000 in the last census count. Other projects may be situated in areas which are in need of rejuvenation and where the unemployment levels are high. Under either scenario, the Congressional intent is to provide and encourage the much needed economic activity and development to these often remote or blighted areas.

Sponsors of regional centers undertake a great deal of responsibilities to develop, manage, and complete the project. Their duties and obligations are incorporated in the parameters of documents known as the Private Placement Memorandum, Subscription Agreements, and Operating Agreements. These documents govern the conduct of the sponsor and the investor and must be strictly respected and abided by all policies. No document can be signed within the U.S. as the program is strictly designed for foreign nationals.

Targeted Employment Areas (TEA)


Throughout this site, we have briefly mentioned the subject of targeted employment areas, which are commonly known as ‘TEAs’. It is important for developers and investors to have a good understanding of what a TEA is and their role in the EB-5 program.

Before a regional center is created, the developer will research the census tracts as determined by the department of labor of a particular state. Based on this official information, the developer can then determine if the project qualifies as a TEA under population trend guidelines; wherein the population cannot exceed 20,000.

The census tract must be recent and based on the most current census information obtained by the state. Each county and area within the state will have a census tract as they often rely on federal funding for supplementary support. If a TEA is not identified, then the default position is always a $1 million dollar investment threshold for the investor. An alternative method used to qualify as a TEA is determined by the unemployment levels in the area where the developer seeks to locate the project. As such, if the unemployment level surpasses 150 percent of the national average as determined by the Department of Labor statistics, then the developer has an opportunity to outline the territory for his TEA. The advantage, of course, is that the developer will be able to offer the investment to foreign nationals at the $500,000 level.

What is a Regional Center?

A regional center is no more than a defined geographical area in the U.S within which a sponsor seeks to promote economic growth through increased export sales, improved regional productivity, the creation of new jobs, and increased domestic capital investment. The regional center can be as large as an entire state or as small as one square city block.

Regional Center