eb-5 overview: for foreign investors

EB-5 Overview: For Investors

Travis C. Hook, M.B.A. SDEB5 Consulting Principal I BRE: 01927399

T: 415.866.6906 E: [email protected] W: www.SDEB5.com

SDEB5 Consulting San Diego, CA 92101 T 415.866.6906 E: [email protected] W: www.SDEB5.com

SDEB5 Consulting MyCityShares, LLC

http://www.SDEB5.com

mailto:[email protected]

http://www.SDEB5.com

SDEB5 Consulting, MyCityShares LLC

Table of Contents

Disclaimer: The materials in this document are for informational purposes only and not for the purpose of providing legal advice. Readers should contact an attorney to obtain advice with respect to any particular issue or problem. Use of and access to our website or any of the e-mail links contained within the report do not create an attorney-client relationship between SDEB5 Consulting or associated partners with the user or browser. The opinions ex-pressed in this report are the opinions of the individual author and those retrieved from online resources. This doc-ument has been prepared in good faith on the basis of information available at the date of publication without any independent verification. SDEB5 Consulting does not guarantee or warrant the accuracy, reliability, completeness or currency of the information in this publication nor its usefulness in achieving any purpose. Readers are responsi-ble for assessing the relevance and accuracy of the content of this publication. Every effort has been made to ensure the accuracy of the information supplied in these pages, and to the best of our knowledge. However, we are con-scious that there may be unintentional errors, omissions and/or un-cited text and we are anxious that any which are discovered should be reported to [email protected] and we will correct them as soon as possible.

Introduction 3

How EB-5 Visa Program Works 4

Why EB-5 For Investors 4

EB-5 Program Structure 5

EB-5 Investor Process 6

Top Countries Investing 7

San Diego Region Industry Profile 10

San Diego Regional Snap Shot 10

San Diego Global Cities Initiative 11

EB-5 Investor SWOT 12

Exhibits: Why EB-5 For Investors? 13

EB5 Overview: For Investors " 2


IntroductionThe United States Government sets aside 10,000 Employment Based Fifth Preference (EB-5) immigrant green cards each year. Over 3,000 of these are reserved for foreign investors who invest through a pre-approved Regional Center approved by the United States Citizenship and Immigration Services (USCIS). A Regional Centers’ mission is to stimulate the US economy through job creation and foreign capital investment.

As the program evolves, investors must seek the assistance of EB-5 professionals to reduce risk and ensure green card approval. Recent projects have deployed funds into development, education, hospitality, city infrastructure, innovation, energy, the private sector and private/public ventures.

A deep understanding of the types of projects available and how to navigate the program is needed to benefit both investor and the project. The ultimate goal of the investor is to gain a green card for permanent residence for themselves and immediate family.

SDEB5 Consulting is a regional business consulting firm specializing in economic development through foreign direct investment utilizing the Employment Based Fifth Preference (EB-5) Visa program. We are actively involved in the California investment, development, real estate and business community continually looking for qualified projects that satisfy EB-5 Investor needs.

Sincerely,

Travis C. Hook, M.B.A.

Principal & Co-Founder

SDEB5 Consulting, MyCityShares, LLC



How EB-5 Visa Program WorksForeign investors can invest $500,000 into high unemployment areas in the United States and receive EB-5 green cards for themselves, their spouse and any children under 21. After two years of meeting EB-5 conditions, the investor and their family can petition to remove all conditions and receive a permanent residence card. The EB-5 investment goes into either a direct investment project by the entrepreneur or into a designated regional center sponsoring a project.

EB-5 Visa is unique in that the investment may be passive, where in investor does not have to work, can invest in one state and live in any other. EB-5 requires the investment generate at least 10 american jobs.

Simply investing in real estate will not meet EB-5 Visa requirements. Real estate does not qualify, by itself, to be a job creating activity, but is often a necessity when starting a business so if some EB-5 funds are used to purchase real estate, the impact on employment must be detailed in the EB-5 business plan.

Investing in a new hotel development or starting your own restaurant are good examples of an investment that often meet the job creation requirements. Hotels, restaurants and service industries create american jobs and are often a profitable and rewarding investments.

As with any investment, there is risk of total loss involved. Connecting with reputable projects and stakeholders minimize risk of investment and secure your funds so your money is not invested until you are conditionally approved for EB-5 Green Cards.

Why EB-5 For InvestorsThe EB-5 Visa program is an excellent opportunity for foreign nationals, investors, professionals or parents of students with $500,000 saved or available, seeking permanent residency in the US, essentially buying their way past the long naturalization and visa lines. Often investors are to be repaid their investment, with any agreed upon interest, after 5 years when the development or project is refinanced, sold or cash flowing.

The EB-5 visa is one of the most flexible paths to obtaining a green card. The immigrant investor is not required to manage the business’ day-to-day operations. The investor can invest in a new or existing business. The investor is not required to live in the region where the investment is made. Additionally, funds may come from any legal foreign or US source; including gifts, loans, and divorce settlements. Borrowed investment funds qualify as long as the assets of the target US business do not secure the loan. 1

There are many benefits to using the EB-5 visa program. The investor and their family may live or work anywhere in the US, start or invest in a business or simply retire, enjoying domestic benefits like property and education opportunities.

http://edufundamerica.com/eb5/1


http://edufundamerica.com/eb5/


EB-5 Program StructureThe foreign national invests a minimum of $500,000 in a new commercial enterprise in the U.S. A new commercial enterprise is defined as any for-profit activity formed for the ongoing conduct of lawful business including, but not limited to:

• A sole proprietorship

• Partnership (whether limited or general)

• Holding company

• Joint venture

• Corporation

• Business trust or other entity, which may be publicly or privately owned

The minimum investment amount is $1 million per investor in an EB-5 investment. The amount of capital may be reduced to $500,000 should the new commercial enterprise reside in a target employment area (TEA). This is defined as 150% of the national average or a “rural area.”

The investment will need to create or maintain a minimum of 10 new full time jobs for a minimum of two years for each investor seeking to qualify for permanent residency. This is analyzed using an economist and special softwares based on operations, revenues and their impact on the region. The main focus of the program is to create at least 10 US jobs per EB-5 investor green card.

An immigrant investor may diversify his or her total EB-5 investment across a portfolio of businesses or projects, so long as the minimum investment amount is placed in a single commercial enterprise. For immigrant investors who are not associated with a regional center, the capital may be deployed into a portfolio of wholly owned businesses, so long as all capital is deployed through a single commercial enterprise and all jobs are created directly within that commercial enterprise or through the portfolio of businesses that received the EB-5 capital through that commercial enterprise. 2

EB-5 Regional Centers (RC) serve an important role and act as an economic unit to accelerate the EB-5 program aiming to help foreign investors obtain EB-5 visas. Acting as a loan origination shop, developers and project owners can submit their projects to a RC for EB-5 funding. The RC will review the project and issue a non-binding letters of intent that outline terms on which loan can be made using the EB-5 program.

http://www.uscis.gov/sites/default/files/USCIS/Laws/Memoranda/2013/May/EB-5%20Adjudications%20PM%20(Ap2 -proved%20as%20final%205-30-13).pdf


http://www.uscis.gov/sites/default/files/USCIS/Laws/Memoranda/2013/May/EB-5%20Adjudications%20PM%20(Approved%20as%20final%205-30-13).pdf


EB-5 Investor ProcessFirst the foreign investors file a I-526 petition with U.S. Customs and Immigrations Services (USCIS). This form indicates that the investor is in the process of investing $1 million in a for profit new commercial enterprise in which 10 jobs will be created or persevered. The investment amount can be reduced to $500,000 if the investment is in a Target Employment Area, or TEA, and thats defined as an are where unemployment is 150% times the national average. As of December 2014, the U.S. national average is 5.6%.

Once the I-526 petition is approved, the investor will complete form I-485 to register for permanent residence. Upon I-485 approval, USCIS will issue a two year conditional permanent visa for application and include children under 21 and spouse on application.

90 days prior to 2 years the applicant can file I-829 to provide evidence of sustained investment during the two years and evidence that 10 full time jobs were created or preserved. Once the I-829 is approved, conditional status is removed from visas.

Priority is given to foreign investors investing in the EB-5 Regional Center program, in which the funds will be invested into a USCIS approved regional center, rather than a direct EB-5 investment. Regional Centers file their own application which entails focusing on a geographic area and detailed economic analysis including business plan of how at least 10 full time jobs will be created by each investor in a regional center. These jobs can be direct, indirect or induced.

Nearly 90% are issued to investors who invested in TEA’s via regional centers. The number of approved regional centers has jumped dramatically and now over 200 regional centers exist.

Filing times for petitions have increased in recent years due to high volume. A recent EB-5 shareholder meeting provided current processing times and insight on the application process.

Experts anticipate processing time will slowly decrease over the next fiscal year as the Immigrant Investor Program Office (IIPO) reaches its staffing goals. Despite this increase in I-526 Petition processing times, USCIS has actually greatly increased its activity on I-526 Petitions. In July 2013, USCIS took 300 actions on I-526 Petitions. In July 2014, USCIS took 1,200 actions. Another factor affecting processing times is the increase in receipts of I-526 Petitions. In the first eight months of the calendar year 2014, USCIS received approximately 8,000 I-526 Petitions and 1,200 in July 2014 alone.

Investor Form Processing TimeI-526 petition 13.4 monthsI-829 petition 7.6 monthsI-924 petition 7.1 months




Investor’s Sustainability Evaluation (determination of eligibility for EB-5 investment)

Exclusive Visa services and available EB-5 Projects overview

EB-5 Regional Center Investor Consulting Agreement is signed between Exclusive Visas and Investor

Exclusive Visas conducts due diligence investigation of up to 5 prospective EB-5 Projects that investor has interest in

Investor analyses the comprehensive report on EB-5 Projects provided by Exclusive Visas and chooses one for investment

Investor signs Subscription Agreement with the Regional Center

Investor deposits USD 500,000 or USD 1,000,000 into the Escrow account

Investor: - hires independent Immigration Attorney - prepares documents for his and his funds background check

Exclusive Visas: - verifies that Regional Center has forwarded all applicable offering documents to Investor or his Attorney for timely execution

Investor’s Immigration Attorney prepares & files I-526 Immigration Petition to USCIS

Approved by USCIS: Escrow account agent releases investment funds to EB-5 Project

Denied by USCIS: Escrow account agent returns 100% investment funds to Investor

Investor has a U.S. Consulate Interview (resides out of US) or files for adjustment of status (resides in US)

Upon approval from USCIS Investor receives conditional permanent resident status (2yr conditional Green Card)

Investor or his Immigration Attorney files I-829 application to USCIS for removal of conditions (21- 24 months after receiving conditional Green Card)

Upon approval of I-829 Form, Investor receives permanent Green Card

Approximately 5 years after Permanent Green Card issuance, Investor is divested of EB-5 Project (money returned) and may apply for U.S. Citizenship

Initial Phase

Phase 1:

RegionalCenter

Due Diligence Services

Phase 2:

EB-5 Liaison Services

Exclusive Visas Timeline / Flowchart for the EB-5 Investor


Top Countries InvestingIn 2012, 6,895 Chinese nationals were issued visas through the program, outpacing all other nationalities by a wide margin, according to State Department data. South Koreans, the next largest group, were issued 364. A single EB-5 application can account for multiple visas for investors' immediate family. 3

The 5% rate of growth in the program in 2013 was lower than in recent years, when the number of applications increased by 58%, in 2012, and 94% in 2011. I-526 petition numbers correspond directly to the number of investors, making the data a more precise measurement of demand than State Department EB-5 visa numbers, which include investors as well as their family members. 4

In the pre-Recession period, Hong Kong, India, Japan, Chile, and Germany ranked just below the UK by number of investors. Of these, only India has held its ranking since 2009. Countries growing in significance in recent years include Iran, Mexico, Venezuela, Russia, Vietnam, Brazil, and South Africa. Meanwhile, India, Canada, Japan, Netherlands, and Germany have continued to supply a moderate number EB-5 investors.

http://online.wsj.com/articles/SB100014240527023046037045793271739315191803

ttp://blog.lucidtext.com/category/updates-from-uscis/4


http://online.wsj.com/articles/SB10001424052702304603704579327173931519180


While mainland China has been an increasingly dominant source of EB-5 investors, the total number of countries contributing investors has also grown. I-526 approvals since 2009 represent EB-5 investors from a total of 118 countries, while 106 countries were represented prior to 2009. Demand trends for countries other than China become especially significant as EB-5 visa numbers approach the annual quota, raising the possibility of quota backlogs for Chinese investors. 5

��In just the first couple of months of FY2014, 4,748 EB-5 are spoken for already. That number is up 50.2% in the same period as last year. 6

https://iiusa.org/blog/research-analysis/quarterly-retrospective-january-issue-regional-center-business-journal/5

https://iiusa.org/blog/research-analysis/quarterly-retrospective-january-issue-regional-center-business-journal/6


https://iiusa.org/blog/research-analysis/quarterly-retrospective-january-issue-regional-center-business-journal/

https://iiusa.org/blog/research-analysis/quarterly-retrospective-january-issue-regional-center-business-journal/


San Diego Region Industry Profile7

San Diego’s location on the West Coast and the shared border with Baja California provides an attractive geographic position to expand trade with the Pacific Rim. To leverage its unique border location, the San Diego region is championing a bi-national global competitiveness strategy in the Southern California-Baja (Mexico) border region. Driven by existing networks of business leaders, community leaders, and organizations that work together on a bi-national basis, this “mega-region” initiative is a public-private partnership that is focused on attracting and expanding four targeted industry sectors including clean-tech, applied biotechnology and specialized manufacturing.

Recognized as one of the leading technology hubs in the U.S., San Diego’s innovation economy is anchored by established life science, communications, clean-tech, software, and maritime industries. The businesses are fueled by a collaborative culture and sophisticated support systems focused on commercializing research and growing entrepreneurial, knowledge-based companies. Regional leaders have demonstrated a deep-rooted understanding of the necessity of a globally competitive economy to San Diego’s economic prosperity and the role exports play in the successful creation of such an economy.

Working with the Brookings Institution, regional leaders convened to develop a comprehensive metropolitan export plan. This plan was called for by local elected officials, business leaders, innovators, residents, and leading academic research institutions. Together with San Diego Regional Economic Development Corporation (EDC), this group comprises the "San Diego Core Team" to develop an overall international business strategy for San Diego’s growing industry clusters. EDC's Foreign Direct Investment Program, as well as the Global Identity Strategy, also work to position the San Diego region as a place to invest within the international marketplace.

San Diego Regional Snap Shot 8

The Cali Baja Bi-National Mega-Region includes San Diego County, Imperial County and Baja California. 6.5 million people live in the Mega Region. In the next 40 years, San Diego County’s population is expected to grow by 1.5 million people. Two major international airports, three land ports of entry and two major seaports.

• San Diego unemployment rate is 6.8%, much lower than California 8.5% and above the US average at 6.6%.

• San Diego is the 16th largest metropolitan economy in the world, with $177 Billion in GDP in 2012.

• San Diego exported over $17.2 Billion in goods and services in 2012.

• San Diego Start-Ups and businesses received more than $1.1 billion in venture capital, one of the highest in the US.

• 67% of the economy is local businesses, 13% is Innovation, 11.7% is tourism and 8% is military.

• San Diego Innovation: over 7,300 companies and employs more than 175,000 people. 6 universities, 80 research institutes and more than 500 research scientists.

• The region has more than 15 incubators, accelerators and co-working environments.

• The sectors are anchored by CleanTech (4.5%), Defense, Information and Communications Technologies (36.6%), Life Sciences (19.7%) and Aerospace/Navigation & Maritime (20.1%), traded manufacturing (5.6%).

http://www.sandiegobusiness.org/7

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http://www.sandiegobusiness.org/

http://www.sandiegobusiness.org/


San Diego Global Cities Initiative 9

The Brookings Institution released its first-ever metro-level analysis of foreign direct investment’s role in the San Diego metropolitan area’s economy as part of its Global Cities Initiative, a joint project of the Brookings Institution and JPMorgan Chase. The report analyzes the types of foreign-owned businesses located in the San Diego metropolitan area, outlines the region’s sources of foreign investment and shows that 48,370 jobs are supported by FDI locally.

The research finds that San Diego has seen a steady climb in its FDI ranking, which is based on the top 100 most populous metropolitan areas in the US. In 1991, San Diego ranked 31 on the list with 25,600 jobs in foreign-owned establishments (FOE). In 2011, the region ranked 24th with 48,730 jobs, signifying more than a 90 percent increase in the number of jobs in FOEs in a 20 year period. Other key finds specific to the San Diego region are bulleted out below:

1. Industries with the highest concentration of jobs in FOEs include precision instruments (unmanned systems, medical devices), grocery stores and semiconductors

2. The largest share of jobs by FOE were created from mergers and acquisitions (36 percent)

3. FOEs have become more goods-intensive. The most recent data shows that 2011 was the first time more jobs in FOEs were concentrated in goods as opposed to services

4. Tokyo (13 percent) followed by London (12.1 percent) are the top sources of FDI by city

Since April 2014, San Diego has been part of a Global Cities Initiative pilot program to create and implement metropolitan plans to secure and sustain FDI. The FDI in U.S. Metro Areas report will help the region’s Global Cities Initiative team comprised of leadership from the City of San Diego, San Diego Regional EDC, BIOCOM and Qualcomm – design its plan to maximize the amount, quality and economic benefits of FDI in the region and integrate FDI into an overall smart economic global trade and investment strategy. San Diego is one of two cities - and the only in California - that Brookings selected to publish and develop its FDI plan.

“San Diego is global city,” said Mark Cafferty, president and CEO of San Diego Regional EDC. “It’s no coincidence that our top two FDI-generating cities, Tokyo and London, are also the two direct international flights out of San Diego. This report gives the San Diego region a key resource to take full advantage of this important economic development tool.”

According to the Brookings report, the benefits of FDI extend well beyond the millions of jobs supported. For example, U.S. affiliates of foreign companies pay well above average wages. These companies strengthen U.S. trade, producing more than one-fifth of all U.S. goods exports. Additionally, nineteen percent of all corporate R&D expenditures in the United States come from foreign-owned companies. Finally, 48 percent of total FDI flows in 2012 went to manufacturing industries, shoring up the nation’s eroding production base.

“As part of the Global Cities Initiative, San Diego is now at the forefront of U.S. metro areas seeking to position themselves as more globally fluent and competitive regions by developing a metropolitan global trade and investment plan.” said Brad McDearman, a fellow and director of global special projects with the Metropolitan Policy Program under the Brookings Institute.

http://www.sandiegobusiness.org/category/tags/fdi9


http://www.sandiegobusiness.org/category/tags/fdi


EB-5 Investor SWOT

StrengthsEB-5 Program flexibilityIncludes spouse and children under 21Invest in one are and live in any otherDiverse investment opportunitiesNo need to renew visaFree to travel in an out of countryNo “day to day” business involvementPassive Investment

WeaknessesProcessing time for investors limited by governing bodiesIncreased competition among regional center and projects Limited number of EB5 Visas issued a yearAt risk investment as required by USCISInvestor to perform project due diligence

OpportunityInvest in growing global economyLive/retire in San DiegoChildren to attend US UniversitiesDomestic benefits - taxes, property ownership, travel

ThreatsEvolving market trendsGovernment regulation changesLegal accountability: securities issues, loan structuring, etc.EB-5 cost of capital is increasingNeed for reliable job/fund tracking



Exhibits: Why EB-5 For Investors?

"

No day to day management required.

Invest in one area live in any other. You are free to travel in and out of the U.S. as well.

Property and education benefits (State Acceptance & Tuition).

Low cost and flexible, typically repaid in 5 years with interest.

Conditional visa time counts towards 5 year residence requirement.

People: The EB-5 Visa is likely the most flexible employment based visa. Your spouse and children will have the opportunity to receive better education, better quality of life and knowledge that they helped create jobs for people in their new home! A single Regional Center or Pooled Direct Project may be able to grant green cards for cousins, uncles and friends who also want to be U.S. Citizens.

Time: No day to day management or work is needed for this Visa program! Your time is spent wherever you like in the U.S. Relaxing, traveling, having fun anyway you like. The two years spent under your conditional visa count towards your permanent residence time requirements as well.

Money: Your investment is being used productively by active businesses and often repaid within 3-5 years with some interest. You are not spending $500,000 USD or $1 million USD to “buy a green card.” This is a short term investment traditionally resulting in your money back, with some interest and permanent residency for you and your family. Once you are repaid your investment, you are able to use your money as any other American citizen for: retirement, starting a business, buying a house, paying children's college tuition and traveling.

Why EB-5 For Investors?

FINANCIAL

PASSIVE

LOCATION

DOMESTIC TIME

NO AGE, SKILL, LANGUAGE, RE-QUALIFICATION REQUIREMENTS & SPOUSE + CHILDREN ARE INCLUDED IN EB-5 GREEN CARD


eb-5 overview: for foreign investors

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