EB-5 Regional Center Program

Congress created the EB-5 program in 1990 to benefit the U.S. economy by attracting investments from qualified foreign investors. Under the program, each investor is required to demonstrate that at least 10 new jobs were created or saved as a result of the EB-5 investment, which must be a minimum of $1 million, or $500,000 if the funds are invested in certain high-unemployment or rural areas.

In 1992, Congress enhanced the economic impact of the EB-5 program by permitting the designation of Regional Centers to pool EB-5 capital from multiple foreign investors for investment in USCIS-approved economic development projects within a defined geographic region. Today, 95 percent of all EB-5 capital is raised and invested by Regional Centers.

What is a EB-5 Regional Center?

An EB-5 Regional Center is an organization, designated and regulated by USCIS, which facilitates investment in job-creating economic development projects by pooling capital raised under the EB-5 immigrant investor program. Regional centers can be publicly owned, (e.g. by a city, state, or regional economic development agency), privately owned, or be a public-private partnership.

Regional Centers maximize the program’s job creation benefits by facilitating the investment of significant amounts of capital in large-scale projects often in coordination with regional economic development agencies which use the EB-5 funds to leverage additional capital.

Regional Centers use economic analysis models, including those developed by the U.S. Department of Commerce, to demonstrate that job creation targets required by law have been achieved. For investments made through Regional Centers, at least 10 direct, indirect or induced jobs must be created.

All investment offerings made by EB-5 Regional Centers are subject to U.S. securities laws, enforced by state securities regulators and the U.S. Securities & Exchange Commission.

What do Regional Centers do?

• Identify investment opportunities that will create jobs in local communities, often in partnership with economic development agencies.
• Assist in marketing those investment opportunities to investors from around the world.
• Ensure that the investment offering complies with federal and state securities laws and SEC regulations as well as specific EB-5 requirements.

Why is the EB-5 Investment Program Important?

A comprehensive peer-reviewed economic study found that during fiscal year 2012, investments made through the EB-5 program contributed $3.39 billion to U.S. GDP and supported over 42,000 U.S. jobs. This is more than a 100 percent increase from the average annual impact result reported in 2011. And, these jobs were created at no cost to taxpayers. The Congressional Budget Office has scored the program as revenue neutral, with administrative costs paid for by applicant fees.

More than 25 countries, including Australia and the United Kingdom, use similar programs to attract foreign investments. The American program is more stringent than many others, requiring substantial risk for investors in terms of both their financial investment and immigration status.

• Investments made through the U.S. EB-5 program must be “at risk” in the same way that investments in stocks or equity funds carry an inherent risk. There is no guaranteed financial return.
• If their application is approved by USCIS, EB-5 investors receive a conditional visa that is valid for two years. In order to receive a permanent visa, these investors must demonstrate that the legally required economic benefits flowing from their investments have been achieved.

Annually, the EB-5 Program accounts for less than 1% of the visas issued by the U.S. Throughout the process, EB-5 investors are subject to the same background checks and national security screenings as applicants in any other visa category, and their ability to eventually apply for citizenship is subject to the same criteria as other visa holders. Like any other investment vehicle, EB-5 investment funds are subject to U.S. securities and anti-fraud laws and regulations.

Examples of Successful EB-5 Regional Center Projects

Approximately 95 percent of all capital raised through the EB-5 economic development program is raised in affiliation with IIUSA’s members. These include Regional Centers that are publicly owned and operated by state economic development agencies, public-private partnerships, as well as private sector investment companies.

Capital investments made by EB-5 Regional Centers have supported successful economic development projects, including:

• Redevelopment of a closed Air Force base in Southern California into a vital commercial area including a distribution center and regional airport
• Development of assisted and retirement living communities in Washington State, creating 800 jobs and serving approximately 130 seniors
• The transformation of the a closed Navy yard in Philadelphia into a dynamic, multi-use development now home to 130 companies and 10,000 employees
• Restoration of the historic “Alaska Club” building in Seattle, creating a modern hotel that employs almost 100 people and serving over 100,000 hotel guests annually
• Expansion of a one season ski-resort in Vermont into a thriving four season vacation destination
• Rehabilitation of a 100 year old building into a hotel that created over 161 jobs while kick-starting the revitalization of an historic Dallas neighborhood

Support for the EB-5 Regional Center Program

The EB-5 Regional Center program is supported by mayors and local economic development officials who see the value of the program first-hand.

• The U.S. Conference of Mayors recently endorsed permanent authorization of the regional center program, noting that EB-5 has become a vital source of urban redevelopment funds.
• Dallas Mayor Michael Rawlings said, “The EB-5 Program enables regional centers to be a key economic driver in their communities, creating desperately needed jobs in a tough economic environment.”
• Mark Jaffe, president of the Greater New York Chamber of Commerce, has called EB-5 “a common sense job creator that is straightforward with no cost to U.S. taxpayers,” and cited the program as “an important ingredient” in the success of “large-scale, public/private real estate projects that create much needed jobs in areas of high unemployment.”

EB-5 Regional Center Program – Frequently Asked Questions (FAQs)

How are EB-5 investments affiliated with Regional Centers structured?

EB-5 investments that are affiliated with EB-5 Regional Centers are made through private placements – the sale of securities to a relatively small number of select investors. Like all private placements, which are used by companies to raise capital in a number of contexts, EB-5 private placements are governed by federal and state securities laws and regulations.

A private placement memorandum is developed that details the investment offering, including detailed explanations of the project that will be funded along with disclosures of risk and material information consistent with all applicable federal and state laws. The economics of the project related to EB-5 specifically – the expected job creation – are also detailed in the memorandum. In some cases, the issuer of the private placement memorandum is an EB-5 Regional Center itself. In other situations, the issuer is business entity that will be receiving the investment funds and is affiliated with a Regional Center.

What risks do investors face in EB-5 regional center investments?

By law, EB-5 investments must be “at risk” in the same way that any equity, stock or other type of investment carries inherent risk. Regional centers, like other entities that market investment opportunities, cannot guarantee a return on investment. Regional Centers also cannot guarantee return of the investment principal to the investor.

What kind of financial commitment do EB-5 investors make?

By law, an EB-5 investor is required to invest a minimum of $1 million, unless the investment is located in a Targeted Employment Area (TEA)—a rural area or area of high-unemployment designated by USCIS. Regional Centers funding projects in TEA’s can accept a minimum of $500,000 from each EB-5 investor.

What risk do companies have in accepting EB-5 investments?

Companies bear no additional risk for EB-5 investment. They interact with the money as any other equity or financing investment, albeit often at a lower cost.

Are EB-5 regional center financing options cheaper for companies than other sources of capital?

Yes. In many instances, EB-5 funding is a lower-cost form of capital than alternatives because investor demand for return on their investment is often lower for EB-5 capital than other sources of capital. In addition, securing EB-5 capital increases the overall liquidity of a business or project which, in turn, reduces the cost of acquiring capital from other sources.

How do EB-5 regional centers help communities?

EB-5 Regional Centers facilitate direct investment in projects that meet the job creation and economic development goals of designated geographic areas. Regional Centers pool investments made by multiple EB-5 investors and deploy that capital to large-scale projects, often in coordination with regional economic development agencies.