SO SOMEONE SAID YOU SHOULD BE A REGIONAL CENTER?

1. SO SOMEONE SAID YOU SHOULD BE A REGIONAL CENTER? EB-5 MECHANICS Steve Anapoell, Greenberg Traurig, LLP Jeff Carr, Economic & Policy Resources, Inc. Kate Kalmykov, Greenberg Traurig, LLP

2. 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

4. 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

5. Professionals Required for Regional Center Designation • Immigration Lawyer • Economist • EB-5 Business Plan Writer • Securities/Corporate Attorney • Bank/Escrow Agent • Marketing Firm/Commissioned Agent

6. 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

7. 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

8. Regional Center Entity (cont’d) • 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

9. Regional Center Entity (cont’d) • 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

10. New Commercial Enterprise • Limited partnership (or LLC) • Investors make equity investments • Invest (equity or debt) in job-creating enterprise

11. Job-Creating Enterprise • Development project • Borrower in debt approach

12. 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

13. Securities Laws • Securities Act of 1933 • General Statement of law • Regulation S • Regulation D • Disclosure Requirements • Recommended use of PPM • Compliance with local laws

14. 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

15. Securities Laws (cont’d) • 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

16. Securities Laws • Investment Company Act of 1940 • General Statement of Law • Is the Issuer an investment company? • Available Exemptions

17. 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

18. 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)

19. 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

20. Operational Plan • Regional center overview • Strategy • Industry focus • Business structure • Marketing • Target market • Agents • Marketing plan • Marketing materials • Marketing budget

21. Operational Plan (cont’d) • Recruitment of investors • Investor screening • Investor subscription process • Regional center funding • Operating budget • Source of funds • Amounts to be paid by investor for overhead

22. Operational Plan (cont’d) • Administrative oversight • Plans for management of regional center • Plans for identifying and assessing projects • Monitoring projects and job creation

23. 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

24. 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

25. 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

26. 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

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

28. 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.

29. Advantages (cont’d) • 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.

30. 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.

31. Disadvantages (cont’d) • 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.

32. 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