In the past few years, there has been a significant rise in the number
of regional centers designated for the EB-5 visa program. This rise was
partially fueled by the demand for geographic coverage provided by regional
centers. As a result, real estate developers are now avoiding the administrative
and maintenance burdens often associated with the seeking designation
as a regional centers, and instead finding a solution by becoming affiliated with one.
While there are new fees and regulatory requirements, establishing a regional
center has relatively little obstacles, this is partially due to EB-5
Adjudications Policy Memorandum released by USCIS on May 30, 2013. On
May 30, 2013, the U.S. Citizenship and immigration Services (USCIS) simplified
the process of regional center designation by removing the need for offering
documents if the I-924 application was based on a “hypothetical”
project. The results were instant. For instance, in 2012 there were fewer
than 25 I-924 applications approved, as compared to the several hundred
that have been approved since the May 30 Memorandum.
The increase in EB-5 regional centers has been met with opposition from
veteran centers that previously had a firm hold on the EB-5 marketplace.
Nonetheless, developers have welcomed this change with open arms. For
instance, developers who are looking to develop a single EB-5 project
are now able to rent a regional center as opposed to trying to obtain
designation as a regional center themselves. In addition, regional center
involvement in a project has largely decreased, enabling developers to
freely dictate the terms of a project’s development process.
Developers who prefer the rental model have an appreciation for the lenient
involvement of the regional center in the overall development process.
Other than an initial review of the project, execution of the regional
center sponsorship agreement, and gathering information to complete the
Form I-924A and Form I-829, regional center involvement is minimal. This
is favorable in light of the fact that not all regional center principles
have experience with real estate development and are not usually in the
position to be able to dictate development terms. Therefore, as long as
there is no apparent fraud on behalf of the developers, a regional center
will shy away from extensive involvement, or they risk losing out on the contract.
Low regional center involvement in a project might soon come to an end.
As apparent in two bills introduced in 2015, Congress is focusing on the
integrity of regional centers, which could possibly require greater regional
involvement in EB-5 projects. The first EB-5 bill introduced in 2015,
entitled S.1501 and sponsored by Senators Grassy and Leahy, and the last
EB-5 bill S. 2415, sponsored by Senators Flake, Cornyn, and Schumer, show
us what we can expect from Congress. Whether or not the two bills pass,
the integrity of the EB-5 remains of vital importance.
A few of the non-exhaustive requirements included in the S. 2415 are:
Increased disclosure requirements including disclosure of
fees, pending or past litigation/bankruptcies/adverse judgments affecting
any of the project associated entities, and conflicts of interest between
any and all of the project associated principals. This will most likely result in the regional center conducting higher
due diligence of the developer and its affiliates and thus, greater involvement.
- Both the regional center and all project-associated identities will be
required to certify that they are complying with securities laws. Generally,
leased regional centers do not have much involvement in the securities
offering or managerial roles in a new commercial enterprise, thus this
requirement will prove burdensome to comply with.
- USCIS will conduct random site visits to the regional center and new commercial
enterprise to ensure compliance is in place.
Compliance has never been more important for regional centers within the
EB-5 visa program. Compliance measures will help to solve issues relating
to integrity of the program and ease the minds of investors and Congress.
Measures of compliance seem to be moving towards greater regional center
involvement in the development process of EB-5 projects. After all, how
could a regional center meet the annual requirements for certification
without becoming more involved in EB-5 project?
To find out more about EB-5, please
contact Melissa Lucar, Esq. at Geraci Law Firm: (949) 379-2600.