Direct investment.

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DIRECT INVESTMENT
Direct EB-5 investments are required to create 10 direct jobs. When individuals invest directly into a project, they are required by USCIS to take a more active role in business operations, often times having a voting seat on the board of directors, and/or holding a key management position.
CREATING A REGIONAL CENTER
In this program, a financier or developer makes a proposal to the USCIS. If the USCIS finds it will benefit the regional economy and shows potential for providing significant employment, the project will be designated a regional center. USCIS approval allows the financier or developer to create a limited partnership, limited liability company, or corporation in which the EB-5 investor invests and may apply for green cards. Less involvement is required in the day-to-day operations of the project for EB-5 investors working with a regional center. Investors are able to take a passive role in the company they are investing in, such as a limited partner.
Investors in a regional center do not have to have day-to-day management responsibility or prove the business directly employs 10 people. Instead, they may rely on economic input/output models.
Sample regional center investments:
1. A real estate limited partnership program that offers an investment in industrial properties in a specified major city. This program, which was granted USCIS designation as a regional center in 1996, generally started out involving purchasing low-yielding warehouse properties with invested funds and converting them into higher-value mixed used properties, including office space, retail shops and storage space. Today, the regional center is concentrating on developing new hotels.

2. Investors participate as limited partners of a limited partnership, and can earn regular monthly income from the project, as well as a share of future appreciation from the project, when sold (for lesser). Investment periods vary, but cannot end before receipt of the permanent green card by the investor.
3. A limited partnership program that makes low-interest loans to businesses in a specified major city. Business investment and development in this program, a USCIS regional center designee since 2003, targets industry sectors that demonstrate strong indications of expansion, growing employment needs, and returns on investments. The regional center directs its efforts at financing projects and developing enterprises within targeted sectors, including hospitality and tourism, trade, technology, higher education, and transportation.
In some cases, investors can capitalize the regional center’s project as a direct investment in a stand-alone project and the investor’s EB-5 application (I-526) can be filed before the regional center is approved by the USCIS. In other cases, investments can be made in the regional center project while its designation application is pending with the USCIS. However, an I-526 individual petition based on a regional center project cannot be filed until the regional center application is granted.
Regional centers are complex, expensive, and time-consuming to operate. They involve constant marketing, government compliance, and project evaluation and management. They can be excellent means of raising capital, but they require a substantial commitment.
The principle advantage of a regional center is that “indirect” employment can be counted toward the 10 jobs each EB-5 investor must create (or, in some cases, save). For example, if an EB-5 visa petitioner invests in a new manufacturing company that will itself hire ten workers, then a regional center is not needed, because the job creation threshold will be met through direct employment creation. In contrast, if the EB-5 petitioner invests in a construction project to build a hotel, which is then leased to a management company that hires hotel workers, then a regional center is needed. The job creation threshold in this hotel example can only be met through indirect employment creation, because the hotel employees will not be hired by the construction project that the EB-5 investor capitalized.
The law permits a regional center investor to qualify for an EB-5 green card by creating (or, in some cases, saving) 10 direct or indirect jobs, such as those in the hotel example. Induced jobs downstream in the economy may also be counted. Indirect and induced employment is usually measured by an econometric input-output model.

Another advantage is that a regional center may create a limited partnership which loans EB-5 funds to a company or project. The investor may not loan the funds directly to an enterprise. The investor must make an “at-risk” investment with no guarantee that the capital will be returned. But USCIS policy permits regional center enterprises that receive EB-5 funds to loan them to a job-creating enterprise.
Regional centers provide other advantages, including that the funds are considered “at risk” when they are deposited with the regional center or placed in an escrow account. This means the investor’s EB-5 petition can usually be filed more quickly than if he/she invests in a stand-alone commercial enterprise, which must spend a substantial portion of the EB-5 funds to prove they are at risk.
The regional center
A regional center is any economic unit, public or private, engaged in the promotion of economic growth, improved regional productivity, job creation, and/or an increased domestic capital investment. USCIS rules and regulations establish eligibility criteria for a regional center and annual reporting requirements. In most cases, a regional center operates a limited partnership for each project, but other entities are permissible.
Geographic area
Each regional center designates a geographic area for its investment projects. The region must be contiguous and may involve many counties or a whole state, as long as the economic impact of the regional center extends throughout the area. There can be more than one regional center in the same area. A person (or group) may set up more than one regional center, or expand the jurisdiction of an existing regional center by requesting an amendment to USCIS’s regional center designation.
A regional center must designate the type(s) of economic activity(ies) to be funded, such as real estate, hotel, wind power, etc. The regional center application can be amended at a later time to include additional economic activities. Regional center applications must be supported by an economic analysis demonstrating the economic benefit and job creation for each economic activity.
Two models – loan and equity
Generally, there are two regional center models. One takes in investors’ capital and loans it out to a job-creating project. The other model involves developing from the ground up or purchasing an investment project, and expanding or rehabilitating it with investors’ capital. A regional center may do both. Some regional centers offer investments in multiple businesses, similar to venture capital funding. This involves complex tracing of the capital and jobs.

Amount of investor capital – TEA
If the investment project is in a targeted employment area (TEA), the EB-5 immigrant’s investment is $500,000 (plus the regional center’s subscription fee that is usually $30,000 to $50,000). A project outside a TEA requires an investment of at least $1 million. Regional centers can fund projects in TEAs and other areas. A TEA is defined as either a high unemployment area (150% above the national rate) or a rural area (outside a town of 20,000 and outside a metropolitan statistical area). Since most regional center projects are in TEAs, it is difficult to compete with them by offering a $1 million investment project. In some cases, states will allow the combining of census tracts to show an area is a TEA.
Details about TEAs
An upcoming change in the data used to determine the unemployment rate for certification of targeted employment areas (TEAs) may have consequences for funding current and future projects. The project must principally do business in a TEA at the time of the immigrant’s investment for the minimum amount to be $500,000. Whether the area later loses TEA status is not relevant.
Certification of TEAs is based on high unemployment, and is left to the states. To determine whether census tracts (CTs) have high unemployment, most states use the “census share” technique. Those that rely on the 2010 census tract boundaries must use the most recent labor force data available. However, some states – including California, Arizona, Illinois, New Jersey, New York, and Massachusetts – have been relying on decennial census 2000 and older labor force data.
Changes in the labor force since 2000 can mean a substantial difference in the unemployment rate when recalculated using current data. Thus, areas that qualify as TEAs now may not qualify in a few months (or vice-versa) if states switch over to using the 2010 census data. California, Illinois and Arizona will switch in 2014; Massachusetts will not. Other states using old data have not confirmed when they will make the switch.
If you are thinking of capitalizing a project in a particular area based on a single CT or group of CTs in a state that is still using 2000 data, it is best to double-check the unemployment rate using 2010 data to make sure the project remains in a TEA when the state switches over.
Capital for setting up the regional center
USCIS requires a regional center to be adequately capitalized with about $100,000. An explanation regarding the sources of these funds must also be provided.

Cost of setting up a regional center
In addition to the owner’s capitalization of the regional center, other costs of setting up and obtaining USCIS approval of a regional center include fees for:
an immigration attorney;
an economist;
a business and securities attorney;
a business plan writer to assist in drafting the needed business and operational plans; and
a market analyst – in most cases, USCIS wants evidence about the project’s market to verify the economic claims and financial projections.
a marketing expert in India.
The USCIS’s filing fee for a regional center application is $6,230.
After approval of a regional center application, there are legal fees for ongoing consultation, research, and preparation of annual reports to USCIS.
Timeframe
USCIS says regional center applications are decided in about 4 to 12 months. Some take longer.
Operating a regional center
The regional center business is challenging. There is considerable competition. There are about 579 approved regional centers. Some regional centers have been in operation for many years. Some are newly formed. USCIS rules are not always clear and often change, and job creation is always key. Investors are primarily interested in immigration and want to see the return of their capital, not high profit. In addition, there are all the problems associated with locating, managing, and monitoring good projects that create 10 jobs per investor.
There are 10,000 visas per year reserved for the EB-5 category. Of these, 3,000 are reserved for regional center applicants (although regional center investors can use all 10,000 visas). The 10,000 visas have never been exhausted since the EB-5 program was created, even though each investor and dependent family

member needs a visa number (the principal investor may bring his/her spouse and children under age 21).
INVESTING IN A REGIONAL CENTER
A regional center is a government-approved firm that pools investors’ capital to build a project. The regional center runs the project and business for investors. The regional center is responsible for new job creation for the investor.
EB-5 Regional Center Due Diligence
In light of the SEC fraud complaint against the Intercontinental Regional Center Trust of Chicago (IRCTC) and its owner, we need to evaluate a regional center (RC) and conduct due diligence. This consists of two types of analysis. The first type concerns the economic risk of inadequate financial return or business failure. The second type concerns the immigration risks or likelihood that the RC will not provide an adequate basis for the investor to achieve the immigration goal of obtaining an unconditional green card.
Evaluating the RC immigration risk is quite complex, as it involves the following:
analysis of job creation, including economic input/output models and the factors used for those inputs;
the application of targeted employment area (TEA) regulations;
review of the business plan for verifiable data to support the economic analysis, proper use of EB-5 capital and other requirements; and
an analysis of the business instruments to ensure there are no disallowed provisions.
Here are some, but not all, of the due diligence factors the investor can evaluate and should consider:
Is the RC approved by the USCIS or is the application pending? If the RC is approved, the investor should obtain a copy of the approval.
What are the RC’s USCIS approved industries, and do these cover the industries involved in the project? The investor should refer to the NAICS codes and industries in the RC approval letter and ensure they cover those in the business plan, which should match those in the economic analysis.
Is the project in an approved targeted employment area (TEA) at the time of investment? (Check for a state certification letter. Otherwise, there should be documentation from the Bureau of Labor Statistics or

the Census Bureau, which should be reviewed by an economist or attorney familiar with TEA calculations.)
Does the economist report of direct and/or indirect job creation project sufficient jobs for all EB-5 investors? Is there a safety net margin? Is the economist experienced with EB-5 matters?
When are the jobs forecast to be created? Within 2.5 years of the I-526 approval?
Has USCIS “approved” the project in an I-924 or another I-526 petition decision? Any I-829 approvals?
How many investors have invested to date?
What is the regional center’s track record with prior projects? (The investor should obtain the resumes of RC principals and/or developers.)
What is the expertise and experience of the RC in the project’s industry – i.e., is the project’s management experienced?
Is there non-EB-5 capital invested in the project? Look at the investment documents and if possible, verify the investment.
Is the project’s business plan detailed and reasonable?
Does the RC have enough assets to reimburse the investor if the I-526 is not approved? If not, are the investor’s funds securely in escrow until I-526 approval?
Does the RC employ a successful and experienced EB-5 attorney?
How much is the RC paying migration agents, and is this amount reflected in the regional center’s investment documents, such as the offering memorandum, or disclosed otherwise?
Research the RC owners on the internet.
Ask for current photographs of the project.
Are the financials for the project reasonable? In the IRCTC case, the costs per room were far in excess of the industry standard.
If you cannot conduct your own due diligence analysis, hire a risk analyst, accountant, or business attorney to perform the due diligence for you.