EB-5 Investments in a Regional Center: A Due Diligence Guide for an EB-5 Immigrant Investor

eb-5-visa Wassem Amin

By Wassem M. Amin, Esq., M.B.A.

The EB-5 Visa program’s popularity has skyrocketed in the last couple of years.  A foreign investor can obtain permanent residency and, eventually, citizenship if the investment follows the United States Citizenship and Immigration Service’s (“USCIS”) guidelines of the EB-5 Visa Program.  The majority of EB-5 Investors invest through so-called Regional Centers.

A Regional Center is an entity, approved by USCIS, to develop projects that meet EB-5 guidelines.  The Regional Center could be the developer of the project or another entity that manages the project.  Obtaining the designation of an approved regional center from USCIS allows that entity to solicit foreign EB-5 Investors.    Although the program has been a huge success – generating billions of dollars in direct investment and creating tens of thousands of U.S. jobs – this success has attracted the attention of unscrupulous individuals.

A couple of recent high-profile examples include the Chicago Regional Center (discussed here) and, more recently, an individual who created a fraudulent regional center to solicit funds and divert them for his personal use.   Despite these unfortunate, the vast majority of EB-5 Regional Centers are legitimate.

If you are considering investing in an EB-5 Regional Center, it is important to conduct your own research and due diligence.  Although this should not be viewed as a comprehensive list, the following guide should be used to assess the viability of the Regional Center and feasibility of the underlying project.

EB-5 Investors: Due Diligence Guide

  1. The beginning step should be to always confirm that the Regional Center has been approved by USCIS.  Start by checking on www.uscis.gov.  USCIS maintains an up-to-date list of Regional Centers across the country.
  2. After you have located a potential Regional Center, request a copy of their USCIS approval letter.  This will help ensure that you are not dealing with an imposter instead of the actual Regional Center.  Further, obtain copies of the actual filings with USCIS.  Regional Centers must file an application (Form I-924) to obtain initial designation and approval.
  3. Stay away from Regional Center projects that do not have clearly written and planned investment offering documents.  Reputable Regional Centers will usually have a Private Placement Memorandum (PPM), or similar, to send to an interested investor.  In addition to the PPM, investment documents for a typical Regional Center project include: Request the above investment information in writing.  If you do not have experience in evaluating the profitability or viability of a potential project, hire an experienced professional, such as a Corporate Lawyer or Business Consultant, to assist you.
    • Memorandum of Terms or Term Sheet;
    • Partnership Agreement or similar;
    • Investor Qualification Questionnaire;
    • Subscription Agreement;
    • Escrow Agreement;
    • USCIS Approval Letter
    • Investor Certificates;
    • Comprehensive Business Plan;
    • Economic Impact Plan by a qualified professional;
    • Wiring Instructions;
    • Disclosures of Administrative Fees;
    • Marketing Plan and Sample Marketing Material
    • Among others
  4. Consider the project developer’s involvement in the project.  A majority of EB-5 Regional Center developers often make significant capital investments in the project.  This would be a positive indication for the investor, because it means the developer’s own funds are at risk and they have their “skin in the game”–their financial return is linked to the success of the project.

Remember, although the EB-5 visa program has one of the highest USCIS approval percentages for individual investors, it is not “guaranteed.”  A telltale sign of potential fraud are promises of a conditional or permanent green card or citizenship.  In addition, be wary of promises of returns on the investment that are significantly higher than market rates.

Keep in mind that a requirement of the EB-5 investment is that the investor’s funds must be at risk–that means that the Regional Center or developer cannot even guarantee the return of your principal investment.  Although most reputable Regional Centers will in fact pay return the investment funds at the end of the agreed-upon period, a promise or guarantee at the outset is not feasible – and could even result in the denial of application with USCIS.

The EB-5 Regional Center program has been very successful and is gaining in popularity.  It has significant potential in generating foreign direct investment in rural and high unemployment areas.  It is also very popular with investors because of it has a track record of success and high rate of USCIS approvals.  However, a potential foreign EB-5 investor should always exercise caution when considering an EB-5 Regional Center investment.  Comprehensive due diligence and research, as with any other investment, is necessary and highly recommended.

If you would like more information about the EB-5 Visa or Regional Center development and investment offerings, please contact Wassem M. Amin, Esq., at wassem@dharlawllp.com.

___________________________________________________________________________________________

Disclaimer: These materials have been prepared by Wassem M. Amin, Esq. for informational purposes only and are not legal advice.  The material posted on this web site is not intended to create, and receipt of it does not constitute, a lawyer-client relationship, and readers should not act upon it without seeking professional counsel.

Wassem M. Amin, Esq., MBA is an Associate Attorney at Dhar Law LLP in Boston, MA and is the Vice Chairman of the Middle East Division as well as the Islamic Finance Committee of the American Bar Association’s International Law Section.  Wassem has extensive experience in the Middle East region, having worked as a consultant in the area for over 9 years.  Wassem currently concentrates his practice on Corporate Law, Business Immigration and International Business Transactions.  He has advised countless Eb-5 Investors and assisted developers in structuring USCIS-compliant EB-5 Regional Centers.  For more information, please visit the About Us page or request more information on our Contact Us page.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s