Friday, March 26, 2010

Canada's Investment Immigration: 2 Steps Ahead of the Superior U.S. EB-5

Canada entered their current model of investment-based immigration years after the U.S. enacted the EB5 Regional Center visa category, but they sprinted out of the starting gate.  When I had my Hong Kong office in the mid-90's, in the years preceding Hong Kong's cessation to China by the British, the EB-5 visa had been on the books for least on paper.  In reality, after the procedural nightmares the USG - at the time, the INS - created in the regulatory framework for the legislation, the attractive features of the U.S. immigrant investor platform were eclipsed by the downsides.

I saw many nervous HK business people over those years, and most of the ones I helped immigrate to the U.S. were ushered in via L-1/EB-1 structures.  I arrived in Hong Kong after the initial rush of emigration; the uber-wealthy had long before planned their exodus to tax havens.  My folks were mostly the Hong Kong version of "small" business entrepreneurs, which over there means a guy with two restaurants grossing U.S. $5-6 million/year and 50-75 employees...the perfect, rock-solid springboard for a new affiliate restaurant in the U.S. and the intracompany sashay for mom, dad, and the kids.

But the real story lies what went on in between that initial batch of very affluent emigrants and the core business community which came to me as the HK handover deadline approached:  a majority of emigrants who headed in two primary directions: Australia (because of proximity and reasonable investment-based immigration criteria) and Canada...because of the generous investment-based opportunities offered to them by our savvy northern neighbor.

Today, you can walk through the streets of any major Canadian city and the Asian influence is everywhere.  But it isn't just the incredible diversity of culture and cuisine in, say, Vancouver which best illustrates the power of a well-formulated investment-based immigration policy.  It's the underlying economic stimulus which has ushered in new economies and new industries in these migrant-enriched Canadian cities.

A just-posted article on list these statistics:

-since its establishment in 1986 and subsequent amendment in 1999, Canada's program has so far resulted in 132,000 people immigrating to Canada as investors.

-About 74 per cent of them have been of Chinese descent - with 29 per
cent from mainland China, 23 per cent from Hong Kong and 22 per cent
from Taiwan.

-British Columbia receives the largest share - with 49 per cent - of
Canada's immigrant investors. Ontario is next with 23 per cent,
followed by Quebec with 22 per cent.

But the real punchline is this: Canada's immigrant investor program generates $2 billion a year for the
prompting a pair of prominent Canadian economists to call for an expansion of the program.  In a recently published study, Pierre Fortin and Roger Ware for the Montreal-based Analysis Group argued for:

  • faster processing times (Canada takes almost 3 years for approval, whereas a U.S. EB-5 Regional Center investor can have their I-526 approved and green card in hand in as little as a year, faster even that Australia, which can take about 14 months.)

  • more investor visa slots

Sound familiar? It's the same thing those of us who believe in the power and efficacy of the EB5 Investor Visa have been saying right here in the good ol' U.S. of A. for a very long time. The key difference: in Canada, this kind of call for action is newsworthy.

Perhaps Americans will care more about U.S. immigration policy, especially as it relates to attracting foreign investment, when the true economic measure of the EB-5 Regional Center visa is properly tabulated.  In good economic times and in bad, show me a country which successfully attracts foreign capital and I'll show you increased job creation, stabilization of commercial real estate markets (to a certain extent, anyway), and a dream PR campaign result for its political leadership.

I have recently visited cities which were vacant, jobless ghosts for years before EB-5 investor capital surged in to provide the infrastructure needed to bring them back to vibrant economic life. Innovative public-private partnerships, creative loan-based structures, and an eye on the economic horizon by visionary Regional Center entrepreneurs who are establishing colossal new economic zones populated by industry leaders...real, tangible, results driven by EB-5 investors who cannot only touch and see the results of their capitalization but who also know exactly when their investment will mature.

Imagine if this became a priority on our national agenda.

Wednesday, March 24, 2010

Immigrant Migration Patterns: Little Pink Houses

It's no surprise that when times are tough and jobs are scarce, the number of illegal immigrants entering the U.S. drops.  What IS interesting, however, is in trying to understand the impact of the recession on overall U.S. immigration...and census stats can't quite tell the tale.

Today's Wall Street Journal features a great article on page A3 entitled "The Sun Belt Loses Its Shine".  The piece examines data released Tuesday by the U.S. Census Bureau which illustrates the rapid cooling of the uber-hot migrant magnets of the past.  The data, collected between July 2008 and July 2009, is a snapshot of America during the "depths of the recession", as the author puts it.

Based on the numbers, some of the country's top immigrant destinations saw an abrupt swing in population patterns.  Las Vegas, for example,  went from an inflow of 54,000 new residents per year to a loss of 1300; similarly, Orlando, went from an inflow of about 52,000 per year (2004-05) to an outflow of about 4,300.  Atlanta also declined signficantly.  But not all big cities are losing numbers: Washington, D.C. had a net gain of 18,200 residents, its first net gain since 2002.  New York City, Boston, and Chicago also grew.

The article is an interesting read and analyzes the impact of the real estate downturn as a key factor in the changes.  One factor NOT examined, however, is the impact of EB-5 Regional Center Investors who continue to flock to the U.S., albeit in statistically insignificant numbers (when compared to cumulative migration patterns.)  Still, it's an interesting shift in the way immigrants come to the U.S.  Consider:

  • a decent flat for a family of 3-4 in any Chinese industrial city is probably a half million U.S. dollar investment...if they can find one; for that same price, that family can buy into a U.S. EB-5 Regional Center investment and immigrate to the U.S.

  • while the U.S. recession -- especially the freeze in construction -- has a direct and visible impact on low-skilled and semi-skilled workers (i.e., those most likely to remain in the U.S. and fall out of legal status even if they entered with a valid visitor visa), this same recession has made U.S. investment opportunities better than ever not only for the affluent but for working professionals with significant nest eggs...and an interest in bringing their families to America.

  • Unlike the traditional channels of employment and investment-based immigration, there is no geographic nexus in EB-5 Regional Center immigration because the investor does not HAVE to take up residence in the geographic area in which his/her investment is made

Let's leave it at this: when the U.S. is booming, it is a magnet for immigrants looking for jobs and expensive for prospective immigrant investors.  When times are tough in America, things are often tougher elsewhere, and geopolitical instabilities make the U.S. even more attractive as a result.

It would be fascinating to research and document exactly where all these new EB-5 Regional Center investors are settling when they get to the U.S.  Given the sheer numbers of Chinese investors, I suspect California is the primary "landing field".  But as one group leaves, others group come, and, as John Melloncamp so aptly asked, "Ain't that America...?"

Thursday, March 18, 2010

TEA for Two? Thoughts on Economic Zone Gerrymandering

The hypothetical:

You are approached by a client who has a solid business in place, a good history of success; the company is looking to expand production to meet export demand.  Although highly invested in the firm, they need money for the expansion, but the banks are saying "no way, Jose", citing their dried up appetite for expansion in this wobbly economy.  They have heard something about this "immigrant investor deal", and you give them the rundown on the EB-5 visa, suggesting either the creation of a new Regional Center for their objectives or, if you know of one, direct them to an established local RC which might be able to accommodate the project.

You're excited, the client is excited, and you jump in to start your homework but, lo and behold, despite the visibly economically-disadvantaged area in which the business is located, it turns out that the area is NOT in a Targeted Employment Area ("TEA").  In fact, the company border is RIGHT ON a dividing line, and it IS a TEA right across the street!  But where your client sits, they are limited to $1 million dollar EB-5 investors...something which, ahem, has not been exactly thriving even during these exciting EB-5 friendly times.

Deal over?

Here's a concept: reread the December 2009 memo, read all the case law, and see if this makes sense...and I am NOT saying that just because something makes sense, you can actually convince the government that it makes sense! Consider:

  1. State determinations of TEA designation, according to USCIS, will be respected.

  2. The objective of state identifications of targeted areas is driven not by politics but, rather, by a real desire to stimulate economic it via TEA designation, tax credits, whatever.

My theoretical submission for the day, and your food for thought (no throwing of tomatoes please):

Doesn't it make sense that in non-rural and urban areas, where existing TEA lines are to a great extent arbitrary and MSA-driven, that the political imperative for state government should be to work with prospective job-creators in making common-sense adjustments to artificial boundaries if in doing so these adjustments result in new jobs which, but for the logical corrections, would never be created?

My point: look beyond the plat maps, Folks.  Exploring Targeted Employment Areas on behalf of solid prospective EB-5 projects is like Forrest Gump's mom box of chocolates: "you never know WHAT you gonna get..."

Wednesday, March 17, 2010

Callback from OZ (a/k/a EB-5 Adjudications Team)

To my surprise (and to their credit), I received a telephone call at 7 pm the other night from a member of USCIS' Laguna Niguel's EB-5 Adjudications team.  Much to the amusement of several attorney friends who were tickled by my naive belief that one could simply call up and speak to the EB-5 folks, I had left a voice message about a week ago. 

The gentleman who called was friendly, and I was TOTALLY off guard, having slipped into "done with work" mode and onto the couch a bit earlier.  After gently chiding me for actually leaving a voice message (they much prefer email communication), he -- and I won't tell you his name out of respect for his courteous call -- asked me how he could help me.  Well, my list of questions was back in the office on my desk, so here I was, with The Man on the line, having to wing it.

We spoke for maybe 10 minutes, but what a useful 10 minutes it was for me.  Here is a brief list of the highlights I got out of our conversation, as filtered through my own subjective point of view (i.e., NOT to be taken as having official merit!):

  • Adjudications makes a clear distinction between what complies with the requirements for a Regional Center vs. those for an actual investment vehicle, that is, a regional center's project.  Apparently, many attorneys fail to draw that distinction.  (It was EB-5 guru Steven Yale-Loehr who recently told the media the same thing I've said all along (I'm paraphrasing): getting a Regional Center approved isn't the hard part of the deal...that's just the beginning.)

  • The very general statutory language associated with Regional Center requirements, even as clarified by subsequent legal precedent, means these good folks in California are seeing ALL kinds of weird stuff.  That means that on one hand, you have pros like Steven and Lincoln Stone turning in their masterpieces, on the other hand you have completely clueless RC applications which will get pummeled with big, fat, well-deserved RFE's.

  • The USCIS is seeing very few RC applications which do NOT trigger RFE's

  • There is an acute awareness - and this is my impression based upon my reading between the lines, not anything specific the officer mentioned -- that the majority of job-creation methodologies submitted with RC applications are seen as highly suspect by the adjudicators.  In other words, they are still very aware of the "smoke and mirrors" of the 90's, except that these days, instead of those sophistries involving the "at risk" issue, they involve job creation.

The moral of the story: if the Regional Center approval is the starting line and I-526s are the first hurdle, there will likely be many who stumble before the I-829 finish line is crossed...