Wednesday, October 27, 2010

EB-5 FUNDAMENTALS: IMMIGRATION OBJECTIVES VS. INVESTMENT OPPORTUNITY

Based on the emails that I’m getting, I think it’s time for us to step back and take a fresh look at the big picture of EB-5 Regional Center visas. With over 100 Regional Centers approved by USCIS and almost as many in the pipeline, I’m finding that the quality of the marketing teams does not bear any direct relationship to the quality of the underlying projects.


Investors who have the resources to invest in an EB-5 visa and secure their permanent residency come in two basic flavors: entrepreneurs and limited partners.  The former are the folks who want to start their own business in the U.S., want to be “hands on”, and believe they can create 10 direct jobs through their investment.  These are the candidates of the Individual EB-5 Investor visa category.  The second “flavor” is made up of the folks who see an EB-5 investment as a pragmatic tool through which they can achieve their U.S. permanent residency.  Sometimes they are coming to America to retire; other times they DO want to start their own business once they immigrate but don’t want the arbitrary constrictions of a conventional investment visa category.  For these folks, putting their money to work and creating American jobs via an EB-5 Regional Center Investor visa makes the most sense.


Today, many immigration attorneys are so busy promoting one EB5 Regional Center or another that they miss the forest…because of all the trees.  I’ve had at least two clients who had received hard-sell EB-5 Regional Center visas.  In both cases, they had existing U.S. businesses and strong foreign affiliates.  They were, unbeknownst to them “Closet L-1As” and readily immediately qualified and eligible for EB-1 Multinational Executive permanent residency…without a half million dollar investment!  (You should see the face of a client who has been led to believe that his only path to the coveted green card is via a jumbo investment when you tell him that’s hogwash: priceless!)


But even for those for whom the straight-shot to an EB-1 isn’t possible, the notion of EB-5 suitability needs to be explored by the attorney.  There are simply too many investors who are not aware that if they open their enterprise in a TEA and create 10 jobs, they CAN get a green card with a $500,000 investment.  Why is this news to almost every investor I speak with?


I’ll tell you why: because the EB-5 Regional Center visa is what the press is eating up and what people are spending millions to promote.  But not all that glitters is gold…just ask the Chinese government, which is taking a good look at some of the more questionable programs being marketed in the Far East, which generates over 85% of all EB-5 investments.


So, first things first: assuming you already know that an EB-5 investment is the best course, first rule out an individual EB-5.  Why?  Because the wisest decision is the best-informed.  Candidly, given that there ARE at least several solid EB-5 programs (IMHO), the argument for an individual EB-5 is suddenly a lot less compelling that it used to be.  Before –again, IMHO – you had a dozen flavors of garbage from which to choose; an individual EB-5 was a no-brainer.  Today, you have a virtual smorgasbord of lame projects from which to choose…and a handful of cherry-picked good Regional Centers.  Given those few good ones…do you really want Uncle Sam looking over your shoulder and making you create 10 jobs when, in reality, your business is doing great with 7?  Not me.


So then, when you amble down the road of true analysis and end at the door of EB-5 Regional Centers…how do you choose?  I suggest to my clients that they begin by separating immigration objectives from investment objectives.  Today, I can show you a handful of EB-5 RC Programs which are proven and successful green card vehicles but terrible investments; I can also show you some pretty smart investment structures in terms of ROI and protection of the EB-5 Limited Partner's investment…but with questionable job creation logic and projections which are heavily academic (i.e., pretty unrealistic.)


How many EB-5 Regional Centers deliver on both fronts?  Very few.  More on this soon!



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