Thursday, June 30, 2011

Still on USCIS EB-5 Stakeholders Call but I found something interesting...

I'm still on the call, marveling at the tremendous diversity in domain expertise demonstrated by the folks calling in with questions (i.e. brilliant to utterly sans clue (-:) and I noticed this on question 15 of the Meeting Q&A...see what I highlight and watch the bullet USCIS dodges, accidentally or intentionally:

Credit for All Jobs Saved or Created

It is our understanding that when EB-5 investor money provides some of the funds for a business, the EB-5 investors get credit for all the jobs saved or created. Is this true?

Response: Yes. The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur by more than one investor, provided each petitioning investor has invested or is actively in the process of investing the required amount for the area in which the new commercial enterprise is principally doing business, and provided each individual investment results in the creation of at least 10 full-time positions for qualifying employees. The establishment of a new commercial enterprise may be used as the basis of a petition for classification as an alien entrepreneur even though there are several owners of the enterprise, including persons who are not seeking classification under section 203(b)(5) of the Act and non-natural persons, both foreign and domestic, provided that the source(s) of all capital invested is identified and all invested capital has been derived by lawful means. See 8 CFR 204.6(g).

Okay, all that is fine and correct but...what about job preservation??  Given my penchant for reading too much into everything and overanalyzing, it may be that the questioner was failing to distinguish between job preservation as relating to a statutorily-defined "troubled business" and plain old new job creation.  Maybe the good folks at Laguna Niguel DID answer the question fully!

For me, however, a more comprehensive question is begged: 

When a project involves a troubled enterprise but the EB-5 investment will both save jobs AND create new ones, how is the job count methodology between the two different treatments of head-counting reconciled?

I would sure love to have the answer to that.  Right now, the only way I can be sure that my RC client is protected is by separating the first tranche of investment and seeking adjudication under the "troubled business" parameters until we think we've got the number of EB-5 investors who will preserve the existing jobs...and then move forward with future tranches creating new jobs.

It would sure be great to be able to combine both job preservation and job creation under a single adjudicatory protocol.  Unfortunately for everyone, this has not been addressed in law, regulations, or memoranda...maybe it will be soon!  USCIS, thoughts?

Monday, June 27, 2011

1999 Flashback: My Thoughts on the Internet and the Practice of Law

Just found this, posted on my old "Port of Entry" web column (the word "blog" didn't exist) in 1999.  Seems like the right time to rerun it:

Top Ten Reasons Why Web-Based Immigration Firms are Superior to Conventional Practices


10. Email creates a written record of all communications for both the client and attorney.

9. The client can constantly refer back to complex explanations, promised attorney completion dates, etc., and not have to rely on memory.

8. The attorney who masters the web has the world's resources in hand in preparing NIW, Extraordinary Ability, and other visas requiring thorough analysis in a reader-friendly format.

7. The attorney can handle clients from any part of the world, at any time, without the expense of client travel.

6. Because of the global market a successful firm can develop, specialization is encouraged, and the attorney has a more limited field of professional focus.

5. The attorney and client can take advantage of emerging technologies, such as real-time text conferencing (just around the corner for, on-line videoconferencing, etc., preserving a record of communications.

4. You don't have to see the attorney on a bad hair day.

3. The attorney's brain works more efficiently because of the absence of a necktie.

2. You can print out the weekly e-newsletters to make great bird cage liners for the Saturday morning cleaning and....


1. The Web is THE future of immigration client management, offering a level of service, responsiveness, information reach, and commitment no limited local law practice can offer. Climb aboard, or get out of the way!


Sunday, June 26, 2011

Kudos With a Disclaimer

My good friend from EB-5 Land, Michael Gibson, recently published an internal "EB-5 Yearbook", memorializing some of the people, events, and developments in our very specialized little legal community this past year.  I was delighted to see an entry about me in the yearbook...and had to smile when I read Michael's disclaimer (which effectively gives the article an unwritten subtitle akin to "Jose and his Big Mouth"...) (-:

Truth be told -- and, of course, that's what I tend to do, much to the dismay of many -- there are a lot of folks out there who are annoyed when I reveal truths which disrupt their less-than-truthful money-making.  I never name names but as we all pretty much know, it's not hard to figure things out when there are so few visible players.

Thanks for the plug with the caveat, MG, and remember, Readers: if you aren't disrupting the status quo, the wool is rapidly growing over your eyes!

JEL in Gibson yearbook

Tuesday, June 21, 2011

Something Solid...Something Real? Challenging the Residential Real Estate Market

Foreign investors snapping up real estate is nothing new in South Florida, but record numbers of them have poured in so far this year, eclipsing anything we've seen before.  Depending on whose numbers you believe, cash buyers from overseas have made up more than half of the closings in our area in 2011 -- some put it at +60%.

The cycle which got us here is, at first blush, predictable:  overleveraged buyers couldn't (and can't)  keep up with the big mortgages associated with properties purchased at inflated prices, bank foreclosures skyrocketed, bank lending rules tightened dramatically, and at a given point, cash buyers - both domestic and foreign -- conclude that the time is right to buy. No surprises at that level of analysis.

But when examined a bit more closely, in the context of not only the real estate market but also in the context of the exploding world of EB-5-based U.S. migration, the logic behind the current rush toward residential real estate is a bit more nebulous.  Despite the abundant residential real estate inventory which continues to dog the national market, a number of new and pending EB-5 Regional Centers are offering residential construction as the project basis.  The expansive marketing by the EB-5 industry -- particularly in the largest global investor market, China -- seems to have produced a collective illusion that all is well and fine with U.S real estate...the analysis doesn't go beyond the indisputable facts that:

#1- In the current U.S. econmy, Cash is King and

#2- Prospective Chinese investors have lots of cash burning a hole in their great, big, collective pocket.

But does that make sound fiscal sense?  I have a hard time with this, given the fact that I am spreadsheet-challenged (i.e., you do NOT want me analyzing your balance sheet).  As a serious student of the obvious, however, certain things are more apparent to me than ever before: for years before the real estate crash, there was no logical relationship between skyrocketing residential values and stagnant rents.  No matter how you twisted the numbers, could it ever really make sense to spend $500,000 on a condo which could be rented for $1500 per month, unless you were hoping to flip the property on the next round of appreciation greed?  And why was it that commercial real estate values, even when things were horrific, never recoiled as dramatically as residential?

I have my theories.  First of all, just as the Internet democratized the stock market, the residential real estate market democratized speculative greed.  Before, real estate "flipping" was something undertaken by developers and speculators, not the general public.  But inflate values enough, tell people to tap their fictional equity lines, and everyone is a Mini-Trump.  And those are the folks whose second properties are clogging up the foreclosure process: people who had no business getting a second home (or, for that matter, investing in far more home than they could afford thanks to some sort of unthinkable mortgage mutation).  People who wanted to do what Cousin Bobby did: make $100,000 in three months selling their overvalued condo to a person even greedier and dumber than themselves.  (As far as "why not so bad in the commercial property sector", I have a simple theory: while most speculators had purchased and sold residential properties before, not many had dabbled in commercial. Fear factor, basically.)

For a parallel understanding of what I'm saying, consider the stock market.  Its "democratization" has been totally transformational: 15 years ago, market prices of publicly traded securities were subject to a certain degree of stability, if only because the information to which investors were privy was limited by where we were technologically.   If you were a "normal" investor, you relied on your portfolio manager and maybe read the Wall Street Journal; if you were a heavily involved trader, you subscribed to a lot of different publications, maybe had one of those expensive, real time ticker-tape pagers.  (My cousin had one of those years ago, prompting several near-heart-attacks over lunch in the early 90s.)  Sure, Charlie Schwab and those like him had been there in the discount brokerage business all along, but it was not until the Internet was mainstream that the securities business changed.

Today, the stock market valuation process is no longer derived from a relatively stable process involving a few hundred expert entities, publications, and pundits to an irrational, purely emotional roller coaster driven by Web-based chatter, debate, and, more often than not, uneducated conjecture.  (Does anyone really make their investment decisions from a guy screaming hysterically on TV??)  The fact is that today, if the Mr. Bernanke burps...your kid's college portolio could well be affected.

Which brings me back to the subject of residential real estate in the EB-5 context: as any immigration attorney will tell you, the passive ownership of residential real estate will not, in and of itself, qualify you for a working visa.  A guy opening a $100,000 hair salon may well qualify as an E-2 Treaty Investor (assuming his nationality permits such status); a lady buying a $20 million mansion and doing nothing else does not.  Since the Immigration Act of 1990 (maybe even earlier, but I was a wee lad and consular officer then), one thing has been clear: for any investment based visa -- including the pre-Regional Center individual EB-5 -- an "active" investment is required; passive holdings in property will never qualify as an investment for U.S. visa purposes.

Fast forward to the EB-5 market today: do NOT make the common mistake of thinking that just because a Regional Center investor may not have day to day operational control of his project, the investment is not "active".  Under the somewhat cryptic language of the regulations, it is settled that the USCIS will accept the Limited Partnership investment of an EB-5 visa applicant as qualifying, provided he or she meets certain defined criteria.  (We never use the term "passive investment" to contrast a Regional Center EB-5 investment from an individual EB-5 investment, simply because it makes our collective AILA karma quiver in fear of an RFE)  So it is settled that an EB-5 Regional Center investor does not have to be "hands on" on a daily basis. The "activity" in such cases is the job creation, or, using Reaganesque terminilogy, the "trickling down" of the EB-5 investor funds into new American jobs.  My question:  how "active" can a Regional Center project be when its cornerstone is the construction or rehabilitation of residential space?  (Agreed, we can count construction jobs based on the USCIS' more recent rules but then what?)

Even a guy like me can do the math: an EB-5 RC investor needs 10 jobs (albeit indirect and induced, as well as direct) for his or her $500,000.  That's $50K per job (I can feel Scott Barnhart, my esteemed economist/collaborator, getting lightheaded with my choice of words.) When a residential EB-5 Regional Center project entails collateral services such as assisted living, vacation rental management, etc., it is clear there are other jobs and impacts.  But when it's just about building new homes and selling them...where are the jobs?

The quarky science of econometrics, IMPLAN, RIMS, Son of RIMS, etc. notwithstanding, it is important for us all to remember that at the time of the I-829, USCIS will be looking at only one thing in determing whether an investor gets his or her permanent residency: job creation. Prove it by head count or prove it by indirect job creation only (as masterfully structured by the inimitable CMB), but prove it...or get your I-829 denied.

So, as I sit here in beautiful South Florida, with it's 13% unemployment rate, looking out my office window at vacant condos listed at 30% of what they sold for two years ago, I can't help but ask myself: If I were an EB-5 investor, would I want my green card destiny tied to the residential real estate market? 

No way.  Jose.

P.S. Take a look at this WSJ article to see how foreign money is propping up residential real estate not just in the U.S. but worldwide:     Wall Street Journal Article on Foreign Real Estate Investors

Saturday, June 18, 2011

San Diego EB-5 Workship with Brian Su

Brian has done it again: with an All Star roster of speakers, his San Diego EB-5 event is proving to be another invaluable experience for those of us in this sector. As participants were greeted with the beaming smile of Aijun Cheng (Chief Investment Officer of Kantex Oil & Gas, LLC, currently initiating Regional Center formation via our own EB-5 Resource Center team) at the registration desk, it was apparent that this was anything but another dull, half-hearted event.  It's not often you get to see a big roomful of people eager to discuss a subject, but this is the dynamic environment Brian has been able to recreate yet again.

The morning started with my good friend Michael Gibson of USAdvisors making a call for support of IIUSA, the EB-5 industry group.  WIth the Pilot Program due to sunset relatively soon, the need to make the EB-5 program a permanent part of the U.S. immigration landscape is pressing.  Next up was Fragomen's David Hirson, who I had the privilege of meeting for the first time.  His presentation was full of insightful observations from the perspective of the world's largest immigration law firm...something valuable to all of us, attorneys and non-attorneys alike.

My friends Roger Bernstein and Karen Caco will be speaking on the EB-5 petition process and consular processing next, and after lunch we'll have an afternoon full of input from the Chinese agencies who continue to fuel the bulk of EB-5 investment dollars which make their way to the U.S.

As always, the best part of Brian's seminar is the networking and contact development opportunities incumbant with the event.  Ours is a small community, and the opportunity to share war stories with others who are seeing the ongoing mutation of EB-5 adjudication practices is priceless.  Imagine getting into a jaunty "my RFE is bigger than your RFE" debate with a colleague! (True story.)

Word of a Regional Center approval from a seminar participant causes impromptu applause from the audience; I smile, realizing as always that RC approval is not the finish line.

It is only the starting gun.