Continued from page 23 many long-term , full-time jobs . To remedy this situation , developers turn to regional centers and economic methodologies . Accounting for regional impact , industry cluster multipliers , and indirect and induced jobs , the project will likely get much closer to the 500 jobs requirement .
Consider a different example ; not all projects are residential or mixed-use . What about a hospital ? Same numbers — one year construction time frame and a cost of $ 25 million — only this time construction would yield 200 hospital beds . How many long-term , full-time physicians , nurses , assistants , and various levels of support staff are required to run a hospital with 200 beds ? How many executives , accountants , and professional staff are required ? Not something we often think about in the EB-5 field , but likely a lot closer to the 500 jobs than one would think .
Advanced direct investment structures – the new private equity fund model
What is a private equity fund ? In its most basic incarnation , a private equity fund is an entity that aggregates investor funds for future investment into multiple projects at a desirable rate of return . This model is not often used in the EB-5 program because there may be uncertainty about how the funds will be aggregated and distributed , and whether the funds will directly create jobs . But what if the private equity fund knew exactly how the funds would be distributed ? What if the model of the private equity fund was specifically designed to raise EB-5 investor funds to deploy into a wide array of job creating projects ? As we saw above , the regulations allow this model as long as the “ capital is deployed through a single commercial enterprise and all jobs are created directly within that commercial enterprise or through the portfolio of businesses that received the EB-5 capital through that commercial enterprise .” Yet the hurdle of job creation remains ; how could the private equity fund ensure that there would be pro rata job creation for each and every EB-5 invested project ?
Table 2 :
General Partner ( GPs ) LLC / Inc 1
New Commercial Enterprise Limited Partnership 1
100 % Ownership Required Loan With Promissory Note OR Equity Interest
purpose of accepting equity investments from potential EB-5 investors , only this time rather than lending to the JCE , the NCE will lend to a wholly owned subsidiary . From there the wholly owned subsidiary will perform the function of a private equity fund , by lending to multiple JCEs . The role of the wholly owned subsidiary is not absolutely crucial , as it could instead be the role of the NCE to ensure proper job creation pro rata to each investor . However , the wholly owned subsidiary , by performing accounting , marketing , training , pay roll , and additional functions , may qualify as the “ place of principally doing business ” for each wholly owned JCE — meaning that job creation for each and every single JCE will be counted at the wholly owned subsidiary level . This is potentially very important , as the prospect of one JCE falling short of the pro rata requirement by creating nine jobs rather than 10 , resulting in the denial of the investor ’ s petition , may be avoided . The investor will not rely on one specific JCE , rather all created jobs across the JCEs will be divided amongst the investors .
Conclusion
The direct investment model may not suit the needs of every interested party , but for some it may be the more efficient and cost-effective approach . The direct investment model often times requires less documentation in that economist reports are not required , and direct projects that create sufficient jobs need not form relationships with existing regional centers for sponsorship . Additionally , direct investment I-526 petitions are currently adjudicated far more rapidly , regardless of how many times USCIS denies this .
This analysis is in no way meant to drive developers or investors away from the regional center model , but rather , it is only intended to shed light on some common misconceptions . The presented direct models can be treated the same as the regional center model for all intents and purposes .
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Nima Korpivaara is a partner at David Hirson & Partners , LLP . Prior to joining the firm , Nima was a senior EB-5 attorney at Fragomen , Del Rey , Bernsen & Loewy , LLP , and worked inhouse for a Fortune 100 company . Nima can be reached at nk @ hirsonimmigrationlawyers . com
Wholly Owned Resource Center ( principal place of business ) lending to wholly owned subs **
Nima Korpivaara
LLC 1 LLC 2 LLC 3 LLC 4 LLC 5
Compare this chart to Table 1 . It is essentially the same structure , but it follows the regulations word for word . Capital is deployed through a single commercial enterprise , and all jobs are created directly within that commercial enterprise or through the portfolio of wholly owned businesses that received the EB-5 capital from the wholly owned parent , the new commercial enterprise . Again , the NCE is formed for the
24 EB5 Investors Magazine