Regional Center FAQ

What is a Regional Center?

The United States Citizenship and Immigration Services (USCIS) defines a Regional Center as “any economic unit, public or private, which is involved with the promotion of economic growth, improved regional productivity, job creation, and increased domestic capital investment.” Simply put, a Regional Center is an entity (often in the form of a Limited Partnership or LLC) that is designated by the USCIS to accept foreign investment from immigrant investors who in return obtain permanent residency (so-called “green cards”). To receive official government designation the entity must submit an application to the USCIS basically showing the following:

  • How the Regional Center plans to focus on a geographical region within the United States and how the Regional Center will achieve the required economic growth within this regional area.
  • How in verifiable detail (often with the assistance of economic models prepared by economists) jobs will be created directly or indirectly through capital investments made in accordance with the Regional Center’s business plan.
  • The amount and source of capital committed to the project and the promotional efforts made and planned for the business project.

The USCIS keeps a list of approved Regional Centers by state which you can access here. Keep in mind that not all Regional Centers on the list have current projects. Also, there are many, many more Regional Centers in the approval pipeline and the total number of approved Regional Centers is expected to double within the next year or two so the competition for foreign investors will get even fiercer. There is a misconception that Regional Centers are government entities. They are not, just like a bank, while required to meet federal and state regulations, is not. There are a couple of Regional Centers which are publicly run, but the vast majority of Regional Centers are for-profit private entities. (A general description about the EB-5 program can be found here.)

Once official designation is received, a Regional Center will market a specific EB-5 project to investors overseas (and in some limited instances foreigners already residing in the U.S. on non-immigrant visas), pool the funds and invest in a project that meets the legal requirements of the EB-5. Most Regional Centers rely on overseas marketing consultants (a/k/a brokers) for overseas marketing. Sometimes, the owner of the project (e.g. the real estate developer in a real estate project) will establish a Regional Center to finance its own project. In other instances, the Regional Center plays the role of the financial intermediary between the foreign investors and the project owner similar to a bank or fund.

The EB-5 Immigrant Investor Visa program was introduced by Congress in 1990. The Regional Center Pilot program was subsequently introduced in 1993, so it is not new. There are a couple of driving forces behind the recent interest in the EB-5 program as a source of alternative capital: the most obvious being the downturn in the U.S. economy which has dried up traditional financing sources, especially for construction projects. (But EB-5 investments are not limited to real estate projects.

Any project that can create 10 full-time jobs per investor can potentially be structured as an EB-5 investment. It’s just that in New York we don’t have wind farms or ski resorts – just buildings.) In February 2001, The Wall Street Journal featured a story about EB-5s as a source of alternative capital which you can read here. (You know you’ve gone mainstream when the WSJ starts covering your industry.) Another driving force behind the boom of EB-5s is that Canada, among other changes, recently changed its minimum investment immigration threshold from approximately $200,000 to $400,000 making the U.S. EB-5s more attractive to overseas investors looking to immigrate to North America.

The original EB-5 program (often called “Direct EB-5s”) requires that an investor invest a minimum of $1 million dollars to obtain conditional permanent residency (called an “I-526 filing”) and then two years later show the creation of 10 direct jobs to remove the conditions and obtain true permanent residency (called the “I-829 filing”). This means that at the I-829 filing, the investor has to show through payroll records and I-9s and other documentation that 10 or more jobs were actually created, among other technical requirements. The $1 million minimum requirement can be reduced to $500,000 if the Regional Center’s project is located in what is called a Targeted Employment Area (TEA). All of this still holds true and Direct EB-5s are still filed. Direct EB-5s, however, account for less than 10% of all EB-5s filed nowadays. This is because through the Regional Center Pilot Program has one great advantage over the Direct EB-5s: the USCIS will allow the counting of “indirect” jobs created through the project.

This is achieved through various economic models such as RIMS II or IMPLAN. Without going into too much detail, basically the USCIS will accept indirect job numbers that can be deduced through the amount of investment, the location of the proposed project and the particular industry cluster that the project belongs to. Therefore, at the I-829 stage, the investor only has to show that the project went ahead according to the original business plan with the required funds expended to meet the job creation requirement.

Admittedly this is a very simplified explanation of the process, but suffice it to say that this is a good thing – and sure beats gathering payroll information for all the employees, keeping track of construction jobs, and then finding out that one of the employees had false papers so can’t be counted.

I just mentioned that the minimum investment is reduced from $1 million to $500,000 if the project is located in a TEA. A TEA is a “rural area” or “high unemployment area” – each with exacting legal definitions. I won’t discuss the “rural area” definition, but you can take my word for it that New York City does NOT qualify. A certain region will be accepted by the USCIS as a TEA if an authorized body of the government in the state in which the project is located certifies that the geographical or political subdivision of the area has an unemployment rate that is 150% or more of the national average. (There is currently a bit of uncertainty regarding what constitutes a legitimate “geographical or political subdivision.” I’ll update this section as the USCIS provides more clarity in the coming months.) If the project is located in a TEA, the minimum investment becomes $500,000 for both the Direct EB-5s and the Regional Centers.

No. While it is possible to structure a perfectly legal $1 million/investor EB-5 project, the seeker of financing should understand that the EB-5 market won’t support such a project. The foreign investor’s primary motive for investing in EB-5 projects is to obtain a green card. The potential investor will look at which project is more secure and provides the best possibility of job creation. So in a way, EB-5 projects are a commodity to the investor that is easily interchangeable; and no one will pay twice as much for the same product. (In fact, a recently launched Chinese EB-5 portal is aptly titled “EB-5 Supermarket.”)

Depending on the core competency of your organization, establishing a Regional Center may or may not make sense. For example, if you are a real estate developer with a steady source of projects that require alternative financing and you are willing to learn about the EB-5 process and have the overseas marketing capability, the time and expense in setting up a Regional Center would be worth the investment.

On the other hand, if you have a project (or two) that needs alternative financing, getting your project “adopted” by an existing Regional Center operating in your particular region could be a more attractive option.

Please email me to arrange a complimentary consultation. I am also available to give presentations to your organization regarding the ins and outs of the EB-5 process.