"EB-5 Visas and the Ramifications for Regional Development"

May 9, 2012

Economic Consulting Group, LLC

The ECG Team

• Riley Moore• Lorrie Brown• Lizbeth Martin-Mahar• Hart Hodges• Dave Wallace• Kari Qvigstad

2

Employment-Based Immigration - Fifth Preference (EB-5)• EB-5 Visa

– Started in 1990– Invest $1 million or $500,000 in a targeted employment area (T.E.A.)– Need to directly create jobs for at least 10 U.S. workers

• EB-5 Regional Pilot Program (Regional Center)A Regional Center (RC) is defined as "any economic unit, public or private, which is involved with the promotion of economic growth, including increased export sales, improved regional productivity, job creation, or increased domestic capital investment.

– Pilot program started in 1992 (extended until September 30, 2012)– Invest $1 million or $500,000 in a targeted employment area (T.E.A.)– Need to either directly or indirectly create jobs for at least 10 U.S. workers– Investor can be limited partner– 3,000 EB-5 green cards each year are held for people who invest in

designated "regional centers.“

3

USCIS RC EB-5 Homepage

4

“It should surprise no one that citizens of other countries are eager to invest in the U.S. economy. And along with the positive message a healthy and productive program like this sends to investors around the world, the core purposes of the EB-5 Regional Center Program are to generate capital investment and create jobs in communities around the United States. I want to underscore that both of these benefits are accomplished at no cost to taxpayers, and are not reliant on what is currently a very restrictive credit market. Under the program, in order to become a non-conditional lawful permanent resident, a foreign investor must prove the creation of 10 new jobs. The job creation requirement is central to the program, and ensures that foreign investments translate into tangible benefits for Americans. We can all acknowledge that the issue of immigration is a difficult one. But I view the Regional Center program as less about immigration than about job creation and capital investment in American communities”.

Senator Patrick Leahy (D-Vt.), Hearing On "Promoting Job Creation And Foreign Investment In The United States: An Assessment Of The EB-5 Regional Center Program" July 22, 2009

5

United States not Unique

Immigration through investment is not unique to the United States. Other countries with similar programs:– Canada– Australia – New Zealand – United Kingdom

6

EB-5 RC Options

• New commercial enterprise and create new full-time jobs

• Existing and troubled enterprise and save full-time jobs

7

Complicated and

detailed process

Source: http://www.whicheb5.com/flow-chart-eb5-visa-application.php 8

Program of Contradictions & Limited Transparency

• EB-5 is an economic development program that is administered by a federal agency that is mainly focused on “immigration enforcement”

• Continues to evolve and limited transparency• Regional center pilot program still not permanent

and continues to be repeatedly extended for three year periods (extended again until Sept. 2012)

• Up until recently, review of RC’s economic impact reports were conducted by non-economists

9

10

More Recent Local

Coverage

11

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

FY06 FY07 FY08 FY09 FY10

Total EB5 Visas Issued, by Category, FY06-FY10

EB-5 - $1M EB-5 (TEA) - $.5M

Regional Center - $1M Regional Center (TEA) - $.5M

Source: U.S. Department of State: Report of the Visa Office

12

* Estimate of visas issued to the investor and dependents** As of March 2012, Source: U.S. State Department

158

744 806

1,360

4,218

1,885

3,463

2,405

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12**

Total EB-5 Visas Issued*

13

Top 5 EB-5 CountriesPercentage of Total Visas Issued

FY2006 FY2008 FY2009Rank Country % Country % Country %

1 S. Korea 47% S. Korea 48% China 47%2 China 12% China 25% S. Korea 21%3 Taiwan 8% U.K. 8% U.K. 8%4 Canada* 6% Taiwan 3% Taiwan 4%5 U.K. 5% Canada 2% Canada 2%

Source: U.S. Department of State, Visa Office* Tied with Netherlands at 6%

14

Top 10 Countries Issued EB-5 Visas

Source: U.S. Department of State: Report of the Visa Office

# %1) People’s Republic of China 772 412) Republic of South Korea 295 163) Great Britain/Northern Ireland 135 74) Taiwan 94 55) India 62 36) Iran 55 37) Mexico 50 38) Canada 45 29) Russia 41 210) South Africa 34 2

15

FY06 FY07 FY08 FY09 FY10

Africa 14 12 6 70 58Asia 610 649 1,188 3,340 1,358Europe 124 105 192 571 289North Am. 45 16 40 142 111Oceania 0 1 2 16 24South Am. 9 10 15 79 45

0500

1,0001,5002,0002,5003,0003,5004,000

EB-5 Visas Issued, By Region, FY06-FY10

Source: U.S. Department of State: Report of the Visa Office

16

Economic Impact Analysis Steps

1) Identify the targeted area of the proposed regional center

2) Identify the new expenditures that are being introduced

3) Identify sectors affected4) Incorporate transaction value dollars adjusted

for year of the model5) Run the input/output model and evaluate the

change in employment, output, value added and labor income by industry sectors

17

18

Some Drivers for Direct Jobs

• Business plan

• Square footage (and expected use)

• Projected business revenue

• Average employment per industry

19

Components in the Economic Report• Defining the region: characteristics• How the regional center investments will affect the

regional center’s economy– Direct, indirect and induced employment, output & value-

added impacts• Assumptions behind the economic impact results for

the proposed project• Demonstrate that the proposed project activity

results in new jobs• Competition with existing businesses

20

Latest USCIS Issue:Tenant-Occupancy Methodology

• USCIS has clamped down on allowing the counting of future tenants jobs towards the regional center’s direct job count

• USCIS is only counting those jobs resulting indirectly from construction activity and applicable building management

21

Explosion in Supply of Regional Centers

* As of March 2012, Source: USCIS

22

1120

45

77

125

218

0

50

100

150

200

250

2007 2008 2009 2010 2011 2012*

Num

ber o

f Reg

iona

l Cen

ters

States with 5 or more RCs*State # %California 58 27Florida 20 9Texas 14 6Washington 13 6New York 10 5Georgia 6 3Michigan 6 3Nevada 6 3Arizona 5 2Hawaii 5 2Illinois 5 2

* As of March 2012, Source: USCIS

23

24

States currently with no RCs*

* As of March 2012, Source: USCIS

AlaskaArkansas

ConnecticutDelaware

MinnesotaNebraska

New MexicoRhode IslandWest Virginia

25

13 Regional Centers in Washington

Aero Space Port International Group (ASPI Group) Regional CenterAmerican Life Ventures Everett, WashingtonAmerican Life, Inc. - Lakewood Regional CenterAmerican Life Seattle RC | Gold Rainbow | Freedom FundAmerican Life Ventures, Tacoma, WashingtonEastern Washington Regional CenterFarm for America Regional Center Path America Sonoco, LLCSeattle Regional CenterTwin Development LLC Regional CenterWashington Regional CenterWestern Washington Regional Center LLCWhatcom Opportunities RC

Source: U.S. Citizenship and Immigration Services

26

Regional Centers: Public vs. Private

Source: U.S. Citizenship and Immigration Services

6

27

Top Regional Center Firms/Agents

American Life, Inc. Henry Liebman

Can Am Enterprises, LLC Tom Rosenfeld

Invest in the USA Stephen-Yale Loehr

New Kid on the Block with New Paradigm?

28

Introducing 520 Bridge Project in Shanghai

29

Other Issues & Patterns

• Priced too low……as RMB strengthens the cost of entry becomes more affordable…..cost of apartment in Shanghai ~$600K…..get green card for whole family for $500K

• Trend towards investment following students studying abroad (based on discussions with agents in China)….universities can be drivers

30

Conclusions

• Supply vs. Demand: Big increase in RCs in recent years but RCs need to assess demand

• USCIS moving towards more transparency and permanency

• Transition from private to public projects if current policies stay in place

31

THANK YOU

QUESTIONS?

ReminderPacific Northwest Regional Economics

ConferenceSeattle Westin May 17-18

www.pnrec.org