25 Nov The Ins and Outs of Pooled Direct EB-5 Investments

The more well-known avenues to secure a green card via an EB-5 investment include an individual investor either opening his/her own business or investing in a Regional Center project. Recently, another avenue called a “pooled” Direct Investment project has become popular in industries that create a significant number of direct jobs, such as multi-unit restaurants and supermarkets.

The EB-5 program has three general requirements. The foreign applicant must (1) make a capital investment in the amount of $500,000 or $1,000,000[1]; (2) in a new commercial enterprise (NCE); (3) that creates at least 10 new, permanent, full-time jobs.

The main difference between a Regional Center project and a pooled Direct Investment project is the job creation requirement. USCIS permits a Regional Center project to count both direct and indirect jobs, while a Direct Investment requires that each individual’s investment in the NCE result in the creation of at least 10 direct W-2 jobs (or preserved jobs in the case of a troubled business) by the NCE.[2]

Although a Regional Center project affords the advantage of counting both direct and indirect jobs, a Direct Pooled Investment project provides certain benefits to the investors involved. It is generally more expeditious to invest in a Direct Investment project as investment need not wait for the creation of a new Regional Center or amendment to an existing Regional Center prior to their selected project and investment being eligible for approval. Additionally, since indirect jobs will not be involved, investors can avoid the additional expense of obtaining an economic impact report. Finally, Direct investors can negotiate a more active role in the NCE’s business, which may alleviate concerns over the recent news of investment scams involved in Regional Center projects.

A Direct Pooled Investment project does not readily lend itself to all types of industries. For example, a project involving the construction of a retail building or hotel would be unlikely to create sufficient direct jobs to support the job creation requirements to support the capital sought from immigrant investors, as most jobs would be construction-related (indirect).

Multi-unit restaurants and supermarkets, however, provide an ideal model for pooled Direct Investment. An excellent example is Lucky’s Market (http://www.luckysmarket.com), a supermarket chain that provides an extensive selection of farm fresh and locally grown produce along with top quality naturally raised meats, seafood, fresh daily prepared foods and comprehensive natural living and grocery departments. Lucky’s Market continues to grow and is currently represented in 11 states from Florida to Wyoming.[3] Each new store has been developed in a targeted employment area and is designed to create in excess of 10 full-time jobs per investor.[4]

Direct Pooled Investment is an excellent option in industries that create a significant number of direct jobs. Before choosing an EB-5 investment option, however, one must carefully consider the type of EB-5 investment most appropriate for a foreign investor’s individual needs and diligently investigate the suitability of the project for EB-5 investment. Whether one chooses a Regional Center project or Direct Investment project, engaging an experienced team of EB-5 professionals to assist in the process such as those at www.ecouncilinc.com is essential to success.

To inquire regarding our turnkey customized EB-5 services, including our best-in-class Matter of Ho-compliant business plans, project assessment due diligence and a wide range of ancillary services, please contact us at info@ecouncilinc.com.

e-Council Inc.’s website, newsletter and other forms of communication contain general information about legal matters. The information is not legal advice and should not be treated as such. You must not rely on the information on this website as an alternative to legal advice from an attorney or other professional legal services provider. For specific questions about any legal matter please consult with an attorney or other professional services provider.

[1] The minimum qualifying investment either within a high-unemployment area or rural area in the United States is $500,000. A targeted employment area is an area that, at the time of investment, is a rural area or an area experiencing unemployment of at least 150 percent of the national average rate. A rural area is any area outside a metropolitan statistical area (as designated by the Office of Management and Budget) or outside the boundary of any city or town having a population of 20,000 or more according to the decennial census. (http://www.uscis.gov/working-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/about-eb-5-visa)

[2] Troubled business means a business that has been in existence for at least two years, has incurred a net loss for accounting purposes during the twelve- or twenty-four month period prior to the priority date on the alien entrepreneur’s Form I-526, and the loss for such period is at least equal to twenty percent of the troubled business’s net worth prior to such loss. For purposes of determining whether or not the troubled business has been in existence for two years, successors in interest to the troubled business will be deemed to have been in existence for the same period of time as the business they succeeded.  8 C.F.R. § 204.6(e).

[3] http://www.luckysmarketeb5.hk/USCIS-approval.html

[4] Id.