By Michael G. Homeier, Principal, Law Office of Michael G. Homeier – Originally published in the fall 2021 IIUSA Regional Center Business Journal
While EB-5 Regional Center Program participants hold their breath awaiting reauthorization of the “indirect program,” some pro-active regional center principals aren’t sitting on their heels waiting. Instead, they are turning to the original EB-5 Immigrant Investor Program, the “direct program,” regardless of if and when reauthorization occurs.
These regional center principals still have all the contacts, connections, experience, and education accumulated from years of success in the Regional Center Program and are leveraging all those assets in order to keep working. The Direct Program is viewed as limited by a lower job creation ceiling counting only “payroll-provable” jobs, compared to the high ceilings allowed by econometric-modelled indirect job creation under the Regional Center Program. To be sure, with significantly fewer “count-able” jobs, direct projects can accommodate fewer investors and thus produce smaller raises. But modest-sized projects with raises of up to a dozen or two dozen investors can be enough to enable projects with total budgets in the $10-30 Million range (including EB-5) to be green-lit, in particular those that will generate large numbers of direct jobs such as manufacturing, services, restaurants, health care, education, even tech.
To make it work, of course, requires careful planning and meticulous execution, in particular with regard to the job creation obligation, as there is less margin for error than that often afforded by indirect job calculation. But then, success in EB-5 has always required careful planning and follow-through, even for indirect projects with larger capital stacks, larger EB-5 raises, and highly complex structures. So, what’s different? How does Direct EB-5 compare to Indirect Regional Center EB-5? What must be done differently than the old familiar RC projects?
“Doing Direct” utilizes all the prior education, experience, practices, strategies, and people involved in “doing Indirect” – except where it doesn’t. Most of what Regional Center principals have done before with Indirect remains relevant to Direct. There’s no need to abandon all past practices or learn an entirely new approach—just a modified one. The following are some highlights of the primary differences for the seemingly novel Direct EB-5 scenario, from the areas of immigration and jobs, securities/corporate compliance, business plan writing, and examples of how economists can contribute validation to Direct job counting.