EB-5 Regional Center Best Practices: What the Most Successful Regional Centers Have in Common

The EB-5 Regional Center best practices that separate consistently successful regional centers come down to a single principle: by understanding the priorities of immigrant investors and taking steps to build trust, leading Regional Centers create a foundation that allows them to last beyond a single project.

94% of investors who participate in the EB-5 Immigrant Investor Program do so by investing through an approved Regional Center. Increased demand for Regional Center projects since the passage of the EB-5 Reform and Integrity Act of 2022 (RIA), especially projects in rural areas and other reserved categories, has provided an opportunity for new players to enter the space.

But risk-averse EB-5 investors don’t want to work with just anyone; they want to feel comfortable that their investments will be protected and that job-creation milestones will be met so their immigration petitions will be successful. If your goal is to fundraise beyond just one project and attract EB-5 investors again and again, you have to go above and beyond.

We’ve worked with many Regional Centers over the years, and there are some commonalities we’ve seen when it comes to those RCs that are able to keep investors happy and continue to thrive. Weathering changes in EB-5 can be difficult, so to last, it’s wise to follow the trail set forth by those who’ve found consistent success. Here are just a few of the things successful Regional Centers have done to solidify their place in EB-5.

How successful Regional Centers connect with prospective EB-5 investors

EB-5 investors come from all over the world; some already live in the U.S., while some are still in their countries of origin, and they have varying levels of familiarity with America in general and US investing in particular. Finding ways to connect with those investors and explain the EB-5 project to them will go a long way toward building trust.

For example, some of your investors may not speak English fluently. Translating offering documents into their native language could help them feel more comfortable. And regardless of language barrier, a face-to-face meeting (whether in person or over the web) will allow them to ask direct questions and get a feel for your level of knowledge and experience.

As JTC’s Edward Smith noted at an IIUSA event, investors have basic questions that require competent answers before they’re even willing to consider working with a Regional Center.

“What kinds of jobs are actually going to be created as a result of this investment?” he said. Others have noted that shovel-ready projects (or those where construction has already begun) are more likely to gain investor interest.

Others have noted that shovel-ready EB-5 projects – or those where construction has already begun – are more likely to gain investor interest.

“Do you have the permits to build? Do you have a contract with the general contractor? What is the construction schedule?” asked Joey Barnett of WR Immigration at a JTC webinar.

More than anything, EB-5 investors want to know that their Regional Center understands what this investment means to them.

“Not everybody who does EB-5 has tens of thousands of dollars sitting around,” said Barnett at another IIUSA event. “This is their life savings, and they’re scraping through as much as they can or taking out additional debt to fund EB-5.”

These investors may get only one shot at this, and they want to know you’ll take care of their funds throughout the EB-5 process.

How top Regional Centers protect EB-5 investor funds before deployment

For investors living outside the U.S., the process of making an EB-5 investment can be quite complex. For example, some countries impose remittance limits that prevent an investor’s full EB-5 funds from being transferred through a single transaction. Providing these investors with a solution that allows them to invest while complying with EB-5 rules is critical to their participation.

It is possible for a petitioner to begin the EB-5 process with only a partial investment, but since this can present compliance challenges, many investors would prefer to hold off until all of their funds are in the U.S. With so many investors, some of whom may be making multiple transfers to reach the minimum investment amount, managing deposits can be tricky.

That’s why JTC provides EB-5 escrow services with individual escrow accounts for investor deposits before they are deployed. With JTC as escrow agent and administrator, investors can access our online portal for 24/7 updates on the status of their funds, which won’t be released without approval. And if there is a problem with the project (for example, if it can’t meet its raise), funds can be returned to investors or held in escrow before being deployed to a new project.

Since the minimum EB-5 investment amount in a Targeted Employment Area (TEA) is $800,000 under the RIA, holding investor deposits at a single financial institution would result in uninsured deposits beyond the $250,000 FDIC insurance limit. In addition, many large banks won’t accept EB-5 deposits (or those from certain countries) because of compliance issues.

“EB-5 is not large enough for them to invest the time to come up with a compliance program that would satisfy regulators,” said JTC’s Jill Jones at a webinar on EB-5 banking.

The solution is to work with smaller regional banks, and to spread investor deposits across multiple institutions to achieve full FDIC insurance coverage. With JTC’s independent EB-5 banking solution, Regional Centers can leverage existing banking relationships or take advantage of JTC’s relationships to work with the banking partners that make the most sense for the project, while also providing investors with peace of mind that their deposits are protected before they are deployed.

Aiding EB-5 investor applications with thorough compliance checks

Even before the RIA, many top Regional Centers chose to retain the services of a third-party fund administrator.

“There should be third-party control over the funds,” said Michael Goldberg of Akerman LLP.

Among the mandates of the RIA was a requirement for the use of an independent fund administrator to act as cosignatory on all transfers of funds from the NCE to the JCE. JTC takes its role as cosignatory seriously, monitoring for specific release triggers and never releasing funds until those triggers have been met. We also work with Regional Centers to retain records for the mandated period and ensure all movement of funds is tracked.

“One of the challenges fund administrators have is a reputation of slowing things down or getting in the way,” said Jill Jones. “And to that, I say, make sure that you’re choosing someone who’s experienced and they know what to look for. That really does cut down on the timing”

The RIA does give the option of obtaining a waiver for the fund administration requirement under certain circumstances, one of which is when the NCE undergoes a yearly financial audit. While audits can be beneficial, they are only able to catch errors after the fact, and don’t provide the level of oversight that a competent EB-5 fund administrator can.

“There is a lot of work being done on a regular basis by a fund administrator,” said Reid Thomas. “It’s very, very different than a GAAP audit.”

However, as Thomas noted, audits and fund administration serve different functions, and the way to provide investors with full transparency is to combine them.

“The best and most reputable Regional Centers out there are doing both of these things,” said Thomas.

Proper recordkeeping, a key function of a third-party fund administrator, comes into play when it’s time for USCIS EB-5 audits. Under the RIA, USCIS must audit each Regional Center at least once every five years. As we’ve seen from clients who’ve experienced USCIS audits, the amount of information being requested is no joke, and without a fund administrator, Regional Centers would be forced to come up with this information themselves.

“For as many times as we’ve had to push back on our clients and say, ‘no, I need the backup documentation,’ this is our chance to say ‘wow, I’m so glad we’ve been asking for that,’” said Jones.

Penalties for a failed audit can include termination of the Regional Center, so investors need to be confident that their chosen RC will be able to pass its audits. Choosing fund administration along with audit services from JTC means having an experienced hand in the preparation of documents and even in the room with auditors to walk them through the flow of funds for individual investors.

Thanks to the RIA, EB-5 securities compliance now requires a level of expertise some operators may not possess. For this, you’ll want to work with names your investors can trust.

When talking to investors, you want to be able to tell them that you have proper checks in place to ensure compliance. Working with experienced names can bolster your reputation as you look to build a presence in EB-5.

Creating transparency throughout the EB-5 investment process

Third-party oversight matters to EB-5 investors because they likely reside far from the project and can’t check up on its progress in the way they would like. Having additional eyes will matter to them, but so will the ability to view the progress of their investment online. That’s why investors gravitate toward projects that offer a cloud-based EB-5 investor portal.

JTC’s EB-5 investor portal provides up-to-date information on investment status, whether it’s held in escrow, deployed to the project, or awaiting return of capital. Investors can see the progress being made toward job creation, and can also access the key documents they need for their immigration petitions. Being able to view this information at any time mean they won’t have to request it from you and won’t have to worry about not being able to access it when they need it.

EB-5 investors are increasingly savvy, and want visibility into what is happening with their EB-5 investments. Using online tools to create transparency, you can provide this visibility for them.

Why the best Regional Centers don’t take unnecessary risks with EB-5 investor funds

“Most EB-5 investors are becoming more educated in the industry. They understand how EB-5 works, how the Regional Center program works,” said Jose Rincon at a JTC webinar. “When I’m out there talking to issuers, I feel like the capital stack is something that they’re focusing on very heavily when it comes to speaking to the investors and how they’re going to have their capital stack set up.”

There are obviously many ways to structure an EB-5 project, including as a loan or equity investment. EB-5 investors want their capital returned to them, and being in a position where they are able to be repaid in a timely manner matters.

“Generally, I do think that investors care about the capital stack,” said Irina Rostova. “Number one, they care about the security of their investment.”

That security includes two things: security for their capital and confidence that jobs will be created. Without those two things, you can’t hope to keep EB-5 investors happy.

It’s true that with the shortened two-year sustainment period, it’s possible to offer EB-5 projects with an abbreviated timeline that promise to return investor capital in two years. But most EB-5 professionals will tell you that the safest projects still require a four-to-seven-year timeline, and projects that promise to return capital quicker may come with risks. Some investors may be eager to invest in these riskier projects, but most have an understanding of what’s really important.

“Most good projects that create the ten jobs and are safer in their structure, they need more than two years,” said Rostova.

Presenting EB-5 offerings that are built for success

EB-5 investors have many concerns when it comes to project selection, but above all, successful immigration petitions are their number-one priority.

“Obtain the green card, return of capital, and a distant third might be return on investment,” said Nicolai Hinrichsen, Partner at Miller Mayer LLP.

As we’ve mentioned, you need to be able to answer investor questions, secure their funds, provide transparency, and show them that you’re taking steps towards RIA compliance. But more than anything, you need to demonstrate that you understand their priorities and that your business plan accounts for the necessary job creation required for them to get their green cards.

“Those developers who are forward enough thinking to really create viable projects and good investments where the investors will realize their green cards and get their investments back, they will go to the top of the line in terms of raising capital,” said Michael Goldberg at another JTC webinar.

It all comes down to trust: do your investors trust that EB-5 is more than just an afterthought for this project, that their investment will be used to create the requisite EB-5 jobs, and that their capital will be returned to them?

“Without trust,” said Mariza McKee, Partner at Kutak Rock, “The EB-5 program eventually wouldn’t attract much capital.”

If you’re looking to build a new Regional Center into a stable EB-5 powerhouse, consider getting help from those who know the industry inside and out. JTC offers EB-5 services including escrow, fund administration, audit services, cosignatory, fund accounting, and more. Follow in the footsteps of the most successful Regional Centers by showing investors you care about doing things right.

Learn more about JTC’s EB-5 services