Considerations for Regional Center Rental

UPDATED on February 6, 2020

By Lauren Cohen


To further encourage foreign investment in the United States through the EB-5 program, Congress created a pilot program in 1993. This pilot program enabled U.S. Citizenship and Immigration Services (USCIS) to approve regional centers to facilitate EB-5 investments in defined geographic areas and in approved categories. Regional centers generally offer individual entrepreneur investors advantages when applying for EB-5 visas. A total of 3,000 of the 10,000 visas offered to EB-5 investors each year are set aside specifically for investment petitions submitted through regional center projects.

An EB-5 Regional Center is an organization that sponsors projects under the EB-5 program. A regional center can be any private or public economic entity that is involved with the promotion of increased domestic capital, job creation, improved regional productivity, and increased economic growth. The regional center staff professionally manages regional center projects. Investors are not required to and generally do not actively manage their EB-5 investments on a daily basis. Moreover, regional center projects have the advantage that both direct and indirect job creation is recognized by USCIS to meet the EB-5 program requirement of 10 full-time jobs per EB-5 investor in a new commercial enterprise.

Most of the existing regional centers have been approved as targeted employment area (TEA) investments, thus qualifying for the reduced $900,000 investment requirement – see 8 C.F.R. § 204.6 (e). 

Despite the advantages, starting a new regional center is an expensive and time-consuming process. It can easily take one to two years to gain USCIS approval, if such approval is ever granted. Additionally, the application process and ancillary expenses can cost tens of thousands of dollars.

Rental Options for Developers

The Regional Center Owner’s Perspective

In many cases regional center owners determine that, for what could be a variety of business reasons, the regional center needs to partner with outside EB-5 projects. It may be that the regional center has not been able to attract enough EB-5 investors to its currently available projects, or that the regional center wants to attract projects that will allow it to utilize all of the industry designations for which it has been approved by USCIS.

In these cases, regional centers may decide to partner with outside EB-5 projects through either a rental-type agreement for a fee or for a percentage of a project’s revenues, or as an actual partner in a joint venture proposed by an outside party. The variety of ways in which the rental of a regional center may occur are limited only by the needs of the partners and the advice of legal and other professional counsel.

Whatever the structure, the arrangement allows both parties to meet their business goals. The outside party receives the advantages of establishing the project through a regional center. The regional center further fulfills its mission to assist EB-5 projects in creating jobs and a positive economic impact in the United States.

The Outside Entrepreneur’s Perspective

For the reasons noted above, many entrepreneurs with worthwhile projects that seek to attract EB-5 investors prefer to attempt to buy, or to rent and/or enter into a licensing or joint venture agreement with, an existing regional center in consideration of its sponsorship of the proposed project.

Buying a regional center as a whole is not usually a viable option. Not only are very few regional centers for sale, but such purchases, if available, are complicated by issues such as assumption of existing project liabilities, geographic and industry scope limitations, and other challenges. There may also be risk management and compliance issues relating to pre-existing projects that may preclude the sale from occurring. A purchase of a regional center must also be approved by USCIS.

A better option is presented in the form of the project essentially renting the use of an existing regional center. Growing numbers of regional centers are open to partnering on projects which fall within their geographic and industry approvals, and which present seemingly sound and viable business opportunities. A rental arrangement also allows the regional center to secure a further stream of income.

Thus, partnering may be the most viable way to enable a proposed project to gain the advantages of submittal through a regional center, without the additional time and costs associated with starting a new regional center – coupled with the higher possibility of a denial in doing so. Of course, the project itself must still be submitted to USCIS for approval independent of the regional center, but the approval process is much quicker and less cumbersome than the regional center approval process.

Most regional center rental or business affiliation arrangements involve either:

  1. The payment of a percentage of profits from the proposed project; or
  2. The payment of a fixed direct fee to the regional center.

Generally, the entity that partners with the regional center remains responsible for all costs and liabilities associated with the project. Most often, the developers also cover insurance costs.

In exchange for these financial considerations, the regional center sponsors the proposed project under its regulatory umbrella, and the project enjoys all of the benefits outlined above for a regional center EB-5 project. The regional center may already have extensive marketing plans in place to help “sell” the project and may even already have group of pre-qualified investors ready to invest in the project.

All project developers must undertake serious due diligence with respect to selecting a regional center with which to partner. Regional centers are only authorized to develop projects within a defined region (the geographic limitations are included in the RC’s approval letter). If the proposed project falls outside of the regional center’s geographic scope, an amendment may be submitted to USCIS in order to incorporate the new project. However, this is not automatic and can cause project delays.

Regional centers run the gamut from being managed by seasoned professional staff to being poorly, or even illegally, managed. It is vital to check out the track record of the regional center in terms of USCIS-approved immigrant investor petitions (I-526s) and to speak with qualified references, such as experienced immigration counsel, other industry professionals and existing project partners.

In conclusion, regional centers provide a popular business vehicle for those seeking to develop EB-5 projects – and “renting” a regional center is an increasingly viable option.  As with all new business enterprises, it is important to consult with experienced legal counsel and business professionals before selecting the best option for developing and presenting an EB-5 investment project to potential investors and to USCIS.