Purchasing a Regional Center

By Reza Rahbaran

If you are pondering the question of purchasing a Regional Center, there are coherent arguments both in favor and against such an endeavor. However, without the direction of able counsel, such an adventure can lead into muddy waters.

There are obvious advantages to purchasing a Regional Center. The center may have more industry NAICS codes approved; there may be brand value and history; pre-existing relationships with migration agencies may quicken the capital raise or be a quick fix to expand the geographical scope of projects. Whatever the underlying reason for purchase, competent counsel should be sought to ascertain if an amendment would still be required for the project. In addition, one should investigate past dealings of the center for failed projects that may have damaged its reputation. Caveat emptor.

The recent USCIS EB-5 policy memo addresses many issues that the EB-5 community welcomes. In particular, the memo has addressed Regional Center amendments which would encompass the sale of a Regional Center, as well as changes to its industry focus. The policy memo states that as before, Form I-924 should be used to make “changes to organizational structure or administration” of a Regional Center, however, it also indicates that,

“Such formal amendments to the Regional Center designation, however, are not required when a Regional Center changes its industries of focus, its geographical boundaries, its business plans, or its economic methodologies. A Regional Center may elect to pursue an amendment if it seeks certainty in advance that such changes will be permissible to USCIS before they are adjudicated at the I-526 stage, but the Regional Center is not required to do so.”

This certainly levels the playing field amongst legacy and newer centers. It also removes the many advantages of purchasing a Regional Center with multiple NAICS codes. However, the devil is in the detail. Potential buyers of Regional Centers want to be certain that, post-purchase, USCIS would approve the change in organizational structure and administration, thereby giving continuance to the Regional Center designation. Buyers may not simply purchase the designation. Buyers must purchase the stock of the Regional Center entity; this includes assets and liabilities (particular attention should be paid to past or ongoing projects for potential liabilities). All the corporate formalities must also be followed. For certainty, an I-924 amendment should be filed with a new Regional Center plan to show how the new owners will operate the Regional Center.

Potential buyers have different motivations for exploring the purchase of a Regional Center. Project owners moving into the space of both Regional Center and developer should do extensive due diligence and be comfortable with what this entails. Raising capital through EB-5 is not an easy task. A finely-tuned marketing engine is essential to raising EB-5 capital. Regional Center owners must be comfortable with traveling the globe and marketing their projects. This requires a support team; it’s not a one person show. It is also essential to be familiar with the Federal laws relating to the EB-5 program, the sale of securities and U.S. sanctions. These added burdens may distract project owners from the business that they are in. Project owners unfamiliar with Regional Center compliance or securing EB-5 capital may wish to consider the Rent-A-Center model. It may be far more efficient for them to do the capital raise through the Regional Center, thereby excusing them of the ongoing compliance and retaining a Chinese wall for possible regulatory infringements. This and other matters should be examined in detail by appropriate counsel.

Potential buyers of Regional Centers should be certain of what they are buying and the risks and liabilities that go with such a purchase. Having competent counsel navigate these waters are essential to mitigate the many risks involved. Recent changes in USCIS adjudication policy is a welcomed step and indicate the agency’s commitment to both industry and jobs whilst retaining the integrity of the program. The EB-5 program has a promising future and place within US immigration policy, foreign investment and job creation.