Best strategies for developers to structure EB-5 projects for compliance, with Thomas Martin -

Best strategies for developers to structure EB-5 projects for compliance, with Thomas Martin

How should EB-5 project developers structure their projects so they fully comply with USCIS requirements and also remain attractive to investors? In this episode, Thomas Martin, managing director at Baker Tilly, chats with host Ali Jahangiri about his experience helping developers navigate this process.

Thomas: So we do a lot of preliminary jobs analysis where we’ll evaluate based on the construction budget and the financial projections, how many jobs would be created. And then folks can go back and say, okay, based on the fact that it creates X many jobs, I can easily take so many investors, which then ultimately decides what the capital stack looks like. So and then once that happens and everybody’s comfortable to move forward, we’re again the first call because we then begin the preparation of the EB five business plan. We really are the first call that’s made and we’re happy to be there in that initial role of helping folks to put their project together.

Ali: This is The Voice of EB5 by EB five Investors magazine. Each week we sit down with experts in the EB five investment space to get valuable insights and the latest EB five news. Welcome, everyone, to the Voice of Eve five. I have a Thomas Martin on the call today. He is the managing director for Baker Tilly and he has been instrumental for many years in helping many people with their business plans, with their studies that need to be reported to the USCIS. And he currently is a Baker Tilly, but prior to that, he was with Wright Johnson. Welcome to the podcast.

Thomas: Yeah, it’s great to be here. Thank you for having me.

Ali: Tom. I probably did an injustice with your background a little bit in that you’ve probably over the last ten years, you’ve got your twenty thousand hours in EB-5. Can you elaborate a little bit about what your job entails and what you do?

Thomas: Yeah, we’ve been in the EB five space for a long time. Back in the early 2010s, it was a resurgence of EB five and a new wave and everybody wanted their own regional center. So we were instrumental in helping a lot of people set up their regional centers and get EB five going. And as EB five matured, we moved more into the project and the project preparation and planning and primarily with the business planning and economic analysis. And so I’d say over the last five years we’ve been partners with projects that are looking to get their EB five offering put together in a way that gives them the best opportunity to be approved at USCIS, but also to best present their project to investors out in the marketplace. So we’ve been involved in well over 1000 unique EB five projects through our time, and we feel like we’ve got a pretty good handle on what USCIS is looking for, as well as what the marketplace is looking for.

Ali: Tom It’s interesting how we end up talking to you. You’re actually the first person in this arena we’re talking to. Yeah, I guess that’s pretty appropriate considering you’ve done 1000, right?

Thomas: Yeah. We tend to be the first people that you call because there’s two critical aspects to packaging any EB five project. The first is does the project qualify for a targeted employment area? And most recently is it rural? Folks are looking to see if their projects are rural because of the new legislation and the set aside visas for rural projects. And it’s difficult to maybe if you’re just looking at a map, you might be staring at it and going, Gosh, there’s nothing around here but sagebrush. This has got to be rural. However, the legislation was pretty clear in defining a rural as any project that is outside of a metropolitan area or a city or town of less than 20,000. So metropolitan areas are defined by their counties, and you may have a county that sits inside of a metropolitan area where maybe 90% of it looks and feels very rural. But because the whole county kind of is captured in the in the metropolitan area, it doesn’t qualify. So we tend to get that first phone call that says, Tom, can you check to see if this is rural or can you check to see if this qualifies for targeted employment area? Once that question is kind of settled and folks are satisfied with that, we get the next question, which then says, well, how much EB five can I raise? Which is directly connected back to how many jobs does the project create? So we do a lot of preliminary jobs analysis where we’ll evaluate based on the construction budget and the financial projections, how many jobs would be created, and then folks can go back and say, okay, based on the fact that it creates X many jobs, I can easily take so many investors, which then ultimately decides what the capital stack looks like.

Thomas: So we get that first phone call where folks are vetting the project. And then once that happens and everybody’s comfortable to move forward, we’re again the first call because we then begin the preparation of the EB five business plan. And there’s a lot that goes into kind of getting that prepared, but really nobody else wants it to look at the project until at least that business plan is well down the road so that folks can get an idea of what the project is. And then your securities documents can start to be drafted off of those. And immigration can start to to weigh in and provide their input. So we really are the first call that’s made and we’re happy to be there in that initial role of helping folks to put their project together.

Ali: So, Tom, the other same thing about EB-5 is a lot of these projects you see first, obviously, do you also give advice as you consult? Is a scope larger than what you do or do you refer them to people? Or how exactly do you take the client from where they are or are they referred to you in that you don’t even need to refer them out?

Thomas: Yeah, a lot of times they’re coming in as a referral, so either they’ve already engaged with an immigration attorney or a securities attorney or potentially an EB five outfit’s getting ready to raise money for them and they work with us and they’re comfortable with us, and so they’re being brought to us. We do have people who where the very first EB-5 contact they make. And so in those situations we are very active in referring them out to additional service providers, either attorneys or other folks that might be able to help them package their project together. So yeah, we’re very active in putting the team and the client can interview with who they want and then select who they feel best works with them. But yeah, I would say the vast majority of the clients that we get are coming in through a referral from somebody within our industry.

Ali: Yeah, it’s interesting. We usually end up being one of the first people that touches a lot of clients, which is in a different place with you guys. And it’s interesting how much education it takes. Do you find yourself constantly educating these clients and giving the developers a new regional center as advice on how this stuff works? Or is that done with the immigration lawyer?

Thomas: I would say in conjunction with the immigration lawyer. But yeah, I mean, similar to you guys, those very first phone calls are all about education, right? I remember in the early days of EB-5 when USCIS actually worked quickly and we could get a regional center approved and say less than six months, we’d work with a client who is very. Gung ho felt like they knew everything about EB-5. They wanted to get their regional center put together. We had a system. We put the whole package together. We’d submit it. Six months later, we’re on a phone call. Everybody’s cheering the approval letter and then they’re all looking around the table and going, Okay, now what do we do? Having no really idea of OK Well, what does that mean? We’re grateful we got our regional center, but what does that mean? So we really work to educate people on what the whole process is going to look like. How much time is it going to take, What kind of effort are you going to need? Who’s going to need to be on your team? How much is it going to cost? All those things are important for anybody who’s getting into the EB-5 space, because without it there’s an opportunity for you to expend a tremendous amount of time, energy, effort and money to, say, getting a project submitted to USCIS. But if you don’t have a path ultimately to where you’re going to find investors, then that was a whole lot of wasted time, energy and effort and money because at that point you just have a really great offering. But no one to really take it across the finish line.

Ali: So as all these regional centers and you’ve been responsible for obviously getting a lot of them approved, what is going to happen now, you think? Do you think we’re going to shrink the footprint or expand the footprint? I get a lot of calls that people wanting to buy regional centers and sell them. Where do you think is going to happen? Do you think we’re in an expansion phase or a retraction?

Thomas: That’s a great question. I think a little bit of both. I think folks who are comfortable and already in the EB-5 space are looking to expand their footprint. I would say what we’re very busy doing right now is as everybody’s required to file their I-956 recertification if they haven’t done so already before the end of the calendar year, they’re thinking, Gosh, I’ve got to pay nearly $18,000 to submit my recertification. Why not expand? So I’m seeing a lot of folks that are saying, well, I had a metro area, say, for example, the Los Angeles metro area, but I want all of California or I want all of California, Arizona and Nevada.

Ali: Is that easier to do or is filing a new one easier to do?

Thomas: I would say it doesn’t really matter. I mean, the amount of information you have to collect is the same.

Ali: How about for timing? Which one is a better timing?

Thomas: I think that if you’re only asking USCIS to recertify your regional center, no changes to your geographic boundaries. We’re already seeing that those are getting approved. We are also already seeing folks who have asked for expansion of their regional center getting approved. So USCIS clearly has moved the I-956 adjudications ahead of any pending I-924 prior to the regional centers expiring. So we’re already seeing some action they had on those. So I would say somebody who’s probably starting from scratch is probably going to end up waiting a little bit longer if I had to guess. But we’re seeing USCIS adjudicate these I-956.

Ali: Wow. So now we’re getting into the good stuff. I like this, Tom. I’m getting fired up, I get developer calls and regional center calls every single day. I’m talking to folks and it sounds like you’re the right guy that should be answering a lot of these detailed questions. So let’s take a fact pattern. Let’s say someone buys a regional center and wants to expand the scope. What kind of time frame are you going to give this process? Is it going to be six months quicker than filing a new one? So let’s say a client of ours comes, calls us and says, Hey, I want to buy a regional center located in Arizona. I want to expand it to California and contiguous states. I want to expand it to Southern California and maybe middle of California. Let’s take that scenario compared to someone that comes to you fresh and says, Hey, I want to create a regional center and build a plan around it and all this other stuff, what’s going to be quicker for them to get approved in that scenario?

Thomas: Yeah, and I don’t know that we have enough data points from USCIS to state definitively, so we’ll just use some hypotheticals based on what we are seeing so far, which looks like USCIS is providing preferential treatment to anybody who has an existing regional center. So I would say if you’re an existing regional center or you’re somebody who’s buying an existing regional center, if you’re buying an existing regional center, you have to file a I-956 for a change of ownership anyway. So you’re going to pay the fee, which is nearly 18 grand, and in that you’re filling out I-956. And in the I-956 it asks for what’s the geographic location. So you would state we’ve got an existing geographic location of this. However, we have access to a pipeline of projects that are going to be across this larger geographic footprint. And here’s an attached economic analysis that demonstrates the economic connectivity of those projects across the geographic area, which we’re asking for. So please give us the larger footprint. So USCIS will see. Like I said, if they’re arranging their capacity around, less adjudicate existing regional centers first, which it looks like that’s what they’re doing. Based on what we’ve seen so far, then I would say the person buying a regional center is probably going to end up going faster. However, if we’re just seeing some anecdotal and it’s all first come, first serve and maybe some of these folks that are getting approvals now just happened to get their applications. And at the very beginning when all the forms first came out, then maybe we’re all in the same line and it really doesn’t matter if you buy one or you start from scratch. What I can say, though, is that obviously just from a pure workload standpoint, if you’re an existing regional center and you’re not asking for anything else just to recertification, I have to imagine just from a workload standpoint, that’s easy, right? That’s a rubber stamp. You just look at the biometrics of the ownership and make sure everybody’s in good standing and you rubber stamp it and you get it out the door.

Ali: How much can they ask for? Let’s just throw out a city. Santa Clara. The regional center is in the city of Santa Clara and California, and that’s been like the middle of California, I would say like the Middle South area. And let’s say it covers one or two counties. And they now have called you and say, Hey, Tom, I got a little project for you. Is there any way you can get us all the way over to Austin, Texas? Now, I know it sounds strange fact pattern, but how do you do that? Do you say, no, I’m sorry, that’s just not going to get approved or is that possible?

Thomas: I think it depends on the risk tolerance of the individual who’s applying. We’re using our experience with USCIS in the past to then extrapolate how USCIS may respond in this new environment, new forms and new legislation directing the industry. So if somebody says, Hey, I’m in California and I want to get all the way to Texas, I would say it’s probably a big ask and there’s a large likelihood that USCIS may reject that application. However, I would also say, tell me why you would need to have from California to Austin and everything in between. Do you have a pipeline of projects? Let me give you an example. We’re working with a client that’s helping to build re-entry centers for folks who are coming out of prison, right? So these are not halfway house. It’s a little more sophisticated than that kind of get them employment. They work directly with them and getting housing, all that kind of stuff. And they’re going to be over a very large footprint. And they came to us and said, hey, we want a regional center that covers five states. And we said, okay, well, tell us why you think you need those five states. And they said, Well, here’s all of our pipeline of where we want to put all these re-entry centers across this large geographic area. And they had all the evidence to support why they would need to go in there, where they’re pulling all these people who are going to be living in these facilities from all over these geographic area. To me, that’s a great justification than just saying I want it because I want it.

Ali: So it’s an actual project. So you’d have to go back and say, Hey, where are your prisons? Right?

Thomas: Yeah, exactly. And you could use anything if you were saying, Hey, I’m a real estate developer, I’m a student housing developer, you could say, Hey, USCIS, here’s our pipeline of 30 projects across these four states. We’d like to have the whole geographic footprint. I think that’s a much better argument than just saying, Hey, here’s a hypothetical project that I’ve randomly dropped into the state of Nevada. I’d like all of Nevada that now you could do that, and USCIS may ultimately accept it. But I’m just thinking of there’s a human on the other end that’s adjudicating this and you’re trying to convince them of why this larger geographic area is reasonable. So I think that the idea is that you need to provide at least some evidence that the larger footprint is reasonable based on the type of person who’s owning and operating in that regional center and the pipeline of projects they ultimately might support.

Ali: Got it. So it’s always better to have an actual project, but you’re also very well versed in creating hypotheticals, right?

Thomas: Yeah, absolutely. And I think there’s a lot of folks who just said, we are hotel developers, we’d like a large geographic area so we can produce obviously a random hypothetical project that’s supported by approved methodologies and everything that USCIS is ultimately going to look for. And we can drop those strategically all over a larger geographic area to justify the footprint. But I wouldn’t say I would want to do that for, say, a regional center that ultimately is going to be sponsoring manufacturing projects. Right? Or their pipeline or their background is supporting manufacturing projects. I’d want to make sure that I’m lining up the hypothetical project with the types of projects that they ultimately will be supporting and that they have experience with.

Ali: So let’s go back to this manufacturing. So and I’m asking this for the public who there’s a lot of listeners we have now on our podcast. So are you saying that if it’s manufacturing, they can’t do a real estate project in that region? No, not at all.

Thomas: If you remember, in the old days of USCIS, they would give approval letters. It would actually have industry codes on them. And they and those were the only codes that you could sponsor projects with. And they did away with that because USCIS realized why limit a regional center to what they can sponsor? I was more leaning to your providing an application to USCIS about who the regional Center is and the types of projects that they have right now. And if you’re asking for a great big footprint, there’s got to be a reason why. Now, maybe that reason why is a portfolio projects across a wide range of industries. Maybe you’re sponsoring manufacturing in Alabama and you’re supporting hotels in Georgia, and you could vary the number of projects that you’re going to be sponsoring. But I think ultimately there needs to be some kind of connection or at least a pipeline that you’re referring to in your application that says, hey, we’re people who have access to these projects, so give us this larger footprint.

Ali: So basically, you’re saying that when you do designate, because back in the day when ten years ago or whatever, you designate a type of business you’re doing and you have to stick with that. This happened with regions, right? You used to say you’re going to do a project in this region and you stick with it. But nowadays, even if your regional centers like just Santa Clara, is it possible to file like San Diego and not ask for that expansion of the area but just follow for a bigger region or to do something outside the designation letter? Would you take that risk ever?

Thomas: It’s pretty clear that USCIS is only going to approve projects where a regional center is approved for that geographic area. So I would tell somebody, if they didn’t have a regional center that covered an area, that they were looking to sponsor a project to find another regional center or wait and get their expansion approved.

Ali: But on the flip side of it, if it’s for manufacturing and it’s designated for that, you don’t mind filing. If it’s in the area, you could file something for a per se. For instance, real estate, even though it’s a manufacturing designated, correct?

Thomas: Yeah. And nowadays, regional center letters will not include any industry code that like they were in the past.

Ali: So back in the day, I remember the USCIS, I think is 2017 or 18, they came in they sent a message and said maybe it was 2019, Hey, we’re going to cancel a lot of these regional centers. And I think they sent that letter. And if there’s no activity, we’re going to cancel it. Whatever happened with that and how did that end up playing out?

Thomas: Oh, they did. They were pretty active. A number of our clients were caught up in that process. And the question was how long is the inactivity have to go on before USCIS kind of pulls the trigger on that? We our experience was it was right around 2 to 3 years if there was no activity for a consecutive three years. And it was really they were looking at the I-924a’s, which were the annual reporting to see if there had been any activity done. I think that’s what ultimately triggered some of these. And USCIS would issue what was referred to as a notice of intent to terminate. And it was like basically say you’re not meeting the conditions of the program because you’re not spurring any economic development within your approved regional center. And we had a number of people who successfully fought back against that. And again, it was, here’s our pipeline. We’re actively vetting projects. Here’s the four projects that we vetted in the last six months that we’re anticipating at least one of them to move forward. So but yeah, I think a number of regional centers were terminated due to inactivity. It was one of the only triggers that USCIS had to terminate regional centers. USCIS felt like they were very limited in their ability to terminate regional centers, but they felt like that was the one thing, inactivity was the one thing that they could do.

Ali: On the flip side, a lot of these folks, they sent a letter appealing and then they all ended up being active again. I noticed that the people that actually sent anything back, it just fizzled away, right?

Thomas: Yeah. And we saw that as well. People who provided a strong argument for why they needed to keep their regional center were able to keep it going. But we’ve had some clients who they bought themselves a year and maybe they bought themselves another year. But then after, say, five or six years, USCIS eventually did terminate them. And at that point, many of our clients were kind of like, Yeah, it doesn’t make a lot of sense for me to be paying the annual fees, and I haven’t been able to get a project that I thought I was going to get sponsored. And a lot of remember that in the early days, a lot of regional centers were set up to sponsor very specific projects, right? Like people who said, Hey, I want to access to this alternative capital. The only way to do that is a regional center. It was the early days of EB-5. There weren’t a lot of regional centers out there, and the Rent a Center model really hadn’t become a thing yet. And so people set up their own regional center and either their project went forward and they completed it and they got some EB-5 money and then they’re like, Well, that was it. I don’t need my regional center anymore. Or their project didn’t go forward or they weren’t able to raise funds. And so then they were just hanging on to this regional center that ultimately wasn’t serving them any purpose. So I think we saw a natural cooling of the field just from the standpoint of folks who had gotten into it because they were developers and wanted access to capital, but then also got into the EB-5 game, realized I don’t want to be an EB-5 operator anymore. I just wanted to I want to develop hotels.

Ali: Yeah, no, it’s interesting how it all played out. I mean, you were right there to see it. So, so in this fact pattern, we had some regional centers that dropped out. There was letters that came through. If you’re sitting in the office of USCIS, thinking, Hey, I’m going to start charging, what is it, 20 grand a year now? What’s the fee for it?

Thomas: Tom Yeah, I mean, if you have 20 or more investors, it’s $20,000 a year. It’s ten. Yeah. So at minimum, you’re paying ten.

Ali: Oc So you’re sitting in the USCIS office and they very well might be listening to this podcast, actually, I know because I see the subscribers, right? So you’re sitting in their office thinking, Hey, we have 700, 800 regional centers out here. I think at the peak was more like 1000. Why not just go ahead and charge everybody? Why cancel them? I mean, wouldn’t that create more revenue for the government if they just said, hey, everyone has to pay now?

Thomas: Yeah. And I would be surprised if we did see a more active effort from USCIS to terminate regional centers. At this point. I think that just the fees alone will be a incentive for. Yeah, well then there’ll be an incentive to regional centers to say, Do I really want to keep doing this?

Ali: Am I in the business or not? Right? Am I in this business or not?

Thomas: Yeah, exactly.

Ali: And so with that said, so if I was sitting in the shoes of someone with these regional center licenses as the judge, as the adjudicator for these, I would say, okay, everybody, here’s what you got to pay and just let the fallout happen. Why cancel people?

Thomas: Yeah, and I don’t think we’ll see a lot of cancellations moving forward. I think the past was remember that prior to I don’t remember what year was 2016 or 2017, there was no annual fee associated with the regional center. So you could technically get a regional center approved and say 2009 and not do anything with it. And outside of just filing a blank, I-924a there was no requirement of that regional center to remain active. And I think USCIS was frustrated by that, which then you saw the OK. Well, now we’re going to tack a fee on to I-924a which there was some it wasn’t a huge fee, but it was enough to make people at least think twice when they had to write that check every December. Do I want a regional center? But I think that USCIS was really interested in calling out the 1000 regional centers that were approved, of which maybe 20% were even active at that time.

Ali: Interesting. So your interactions right now, do you actually Tom and I asked this because I might know the answer here, but I want the public to know, do you actually work with the USCIS or do you work with an immigration firm that does?

Thomas: Yeah, we never directly work with USCIS, so we are part of that early process of papering up the project. And then we hand it all over to the immigration attorney who ultimately files the I-956 or, I956f.

Ali: Got it. And here’s the magical question I keep getting asked. So and you can give a range and you don’t need to go into specifics. I know every situation is different, but I am a developer I’m calling Eb5investors.Com saying, Hey, I want a regional center, I want one here. I have nothing. I just have an idea how long and how much money will it take from them to get from point A to point B in that they have a regional center and they want to outsource everything from the idea to the business plan to everything and a range of what the cost generally costs. I know that cost typically varies among groups, but if you can outline out the general cost of the various groups involved, I think this will really help clients looking for help. And by all means, don’t you don’t bring your cost, you just talk about market costs.

Thomas: That’s a great question. I think people have that vision in their head of the end goal, which is I want a regional center and you have to break that into to some smaller pieces. What’s great about the new I-956 and we’ll see if we end up with a new I-96 form that USCIS was supposed to have had that out already. We’ll see if it’s changed much their new version, but it isn’t that complicated of a form to fill out. In the past, the USCIS required really sophisticated project level details around a regional center application, and now it’s not so much. So I would say you would, depending on how large of a footprint you’re looking for, you’re going to need some economic justification for that which we ground that back to a project. So you may put together a hypothetical project or a few hypothetical projects that justify a geographic area. You would then throw on top of that an economic report that would demonstrate the economic connectivity of that geographic area. And then you would need to put together some policies and procedures, manuals and operational plans to outline to USCIS that you understand the rules and the laws and the policies associated with running an operating a regional center. So I would say the costs associated with those that first is probably anywhere from, say, 10 to $15000.

Thomas: And then you’re going to need to have a immigration attorney review all of that and submit it for you. And fees obviously vary depending on which immigration attorney you choose and the services they’re providing. So I would say timing wise, you could probably put an entire regional center application together rather quickly because it’s not project specific. A matter of weeks can probably put your application together and submit it and then it goes into the black hole, which is USCIS. I mean, that could be as soon as six months or as long as two years. You really don’t know. We are like I said, we are starting to see I-956 is getting approved, which is a great sign. There was some concern that I-956s we’re going to end up behind all of the I-924s that had been submitted prior to the regional centers expiring in 2021. So I do feel badly for all those people who have those in there. I assume that at some point USCIS is going to either start issuing denials or at least RFEs on all of those because they don’t conform to the program now. But we are seeing I-956s is getting adjudicated and approved.

Ali: That’s great to hear. Do you think there is the budget aspect is now the reason why it’s faster they hire more people there?

Thomas: maybe a combination of that and the fact that there’s a lot of energy and effort and pressure on USCIS to move things along. I think the Behring lawsuit was a great motivator for USCIS, that they couldn’t just sit back and do business as normal. They realize that they’re not having a good track record when the industry pushes back through legal means to put pressure on USCIS, I think there’s a long string of losses on USCIS part, so there may be a kind of idea of like, Hey, let’s get some stuff out and moving so that the industry can maybe take some of the heat off of us. I wouldn’t be surprised if that was maybe what some of the motivating factor. But I also think that USCIS is also reinvigorated. I mean, the industry is reinvigorated with, hey, this is the new rules, this is the game. We’ve got a five year renewal. But you have to imagine that spills over into overall morale within the service, right? I mean, this was a service where they were constantly going, Are we even going to be is there even going to be an EB-5 program? Why should we waste any time adjudicating applications if this is all just going to expire and go away? So they also have a five year renewal and they also have new forms and and a new lease on the program. So I have to imagine there’s some motivation and energy. There. I would hope there.

Ali: Would be anything interesting. So with that said, we have this time frame for the business. Did you at any one point in the last couple of years as the business kind of was in a lull, were you 50/50 or you’re like, Hey, this thing is going to pass? What Where were you mentally in this whole process?

Thomas: EB-5 If you’ve been in it long enough, you understand that it’s got legs, right? Like there is. People will adapt to finding opportunities to make EB-5 work and I think when the regional center went away, there was a general feeling within the industry of, Well, first of all, how long is it going to last? And if it lasts a long time, can we make it work? And I was surprised at how many people pivoted to the direct EB-5 program. We did upwards of say 60 different unique direct EB-5 projects in that period of time where the regional centers weren’t active. So people found ways to make it work. Now, was it as robust as it was before and what it is now? No, it wasn’t. But I think practitioners who’ve built up a pretty sophisticated network of agents and overseas contacts and all that, they didn’t just let those go away, right? They fostered those even through the process because there was optimism that ultimately EB-5 would work. And then they still found ways to make EB-5 work, even in a maybe not ideal scenario, but they still made it work for them. So I think in overall there was a lot of folks who were I don’t know if this EB-5 thing is going to work, but I remain pretty optimistic because the people that I work with were still engaged heavily in it.

Ali: Yeah, that’s true. It was definitely spotty. I don’t know what you think about it in general, Tom, but I see 50% of the market stuck with it and then 50% kind of disappeared. Is that the numbers you’re seeing too? You think?

Thomas: Yeah, and maybe even a few more disappeared. Because if you had your entire infrastructure built on China, China really did just shut off. So unless you were able to evolve into other markets around the world, you may have sat on the sidelines. And what I’m finding now is that the folks that are coming back to me that were on the sidelines for the last four or five years are all folks who had a pretty active engagement in the China market.

Ali: That is true, that China market was the main driver for a while. I know that you’re also dealt with a lot of immigration lawyers. So how do you work with them? Do they do the I-956 filing and you so are you mostly in contact with them when you’re doing the filings for the new regional centers and the existing regional centers? Or are you in contact with some other person like the securities attorney, who are you mostly in contact with?

Thomas: Yeah, I mean, I think it’s across the board. We are in contact with the immigration attorney. Our feeling is the earlier the immigration attorney can get involved in shaping the strategy and kind of coordinating the efforts of the petitioner for their regional center, the better. Right. Because they’re the ones that ultimately are going to have their name on the application and have to feel comfortable with the strategy that’s putting being put forward. I would say that the vast majority of the immigration attorneys that we work with have already put that strategy together, and they’re connecting us with the client to then paper up the the projects or the regional center operational plan or the economic analysis to to get them to where they’ve got everything that they’re going to need. I also find that immigration attorneys like working with us because we do have a certain acumen in the EB-5 space. And as we talked about earlier in the podcast, where there’s a lot of education that happens up front, it’s helpful for an immigration attorney to know that all the parties that are working directly with that client can teach them along the way. So maybe there’s an initial conversation that the immigration attorney has where they’re kind of teaching up the client and then they pass them off to us and then we take them from EB-5 101 to now 201 and 301, and then we hand them off to somebody else and then they increase that knowledge. So there’s a lot of service providers out there, but if they don’t have the level of expertise, then it’s possible that now only one person is carrying the bag for teaching the client everything that they need to know to get ready to run and operate a regional center.

Ali: And so all these filings that are going to happen in the coming years, in which form is that that continues them annually, is at the I-956.

Thomas: Yeah, the I-956g is the form that they all have to file every year to keep their certification.

Ali: So this December, the reason why people are hustling right now is that do they have to file in I-956g or is it the k?

Thomas: So the G is required before the end of the year, but then also on top of the G, they have to file a I-956 if they’ve not already filed something with USCIS to recertify their regional center. So as part of the bearing case, this kind of the solution or the outcome of that was that all regional centers remained active, that were active prior to the EB-5 regional Center expiring in 2021. In order for them to maintain that, they have to file I-956. And so we’re seeing a number of people who waited all the way up until now to go. Oc Yes, I really want to keep my regional center. I need to file my I-956 and then as part of the annual recertification, they’ve got to file their I-956g, which are two different forms.

Ali: Got it. And so by this December, are you in a rush? I mean, is there a rush right now? You filing some forms? What’s going on?

Thomas: Yeah, we’re in a big rush because like I said earlier, the folks who are saying, well, if I have to pay $18,000 to file my I-956, I might as well expand my geographic area or at least ask. So we’re helping folks kind of paper up the justification for the larger geographic footprint.

Ali: Got it. And that takes a long time or.

Thomas: It depends on how big they want. So if they want an especially large geographic area, then we have to justify that with the types of projects that we’re going to be putting together for them. So it doesn’t take particularly long. It’s not like papering up a project that’s going in for a I-956f, like a real actual project, but it can take some time.

Ali: So that’s the I-956g where you ask for the expansion, is that correct?

Thomas: The G is just the annual certification. So that’s separate from your I-956 And the G basically is just saying whatever projects are under sponsorship of our regional center, whatever NCEs are currently under our sponsorship, here is where they are currently. So it’s a two day analysis of the projects under sponsorship by the regional center. So that’s a separate it’s a little bit of like, here’s everything that we have under our umbrella. Again, we’re looking for USCIS to release the new forms on the I-956g, because if you remember when they first released those forms, their understanding was no regional centers existed prior to. Right? And so the I-956 has a start date of when the RIA came out. And we’re assuming now that with the Behring case, that now that regional centers are to be active even prior to the RIA, will they modify the I-956g to assume then that all projects under the regional center sponsorship, even prior to RIA, will now need to be put on that form? Because the way the form is written right now is just like forward looking from basically June 1st on of this year. And we have to assume now that since regional centers are considered active, that US will modify the form to say no. Okay, all NCEs under sponsorship, please provide us a two date analysis of where they are.

Ali: What are we missing here that people keep asking you over and over? I want to circle out this podcast so the listeners hear all the different questions that people keep on asking.

Thomas: Yeah, I think that the main question that we get asked over and over again is and you’ve asked these as well as how long is it going to take? And we really just don’t know yet from USCIS and how big can I go? Those are the two questions I get. And it sounds like you’re getting asked those as well as how long is it going to take and how big can I go? And until we start seeing USCIS come back and either issuing RFEs on people asking for large footprints or just approving them, then we’ll have a better understanding of the answer to both of those.

Ali: I see. So really, it’s timing. They’re like, Hey, when is this going to get approved? And with the biometrics and the people involved in the team, are you seeing these teams are really worried about who’s on them or do you just see one person just filing in like the old days?

Thomas: That’s actually a great question because prior to the RIA, we had seen regional center applications get requests for evidence from USCIS on single operator regional centers, where USCIS was saying, Hey, we understand that it takes quite a bit of effort to run an operator Regional Center You only mentioned there’s one person operating this thing. Tell us how you’re going to do that. And that was prior to that, we started to see some of the pushback from USCIS. So I think that’s where you’re submitting as part of your I-956 application, a regional center operational plan where you need to outline who’s my team. I mean, you might have a single owner operator, Regional Center, but if you’re outlining, hey, I might be the only one that owns it but here’s my team right here is my securities attorney, here’s my immigration attorney, here’s my economist, here’s my business plan writer, Here’s my fund administrator, here’s my accountant. All these people are going to help me stay in compliance with EB-5 rules and regulations. So I think the days of just like, Hey, I’m a single owner and don’t worry, USCIS, I’ve got this, are probably not going to fly. But we have to imagine that you would need to provide at least some evidence of who your team is, because it takes quite a bit to operate a regional center and remain in compliance, especially with the new rules.

Ali: Yeah, that makes complete sense. Before we go, Tom, let’s talk about your team and who you have. Do you do most of the stuff yourself or are you working in a group out there in Baker Tilly that does this stuff? And how does that work?

Thomas: Yeah, I have a great team that work with me and we have a number of analysts, economists, writers, professionals. Baker Tilly’s a large coast to coast accounting firm, and so I have access to a lot of the resources within the firm. So I would say that I’m primarily the project manager and client engaged with the client, but I don’t necessarily do all the direct work myself. There’s people who are more skilled and more professional at it than I am.

Ali: Got it. And does Baker Tilly offer anything else other than what we’re talking about in terms of EB-5? I mean, do you farm out the taxes back to them? Because I know they’re a big tax firm.

Thomas: Yeah. Anything related to the accounting process. So Baker Tilly is an accounting firm and they can provide audits, tax returns, anything along those lines. So we have a number of regional centers that are choosing not to use a fund administrator. And the law says that if you choose not to use a fund administrator, then you need to have an annual audit. And so we have a few regional centers that you’re using, Baker Tilly, for that audit requirement.

Ali: Oh, that is a great Segway. I have a call with JTC Reid , I think next week or this week perhaps, and we were talking about some of that stuff. So how much does that audit cost?

Thomas: It depends on the complexity of the NCE. And I have a couple of clients that are doing both. You think about it, the fund administrator more up front, like the ongoing compliance to ensure everything’s going on. And then an audit happens after the fact that looks back and says, okay, did everything do what it was supposed to do? And we have clients that are doing both and providing an extra layer of security to their investors and saying, not only are we using a fund administrator through the process, but then we’re also collecting an annual audit as well with a CPA firm. So I think folks that are interested in that be happy to talk to them and put them in touch with the people at Baker Tilly that prepare those.

Ali: People always ask me, Hey, is it cheaper to do an audit or to hire a fund administrator?

Thomas: A lot of it depends on are you auditing just the NCE or do you want to audit the JCE and the NCE? And clearly the costs are going to be significantly different because the NCE doesn’t have a lot of activity, right? There’s funds that go in. Those funds are loaned out, interest payments come back in and then they’re paid out to the investor. And so it’s not a sophisticated audit that needs to happen at that level. But if the audit goes down to the JCE level, then clearly that’s a much more in depth audit.

Ali: Got it. Well, Tom, I appreciate we went over by a couple of minutes, but I think it’s well warranted considering your footprint in the industry. Look forward to seeing you in Miami at our annual event. We have 800, 900 people coming, so look forward to seeing you there. And I will make sure we get the word out to all of our partners and everyone on the scope of business you’re doing, and we’re excited to work with you.

Thomas: Yeah. Thank you so much. It’s been great.

Ali: This has been the voice of EB-5 by EB-5 Investors Magazine. To learn more about this episode, please visit to stay up to date with the latest EB-5 discussions. Be sure to subscribe to the show wherever you listen to the podcast and if you like the show, please consider leaving us a five star review that helps us out a lot. See you next week.