Why Would An Investor Choose To Rent An EB-5 Regional Center?

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There are three types of regional center arrangements and they are and not necessarily in this order, the renting of the regional center, which is the topic of this discussion, number two is the developer filing with Immigration to own a regional center and, number three, a regional center sponsoring a developer’s project. That is basically where the developer comes to the regional center saying, let us say, “I have a hotel to build but I need to get money and investors to invest in”. That is called sponsoring. So, the reason why an investor would choose to rent is primarily relating to timing. If someone has a project, let us go back to the hotel, apartment building or whatever the project is and they are ready to go on the project, if they have to file with Immigration, it takes about four to six months to prepare a case for filing against approval by Immigration.

It may take another nine months for Immigration to approve it, so it is a year before somebody could start raising money to fund the project. The same is true if you want to buy, but probably a little less. Let us say, someone has a regional center that they have not used or abused and decided to get out of that business and they want to sell the regional center, basically you would have to file with Immigration and take the risk that Immigration will not want a follow-up explanation that they have to prove. Sometimes they do, sometimes they do not. Probably in this current atmosphere of issues with regional centers, they would most likely want to approve the sales and then you have another delay.

The reason, again, developers do rent, is that once they enter into a rental agreement, the regional center they want rented from are basically renting or licensing their designations that they have got in Immigration and they do it for free. The reason is timing because you can go right to market as soon as you have your agreement with the regional center.

Are There Clear Benefits Of Renting Over Buying?

What a lot of people do is they do both or they do all three. In other words, let us say, that you have Project A that you want to get off the ground right now. So, you rent. But let us say you have a backup of Project B, which is on the table to do in a year. There you would not rent again, you would file your rent for your Project A and for your Project B, you would either buy a regional center if there was one that was in the area that you wanted to do a project or you would file for your own. Because it would not make any difference that it took a year to get, because the project is not slated until after you complete the first project.

It is the reason why people who have a onetime deal rent and people who are in the business of developing or whatever the business is and have the vision of doing multiple projects may go renting for the first one and filing to have their own. They do not have to pay the rental charge anymore. They have their own then and if they have their own and they want to rent, they can do it too for additional sources of income.

Precautions On Behalf Of An Investor For A Rental Agreement

There are a number of questions that a developer would ask to the perspective regional center. First of all, the developer just does not go to one regional center, they would go to multiple regional centers assuming there were multiple regional centers in the area that they are willing to rent. Some regional centers will not rent. They will only do their own projects, but more and more there are regional centers to rent, so if you are doing your project in Texas, California, Florida or in New York, in the big cities they have a lot of these projects, they will find a number of options. But if you want to do a project in Las Vegas, Iowa or in a smaller state with only a few regional centers, you may find that in the area you want to do the project, there is nobody who will rent, so you do not have any choice, there is only one who will rent to you.

Assuming you are in a place where you have multiple choices, you ask the regional center the following questions. You want to know how many other projects, ongoing projects, is the regional center currently working on, and how many are rental projects, how many are their own projects and the names of the projects. You want to know how many projects has the regional center completed already, in other words, is this a new regional center that just started up and had gotten into the business or is this a regional center that has been doing business for a while. You want to know has the regional center, has any of their projects lost money, been in default, have investors not been paid the return, in other words, these are all financial questions, only relevant if the regional center has been around a while and has done projects.

You would want to find out if there are any past lawsuits against the regional center and even its partners. Are there any past criminal convictions of any of the offices, how long has the regional center been doing business, how many years of experience do the general partners or the principals in the regional center have? If it is a new regional center, how many years of experience do they have? Let us say, they were a builder before they did the regional center and they became a developer afterwards, so how many years of experience do they have and if they have actually been in operation a long time, then you know the experience that they have had currently. That gives you an idea of some of the questions, there are quite a few when I am representing developers who want to do this. We have a whole list of questions, even lengthier than what I am going over now, but this gives you an idea.

For more information on Renting An EB-5 Regional Center, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (310) 477-3000 today.

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