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A Contractor’s Role in an EB-5-Financed Project


By Jennifer M. Moseley, Construction Executive

In recent years, the EB-5 visa immigrant investor program has been used as an alternative source of funding for many large infrastructure projects, hotels, real estate development, nursing and assisted living facilities and hospitals. EB-5 investors have typically preferred real estate-related projects.

EB-5 capital has been used to fund high-profile projects by major brand-name developers and hotels because it is most often less expensive than other sources. EB-5 capital can be used as any typical source capital: equity, unsecured mezzanine debt, or secured, senior debt. Since EB-5 financing has become increasingly popular with developers, developers will prefer contractors who have an awareness of the EB-5 program and their role in ensuring compliance with EB-5 requirements.


Congress created the EB-5 immigrant visa category to stimulate investment in rural and high-unemployment areas. The EB-5 program generally provides that foreign nationals may obtain a visa if they make an investment of $1,000,000 and the investment creates full-time employment for at least 10 U.S. workers. If the investment is made in a “targeted employment area” (TEA), a reduced investment of $500,000 can be made, as long as the investment still creates full-time employment for 10 U.S. workers, at a minimum.

Foreign nationals will receive a conditional two-year visa from the U.S. Citizenship and Immigration Services (USCIS) after approval from the USCIS that the investment has met the conditions of the EB-5 program. Before the end of the two-year period, the EB-5 investor must file an application for removal of the conditions to receive a permanent green card by showing that the conditions under the EB-5 investment have been met—namely, that at least 10 jobs have been created. After all the EB-5 investors obtain their permanent green cards, project sponsors often repay the EB-5 capital by refinancing or selling the project.

Most EB-5 investors invest in entities (partnerships or LLCs) created by a “regional center,” and then such entities will either make a loan to or make equity investments in a job-creating entity that is controlled by a developer for a real estate or other construction project. A “regional center” is simply an entity that has applied for and received a designation as such by the USCIS. Although a regional center is not required for EB-5 investments, using a regional center entity means you can count indirect and induced jobs—not just direct jobs. Indirect and induced jobs include, for example, employees of the tenants in a commercial building and other employees who provide goods and services to the building. EB-5 economists use economic models to predict the total number of direct, indirect and induced full-time jobs.


Since the purpose of the EB-5 program is to create jobs, the developer will be most interested in the budget and timeline contractors create to determine whether the project is in a TEA and is economically feasible. To receive USCIS approval of a project, it is critical for a contractor to provide a detailed construction budget and timeline showing the costs and timeline are reasonable and support the number of newly created jobs required based on a number of EB-5 funds needed for a project.

Unless a construction project lasts for more than two years, construction jobs will not be counted. Instead, jobs will be counted based on expenditure on construction costs. An economist will require that the budget is broken down into hard and soft costs since some costs will not go towards the job count; for example, permitting fees, taxes and insurance are not considered to stimulate the local economy. Generally, the only soft costs that will get counted toward job creation will be architectural, engineering and site testing costs. The economic models also take into account the specific region where the project is located since some regions create more economic activity per expenditure. Most regional centers usually require a buffer of 20 percent to 30 percent more jobs than required.

A contractor has the essential role of creating a detailed and robust budget that involves expenditures that will increase the job count for a project. Because costs that are not actually spent to stimulate the local economy will not be counted toward job creation, contractors could consider sourcing materials and labor locally to help with the economic impact of the region where the project is located, as one example. Contractors can make themselves attractive to developers using EB-5 capital by seeking guidance from experts who can help them understand the contractor’s role and importance in ensuring the required job creation, as well as to assist in creating EB-5 friendly budgets and expenditures.

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