The EB-5 regional center program may have expired, but the EB-5 Direct Immigrant Investor Program is very much alive and Houston EB5 is here to assist. You can make direct EB-5 investments with Houston EB5 through our Moderno Porcelain Works project (details at the end).
We visited with three industry experts – Roberto Contreras IV, managing director of Houston EB5; Bernard Rojano, principal and lead consultant for Xecute EB-5 Business Solutions, one of the oldest and top EB-5 immigrant investment consulting firms; and, Christian Triantaphyllis partner at Jackson Walker LLP and a Top 25 Immigration Attorney per EB5 Investors Magazine.
Short Overview of Direct EB-5 Investing
For direct EB-5, you as an investor, are investing into the entity and taking equity into the entity that develops and runs the project and creates direct employment. Direct employees are, by definition, on payroll of that company, work at least 35 hours per week, and are classified as W-2 employees with benefits, not as subcontracted workers. In contrast, EB5 investments through regional centers allow investors to count indirect job creation, through the economic impact of the investment they are making. An example of indirect job creation would be a real estate construction project. The jobs you stimulate in a construction project are from subcontracted labor rather than being directly employed under the project company.
Although regional center investments relying primarily on indirect job creation no longer qualify, there are six real benefits to direct EB-5 investments:
1. Reduced Investment Amount
The main benefit of making a direct EB-5 investment now is that the minimum investment is currently back at $500,000 (previously at $900,000). This may be the last opportunity to invest at the reduced level before proposed EB-5 reforms by U.S. Congress increase the investment amount again.
According to Bernard Rojano, now’s the time to act to take advantage of the lower amount. “Professionals in this industry like myself know that the EB-5 program will be reviewed by lawmakers and there will be some adjustments made to the program, which could include an increase in the investment amount,” stated Rojano. “If any of the bills that are pending pass, the direct program and the regional center program will see an increase. So, this is a very short window of opportunity.”
Continued Rojano, “If anybody had an interest in an investment to obtain a green card through the EB-5 program and come to the U.S., it’s definitely a great opportunity to do that now at a much lower investment amount.”
2. Less Policy Risk
Whereas the regional center program relies on congressional extensions, the direct EB-5 policy is written into law and permanent. “Although Congress is currently mulling over reauthorizing the regional center program, the most recent proposals only include a 2.5-year extension,” said Roberto Contreras IV. “Tens of thousands of investors have been affected by Congress’ failure to reauthorize the regional center program; a mere 2.5-year extension doesn’t do enough to ensure this won’t happen again.”
3. Potential for Expedited Processing Times
When you invest via direct EB-5, it is now possible to be processed faster, according Christian Triantaphyllis. “With the regional center program in limbo, the USCIS officers are supposed to hold those I-526s filed with regional center projects in abeyance, meaning putting them on hold,” commented Triantaphyllis. “The program has a number of officers who need something to do in the EB-5 unit and the direct EB-5 program is up and running. So, you’d think there will be extra or other USCIS officers looking for work and they will be able to assist on the direct EB-5 side to make that process faster.”
4. More Transparency
There is more transparency as a shareholder of the company and that gives you all the rights of a shareholder to directly monitor your investment’s performance. “Transparency has been a big topic of discussion in Congress regarding the regional center program,” stated Contreras IV. “Many senators believe that a lack of transparency and reporting by many regional centers allow for systemic abuses of the program, much to the disadvantage of investors. No such worries exist in the direct EB-5 investments.”
5. Higher Returns
In making a direct investment, you are eliminating the middleman that many regional centers had historically profited from. There are likely higher returns in direct EB-5 because you are not investing through a regional center. “Regional centers typically raise capital into a fund and loan those funds out to projects,” explained Contreras IV. “They (regional centers) make money on the interest spread of what is paid to them by the project and what they in turn pay to investors. In direct EB-5 whatever the project pays as a return to EB-5 investment is going directly to the investor.”
6. No Need for Redeployment
Another major benefit of direct EB-5 investing is no redeployment of your funds. In recent years redeployment of funds by regional centers has been a topic of contention as investors see their investment funds get redeployed into a second or third project as they continue to await their green card process. In a direct EB-5 investment you only undertake the risk of one project.
“There is no need for redeployment because you’re investing directly into the job creating company,” stated Contreras IV. “As a direct investor you can negotiate the terms, so that your funds remain in the same company until you fulfill your conditional residency and apply for permanent status.”
Recap of Direct EB5 Benefits:
- Reduced Investment Amount
- Less policy risk
- Potential for expedited processing times
- More transparency
- Higher returns
- No redeployment
Direct EB-5 Investing Via Moderno Porcelain Works
Houston EB5 is a distinctive regional center in that it has real estate development investment projects as well as a direct investment project through its Moderno Porcelain Works. It is one of the few operational businesses in the EB-5 industry ready and able to process direct EB-5 investments.
“Once the regional center program expired, 99% of the offerings were affected, many of which had no way to offer direct job creation,” said Contreras IV. “Fortuitously, Houston EB5 has long been offering a project that relies heavily on direct job creation in Moderno Porcelain Works, needless to say we have seen a lot of interest in recent weeks from investors wanting to get in at the lower investment threshold.”
Moderno specializes in the fabrication and installation of ultra-luxe format (5 ft. x 10 ft.) porcelain panels in the residential and commercial markets. As the only company in North America using state-of-the-art fabrication machines and a proprietary installation process, Moderno is 100% dedicated to porcelain.
“That is a unique position as a developer because there are not many regional centers that offer the E-2 and EB-5 direct projects like Houston EB5. It is also important to have experience,” said Rojano. “Roberto’s (Contreras, Sr.) background is in the countertop business, and he did that for many, many years successfully. He has all the contacts, and he’s got an instinct for that business. So, his business model for Moderno is very strong and backed by operators, developers, and management that have many, many years of experience and know exactly what they’re doing. Which is unusual, because most of the time with direct investments you may be investing with start-ups or new concepts.”
“On the investor relations side and the management of the capital, Houston EB5 has 10 years of managing other people’s money within their projects,” explained Rojano. “And the Houston EB5 team has the disciplines around that in communicating with investors, explaining to them clearly the investments, and reporting to them responsibly, and deploying their money timely, and finally you can oversee their immigration process from beginning to end and support that. There are others out there developing projects that are familiar with immigration investment that don’t have these tools available to them to help their clients.”
Houston EB5 chose to offer an EB-5 Visa investment in Moderno for several strategic reasons including the ability to provide repeatable, predictable results. Moderno has a mature business model with several large retail and builder accounts to service. Your investment will fund the opening of new service locations (HUBs), expanding Moderno’s national reach. Investing with Houston EB5 via Moderno is attractive as there is no redeployment factor involved.
Direct EB-5 Investment Details for Moderno Porcelain Works
- Each location creates 55-60 direct jobs that count towards your EB-5 application
- Targeted Employment Area (TEA)
- $3,000,000 total project cost (per location)
- Currently raising funds for new locations planned in Orlando, Los Angles, Phoenix, Washington, D.C., and Denver.
Headquartered in Houston, Texas, Moderno has expanded to locations in Miami, Fla., Central Texas, Minneapolis, Minn., Dallas, Texas, and most recently, San Diego, Calif.
Please consult with your attorney regarding direct EB-5 investing and what is best for you. Houston EB5 continues to monitor the EB-5 regional center program legislation and remains a trusted resource to you.