- July 15, 2016
- Posted by: eb5-economist
- Category: EB-5 Economics, EB-5 Job Creation
For an investor, project selection is one of the most critical components of the EB-5 investment process. It’s important to select a credible project that not only adequately fulfills the job creation requirement of USCIS, but also offers a reasonable cushion. Jobs created directly from construction are the least risky to investors because once construction is completed, job creation requirements should, in theory, be satisfied. EB-5 operations jobs are more risky, and we’ll discuss some of those concerns below.
Let’s first begin by defining EB-5 operations jobs with an example. Suppose a project involves the construction and operation of a full-service hotel. Some jobs will be created from construction, and some jobs will be created from continued operations. The EB-5 operations jobs would include positions like the concierge, hotel cleaning staff, hotel restaurant chef, etc. The number of jobs created from operations is determined by using an income statement projection, which is run through an economic model to determine a final job creation output.
Suppose the hotel in the example above is a $50 million project seeking $10 million in EB-5 investment from 20 investors. As required by USCIS, this project would need to create at least 200 jobs (20 investors each assigned 10 jobs). What would be more reasonable, though, is to assume that the project should create at least 240 jobs—which allows for a 20% cushion above the requirement—making it safer for investors.
, 140 were created from construction, and the remaining 100 jobs were projected to be created from operations. As a reminder, the EB-5 operations jobs are simply a projection based on the hotel operator’s projected revenues. What happens if, after operations begin, the hotel generates less revenue than was projected? In this case, the actual EB-5 operations jobs created will be less than the initial estimate of 100. Depending on the severity of the revenue shortfall, investors’ Green Cards could be jeopardized if, after all construction and actual operations jobs are counted, fewer than 10 jobs are created per investor.
Investors can minimize job creation risk by selecting projects that fully meet the USCIS job creation requirements based on construction spend alone. Also, investors should work with credible developers, regional centers, and other EB-5 professionals who can help discuss the merits and risks of potential projects with them. For more information, or for recommendations on EB-5 professionals, please email us at firstname.lastname@example.org.