Mixed Use Misconceptions in EB-5

“Mixed-Use” Misconceptions in EB-5 By Joseph P. Whalen (June 21, 2012)One of the more popular concepts in Regional Center Proposals has been the “mixed-use”development. I am afraid that some Regional Center sponsors have lost sight of certain keyunderlying facts related to “mixed-use” developments. They are limited to the “kinds ofcommercial enterprises” supported by the Regional Center (RC) Proposal. “Mixed-use” does notgrant one the free-for-all ability to throw together EB-5 Marketing Plans that stray beyond thosetypes of businesses, industries, or NAICS codes for which approval has been sought andobtained.For example, if the RC submitted an exemplar/hypothetical proposal for a project that included:(1) retail space; (2) professional office space; (3) restaurant space; and (4) hotel suites, andsupported that “mixed-use” development with an acceptable methodology for determining thenumber of jobs created then that is the limit of the scope of its “mixed-use” concept approval.That particular mix contains four elements. When a “real” project comes along and contains allfour elements or any subset of them, then it is covered. However, keep in mind this proviso; thatthe precise mix of businesses in their exact proportions within the “actual” project will need abasic review for acceptability. That basic review could be accomplished through submitting an I-526 exemplar as an I-924 amendment or by submitting one real I-526 for an actual EB-5 investoracting as a “guinea pig” or “test subject”. The difference in cost between these two options is sotrivial to a multimillion dollar project that it should never even be a passing consideration. An“actual” I-526 is a real visa petition which MUST be “approvable when filed” for a petitionerwho is “eligible at time of filing”. The I-924 application is not a visa petition and MAY beperfected after filing. That second consideration speaks to the level of confidence the RC has inits project and especially the supporting evidence, i.e. the updated economic analysis.Another major consideration that folks don’t realize is that if a “mixed-use” project comes alongcontaining an element that was not already included in the original Proposal or a subsequentAmendment, then that is outside the scope of the approval. This situation demands anamendment to the RC parameters. The “guinea pig” approach is not acceptable. The RC involvedin Izummi 1 sought to usurp the investor’s petition as a means to amend its scope and thatapproach was ultimately not allowed. Each form involves different statutes and has specificparameters for adjudication!Someone whose opinion I respect 2 observed in an e-mail to me today that: “[T]he term “mixed use” has taken on a definition of its own in the EB-5 context. Real estate professionals normally use the ...[term]... to refer to a mix of residential and commercial uses, not to a mix of commercial tenants in different industries as EB-5 people use the ...[term]...”1 Matter of Izummi, 22 I&N Dec. 169 (AAO 1998).2 Someone who wishes to remain anonymous.

Mixed Use Misconceptions in EB-5

by Joseph Whalen on Jun 21, 2012

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