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Working Towards DEFINING Tenant Occupancy Methodology

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  • 1. Working Towards An Understanding of the Unacceptable U.S. Citizenship and Immigration Services"Tenant-Occupancy Methodology" and the Difference in Office of the Director (MS 2000)Methodologies that also used the TERM "Tenant Jobs". Washington, D.C. 20529-2000 By Joseph P. Whalen at 0:12 am, Sep 22, 2012 OG-602.06-001 PM-602-XXXX I fault USCIS for tossing out the term "Tenant-Occupancy May 8, 2012 Methodology" without defining it. This caused very much confusion and somewhat of a panic in the EB-5 Stakeholder Community. IF (and that is ONLY IF) the potential description Operational Guidance gleaned from the Carlsson Complaint is accurate, THEN there was much needless panic. See the attached on-topic essay. SUBJECT: Guidance on EB-5 Adjudications Involving the Tenant-Occupancy Methodology Our agency has established guidance regarding the deference we should give to prior adjudications. This guidance is set forth in many of our policy memoranda, including in our December 11, 2009 policy memorandum and AFM update regarding the EB-5 program. Our deference policy provides generally that a prior favorable decision will be relied upon in later proceedings unless the facts underlying the prior decision have materially changed, there is evidence of fraud or misrepresentation in the record of proceedings, or the previously favorable decision is determined to be legally deficient. Recently, the question has arisen how our agency’s practice of giving deference to prior adjudications should be implemented in an EB-5 case in which the petitioner has used the “tenant-occupancy” economic methodology to prove the required creation of U.S. jobs. This guidance answers that question. A decision on the economic methodology presented in an EB-5 case is a very fact-specific and fact-dependent one. Consistent with our deference policy, ISOs should rely on a previous determination that the economic methodology is reasonable when the methodology is presented to us in a later proceeding based on materially similar facts. For example: If we approved a Form I-924 regional center application based on a specifically identified project, including the specific location and industry involved, we will not revisit the determination that the economic model and underlying business plan were reasonable when adjudicating related Form I-526 petitions, Form I-485 applications, or Form I-829 petitions. If we approved a Form I-526 petition for an immigrant investor based on a specifically identified project not associated with a regional center, we will not revisit the
  • 2. OG-602.06-001: Guidance on EB-5 Adjudications Involving the Tenant-OccupancyMethodologyPage 2 determination that the business plan was reasonable when adjudicating the investor’s related Form I-485 application or Form I-829 petition.If, however, the facts underlying application of the economic methodology have materiallychanged, then we will conduct a fresh review of the new facts to determine whether thepetitioner or applicant has complied with the requirements of the EB-5 program, including thejob creation requirement.Here is my take on the issue of USCIS DEFERENCE to PRIOR DECISIONS in EB-5.___________________________________________________________________The option to revisit the EA and underlying methodology in a Regional Center affiliatedcase is triggered by changes during implementation of the BP that altered data inputwhich occurred after the prior determination on reasonableness or job creationprojections. If a BP is implemented essentially as predicted there is no need to revisitthe EA or job creation projections. This may be during I-526 adjudication.___________________________________________________________________The option to revisit the BP in a Regional Center affiliated case is triggered by the planas effectuated and as presented via the evidence submitted with the I-829s of the EB-5investors.___________________________________________________________________USCIS should consider an Exemplar I-829 as an I-924 Amendment when there hasbeen a substantial material change in plans from the earlier determination either in theinitial or last amended I-924, or in an Exemplar I-526 (as an I-924 Amendment).In this usage, "Exemplar" might be better understood as a Dummy or Mock I-526 filing.SEE: http://www.slideshare.net/BigJoe5/taking-on-the-eb5-communitys-confusion-about-exemplars.Conditions may still be lifted if the project can survive a "within the scope analysis"AND there are enough jobs to go around (someone might get pushed out), andsufficient funds were expended.___________________________________________________________________The option to revisit the BP in a stand-alone investors I-829 depends on the actualresults of the entrepreneurs efforts. This could have a bearing on the "within areasonable period of time" analysis and/or giving USCIS a reason (and process) todelay and drag out a decision when it would result in an approval and the lifting ofconditions.
  • 3. AT LEAST I THINK I FIGURED OUT THE MYSTERIOUS DEFINITION! I Finally Found the REAL Meaning of the “Tenant Occupancy Methodology” and Its Apparent Source! Alternate Names: “Absentee Landlord Methodology” or “Real Estate Speculator” Methodology”, You Decide! By Joseph P. Whalen (September 19, 2012)I must admit that I was confused, in part, by USCIS’ utter inability to make itselfplainly understood on this point in its EB-5 Engagements. The confusion fromwhich I was suffering had to do with the so-called Tenant OccupancyMethodology. As I read through the Carlsson Compliant, a light went on and Ibegan to see the real issue. My utter lack of understanding was made possible bythe obfuscations of advocates and poor communication skills by USCIS.The passage in the Carlsson Complaint that opened my eyes was this: “.... When a project centers on property renovation, the precise identity of the tenants who will occupy the property post-renovation and the way in which said tenants will generate future jobs cannot be known with certainty before the property is ready for occupancy. Once the identity of the tenants that occupy the space becomes known, a projects initial forecast may change as was the case in plaintiffs project.” At p. 13To that, I say “Yes”, it is more likely than not true that the IDENTITY(IES) of the"tenant business(es)" might not be known up-front. However, the characteristicsand type(s) of the business(es) must be from among the approved industries in therequested operational parameters and within the ultimately defined and approved"scope of the Regional Center". The Regional Center (RC) defined its own scopewhen it presented its proposal. Since you are going to renovate the space, youMUST KNOW how to plan that renovation. You cannot take an empty buildingand create a restaurant for a tenant to operate a gym, a florist, or a manufacturer!While retaining some flexibility is permissible and desirable for everyone and inkeeping with the Congressional Intent of the Program to improve the regionaleconomy, when the RC tries to venture too far, it creates an untenable situation forUSCIS. IF 200 or 300 RCs were to continually shift outside their scope, THENthe Program would become unmanageable. Limits must be set for the Programand this is one of them.The RC defined its own parameters in its proposal. If said RC wants to change itsparameters it must do so in the manner proscribed. In Matter of Izummi, 22 I&NDec. 169 (AAO 1998), the RC tried to hijack an investors petitioning and appealprocesses for a Regional Center amendment. It is understandable that there was Page 1 of 3
  • 4. true confusion on the correct process in 1998. The process has evolved since thenand RCs now have a separate Form and process for this purpose and must use it.This methodology which in my not-so-humble opinion, has been very poorlynamed as the “Tenant Occupancy” Methodology is really nothing more thanblind real estate speculation with little or no real planned use for the propertybeyond profit. It would be easier to understand if it were called the “AbsenteeLandlord” Methodology or the “Blind Greed” Methodology or the “RealEstate Speculator” Methodology! Please take painstaking notice that in that lastsuggested alternate name, I said speculator, not developer. That was for a distinctreason. An actual “developer” has a specific plan to develop a property regardlessof whether it is its own plan or that of the client for whom it will develop theproperty. The mere speculator has no real plan beyond finding a prime location at alow enough price to be very reasonably assured of turning a profit when it sells orleases out that real estate holding. It matters little, if at all, to the speculator as towhat develops at their prime location. If the property will be leased out, the realestate speculator turned “Landlord” does not really care what his or her“Tenant” is or does as long as they pay the rent. Here, job creation potential isperipheral or an afterthought, if given any thought at all.The above described “Absentee Landlord” or “Real Estate Speculator”methodology is a piss-poor basis for any EB-5 Regional Center. An investor in thattype of willy-nilly investment is not specifically focusing on funneling their moneyinto specific kinds of commercial enterprises for the express purpose ofattempting to create jobs in sufficient quantity to meet the demands of the EB-5Immigrant Visa or the “Pilot” Program via the Regional Center. Note that I amaddressing the “EB-5 Immigrant Visa” requirements as something different fromthe “Pilot Program Requirements” for a reason. They are qualitatively different.The underlying straight-forward statutorily-defined EB-5 Immigrant Visa by itselfhas clear but cold, hard, and well-defined requirements: • spend a minimum amount of money and • create a minimum number of direct full-time, permanent jobs for “qualifying employees” (ten per EB-5 entrepreneur/investor) • by the individual EB-5 alien’s deadline!The “Pilot” Program allows one to meet the basic statutory requirements through alooser approach which includes “reasonable methodologies” that predict “indirect”jobs in addition to, or completely in place of, the required jobs. The basiccomponents used to explain the accepted reasonable methodologies are thecomprehensive, detailed, and credible Business Plan (BP) and the predictions Page 2 of 3
  • 5. described in the Economic Analysis (EA) based upon that BP. The data used asinput in that EA derived directly from, or were inspired by, that associated BP.One type of data which has been successfully used as “input” is the number of jobscast or described as “direct” for the specific purpose of use as “input” in the modelused to create that EA. Since EB-5 law defines “direct” jobs differently than the“direct” jobs used as input in EAs, there has been profound confusion all over theplace in the EB-5 world inside and outside of government.In many successful Regional Center Proposals, the jobs used as EA input as“direct” may, and usually do, include jobs that are not EB-5 direct on-the-booksemployees of the actual alien who invested the required money. In manyinstances, the actual employees are those of a “third-party” such as the tenant atthe location, which was specifically developed as the EB-5 qualifying investmentvehicle. That may be OK. It depends on more details than I just presented, whichwere precisely: none!IF the Regional Center clearly defines which “kinds of commercial enterprises” itwill seek to support and develop in its “limited geographic area”, THEN its effortsto achieve its specifically approved objectives in support of the “Pilot Program’s”stated goals are indicative of, and supportive of, a qualifying money-to-jobs nexus.The mere mundane landlord-tenant relationship alone is insufficient to establishthe required nexus, [i.e., a palpable connectivity that is easily felt or touched and isoften clearly discernible with the naked eye]. The simplistic example of “malltenant’s jobs” as being suitable as input in a well defined interdependentrelationship (clear nexus situation) has been taken out of context and misconstrued.IF a property is specifically developed in order to (1) meet a need, or (2) fill a voidin the local/regional economy such that: (3) new businesses spring up, or (4)existing businesses survive, or (5) expand [(6) rather than merely relocate acrossthe street or across town]; THEN (7) the new commercial tenants have beenfacilitated in their efforts and ability to (8) increase the employment in theimmediate and surrounding area. That, in my not-so-humble opinion is an EB-5qualifying nexus for appropriately labeled “tenant jobs” which should count asEB-5 indirect jobs.The speculative approach of “build it and they will come” or as more aptlyexpressed for this case “buy it and hope for the best” is not now nor has it everbeen EB-5 qualifying, nor has it been permitted by USCIS for any RegionalCenter, ever.That’s my two-cents, for now. Page 3 of 3