Introduction
Peter Calabrese (00:01):
Hi, welcome. My name is Peter Calabrese. I am the CEO of CanAm Investor Services. CanAm Investor Services is the wholly owned broker-dealer affiliate of CanAm Enterprises, one of the largest and most successful regional centers in the history of the EB-5 program. I have the great pleasure of being joined today by Mr. Michael Harris. Michael is the principal of HarrisLaw based in Miami, Florida, and he is going to join me today to talk about job creation and how it factors into an EB-5 investment. Michael, welcome.
Michael Harris (00:36):
Great, Pete. Thanks for having me here.
Peter Calabrese (00:38):
My pleasure. Job creation in EB-5 is a subject that gets discussed a lot, but often people will simply note that there need to be 10 jobs per investor and move on. It is a subject that is vitally important to the success of an EB-5 investment and one that sometimes gets overlooked. Today I want to take the opportunity to go deeper on capital stack components and how they affect job creation, the modeling and job forecasting used in regional center projects, and the risks to watch for when evaluating job creation. Michael, how does that sound?
Michael Harris (01:39):
Job creation is one of the two most important metrics for the success of an EB-5 investor. The other is sustainment of capital.
Understanding Capital Stack Components
Peter Calabrese (01:50):
When going into an EB-5 investment done correctly, the goal is to achieve full immigration benefits and be repaid from the fund. Job creation is one of the most important elements of the later stages of a project. Could you walk through the different capital stack components and help investors understand how equity, mezzanine financing, senior debt, and subordinate loans each affect a project’s capacity to create jobs?
Michael Harris (02:33):
Any properly prepared private placement offering will include a breakdown of the uses and sources of funds within the capital stack. You will see the total project cost alongside the different sources of capital: loans, financing, equity, and potentially government-related capital or tax credits that may not be realized for years. The uses side will show you how those funds are deployed across construction, operations, and other project components.
How Job Creation Works Across the Full Capital Stack
Peter Calabrese (03:51):
When job creation occurs, does it come only from the EB-5 portion of the funding, or from the entire project spending?
Michael Harris (04:17):
Job creation is not limited to the EB-5 investor’s funds. All project spending directed toward development can be used in the job creation calculations. If EB-5 funds represent 30% of the capital stack, say $30 million, the other $70 million being spent on the project can also contribute to the job count generated by the economic model. The EB-5 investor benefits from the full economic impact of the project, not just their proportionate share.
Peter Calabrese (05:11):
So in theory, because this project would not exist without the EB-5 funding, all project spending and all the economic benefit it generates can be counted toward job creation.
Michael Harris (05:29):
Correct. And that raises an important due diligence point: if a project cannot be completed without the EB-5 capital, that dependency should be transparent in the offering documents. A project that is fully funded absent EB-5 raises different questions than one where the EB-5 component is genuinely essential to completion.
Job Creation Timeline Requirements
Peter Calabrese (05:50):
Stepping back to the basics: when do jobs actually need to be created, and when must they be documented?
Michael Harris (06:14):
Policy has long held to a two-and-a-half year rule: jobs must be created within two and a half years of the I-526 approval, and no later than before the expiration of the investor’s third year of conditional residence. Jobs created before the petition is adjudicated can also count, since the models project jobs that are created permanently in the economy through reasonable economic methodology.
Peter Calabrese (07:11):
So the two-and-a-half year clock starts from I-526 approval specifically.
Michael Harris (07:20):
That is correct. The rule was originally premised on investors being admitted for permanent residence within six months of approval, followed by a two-year conditional residency period. Post-RIA, adjudication timelines are improving and the framework is becoming somewhat more predictable, but the core two-and-a-half year standard remains in effect.
Peter Calabrese (08:04):
At the I-526 and I-956F stages, job creation is theoretical. It lives in the economic model. The proof of actual job creation comes at the I-829 stage, when the investor is seeking to remove the conditions on their green card.
Michael Harris (09:03):
Exactly. The I-829 is where the investor must demonstrate that the jobs were actually created during the required period, in alignment with the procedural milestones and approvals at the project level.
Understanding Economic Impact Models
Peter Calabrese (09:28):
A question that comes up frequently is: how can a project with 100 investors produce 1,000 jobs? Are there really 1,000 people on the construction site? It helps to explain that regional center projects almost always use model-driven indirect job creation rather than direct W-2 employment. Could you walk through how these models work and how the capital stack composition influences the output?
Michael Harris (10:41):
Under the Regional Center Program, indirect job creation supported by recognized economic methodologies is permitted. Economic impact studies have been used across many industries for decades to measure how capital flowing into a project creates jobs throughout the broader economy. Money spent on construction purchases goods and labor. That spending has downstream effects that can be measured and modeled. The two standard models used in EB-5 projects are RIMS-II and IMPLAN. Both are generally accepted by USCIS. A third proprietary model created by an individual economist is also accepted in some cases. For any given region, the model can calculate how many jobs are created per dollar of spending based on local economic multipliers. If a project has $100 million in construction costs, including both hard costs such as materials and soft costs such as architects and engineers, plus projected revenues from operations, all of those inputs can be run through the model to generate a job count.
Construction Jobs vs. Revenue Jobs
Michael Harris (12:41):
Think of it like squeezing a lemon. In a direct investment project, you might only use part of the lemon. With a regional center project, you can extract all the juice through indirect job creation. But the quality of that juice matters. Jobs predicted from construction costs are generally more predictable than jobs predicted from projected revenues. Construction budgets are laid out in advance and costs are relatively knowable. Revenue projections, by contrast, can vary significantly. If a condominium development has to cut prices by 50%, that is 50% less revenue and potentially far fewer jobs credited to that category. So when you are evaluating a project, you need to understand what percentage of the job count is construction-based versus revenue-dependent, and what the risks are to each category if the project underperforms.
Michael Harris (13:48):
If a project predicts 1,000 jobs and 40% come from construction while 60% come from revenues, and those revenues do not materialize, only a portion of investors may have sufficient job creation for I-829 approval. These are the kinds of detailed questions a competent EB-5 attorney will work through with you before you invest.
The Role of an EB-5 Immigration Attorney
Peter Calabrese (16:26):
This is a financial instrument. An at-risk financial instrument. A strong EB-5 attorney like yourself is not evaluating whether this is a great investment opportunity. You are evaluating whether it qualifies as a viable immigration-linked investment and whether the immigration pathway it creates is likely to meet the investor’s goals. Is the job creation model credible? Is it overly concentrated in one source? What are the realistic risks to actual job creation at the I-829 stage? These are the questions people need to be asking, not just accepting the model as a foregone conclusion.
Evaluating Capital Stack Sources
Michael Harris (18:53):
When reviewing capital stacks, I always want to understand the nature of each source. For example, in some states, condominium deposits from buyers can be counted as equity in the stack. But what happens if the project does not complete? Those funds need to be held in escrow. Is the capital stack fully explained in the private placement memorandum? Government-backed funding is generally preferable because it tends to be more reliable. Institutional financing is preferable to high-cost debt that could impair the project’s ability to generate revenues and create jobs. Every component of the stack needs scrutiny.
Construction Guarantees: Paper vs. Substance
Michael Harris (20:06):
Many projects provide construction guarantees, but the critical question is whether those guarantees are backed by tangible assets or whether they are paper promises. If the guarantor cannot deliver, the guarantee means nothing. If the construction does not occur as planned, there may not be enough job creation even from the construction category. Working with a regional center that can provide documentation demonstrating the construction will occur is essential. I also look at whether the regional center is the developer or a separate entity. It is not prohibited for those roles to overlap, but it raises additional questions about conflict of interest and accountability. Pete, can you walk through what CanAm’s underwriting process looks like from the regional center side?
CanAm’s Underwriting Approach
Peter Calabrese (22:16):
We go into every project wanting as many protections as possible built into the structure. We want full capitalization confirmed before deployment: the EB-5 raise, the equity in place, and any additional debt components are all finalized before we begin counting qualifying expenditures. On virtually all of our recent projects, we require a completion guarantee from the borrower, backed by a guarantor, so that if there are cost overruns, the borrower has a clear obligation to see the project through. And we are very conservative in how we estimate job creation from the outset.
The Importance of Job Creation Buffers
Peter Calabrese (23:34):
We will not go into an investment where the model predicts just barely enough jobs. You do not want to raise capital for 1,000 investors and project exactly 10,000 jobs. We start with conservative estimates of predictable, primarily construction-based job sources and then add a meaningful buffer on top of that. There should be a strong multiple of jobs projected per investor so that even if some sources underperform, the minimum per investor is still comfortably met.
Michael Harris (24:26):
And that buffer is primarily built from construction jobs?
Peter Calabrese (24:28):
From construction, yes. We also make sure the nexus between EB-5 spending and job creation is clearly documented. We do not begin counting jobs until the project’s capitalization is fully in place. The EB-5 program is an economic development program. The job creation must tie directly to the spending, and that relationship needs to be defensible years later at the I-829 stage.
Pre-Existing Debt and Bridge Financing Risks
Peter Calabrese (25:19):
One thing that comes up is the idea that jobs are already created, so there is no risk. Often this situation involves EB-5 capital coming in to replace earlier bridge financing. Can you talk through the risks in that structure?
Michael Harris (25:59):
USCIS policy does allow EB-5 capital to replace pre-existing short-term or bridge financing if certain conditions are met: the replacement was contemplated in advance, and the prior debt qualifies as genuinely temporary financing. The jobs created by spending from that prior debt can then be allocated to the incoming EB-5 investors. However, USCIS has at times pushed back on these structures, especially when the original debt has been outstanding for a long period. The nexus question becomes: what benefit or risk to the project exists if the EB-5 investors do not arrive to replace that debt? If the answer is not compelling, the structure is harder to defend. I have seen this questioned during I-829 adjudications, years after the initial I-526 approval. By that point, options are extremely limited.
Peter Calabrese (29:44):
The key takeaway is: ask these questions at the beginning, not years later. By the time some of these issues surface, you are deep into the process with very little recourse. Conservative planning at the start is far better than trying to resolve a nexus challenge during I-829.
Michael Harris (30:39):
If possible, choose a project with minimal pre-existing debt. Projects with zero or near-zero bridge financing, relying instead on government-backed sources or fresh equity, are simply stronger from an EB-5 job creation standpoint.
What Happens If Jobs Are Not Created by I-829?
Peter Calabrese (31:18):
If an investor reaches the I-829 filing window and job creation has not been fully completed, what options are available?
Michael Harris (31:38):
Policy has generally allowed investors to demonstrate that job creation is underway and will be completed within the third year of conditional residence. The RIA added a mechanism for investors to affirmatively request the additional third year, though the implementing guidance has not fully developed yet. In practice, since I-829 processing can run several years, there is often time to supplement with evidence of ongoing job creation. But if jobs ultimately do not materialize, investors face serious consequences, potentially needing to invest additional capital or pursue amended petitions. The RIA’s good faith investor protections provide some relief in cases where the project failed through no fault of the investor.
RIA Protections for Good Faith Investors
Michael Harris (33:33):
The RIA provides meaningful protection for investors who acted in good faith when a project fails through fraud, mismanagement, or criminal conduct. But those protections depend on the regional center having complied with the spirit of the law, including conducting background checks on developers, maintaining proper fund administration, and reporting transparently to investors. Choosing a regional center that has operated with integrity throughout the process is not just preferable. It is a prerequisite for those protections to be available.
Choosing the Right Regional Center
Peter Calabrese (34:34):
This brings us to the final point. Work with a strong attorney who can analyze the immigration dimensions of the investment. And work with a regional center that takes the most conservative, rigorous approach to every part of the process, from underwriting to job creation modeling to investor communication. When done right, this is a remarkable program.
Michael Harris (35:07):
CanAm is, to my knowledge, the only regional center that has an in-house broker-dealer. Other regional centers hire licensed broker-dealers for compliance, but having the function in-house creates a different standard of accountability. Similarly, while there is no regulatory requirement to have a fund administrator, it is strongly advisable. While there is no requirement for a leading escrow agent, using one is a sign of sound practice. The question to ask every regional center is: what have you done to ensure compliance with securities laws, fund administration standards, and your ongoing obligation to communicate with investors? Regional centers should be reporting to clients at minimum quarterly, regardless of whether conditions are favorable or not.
Best Practices and Investor Communication
Peter Calabrese (37:10):
Best practices across all of these dimensions, from project structure to investor communication, are what produce the best outcomes. When you are speaking with a regional center, do not just hear “10 jobs per investor.” Ask how they get there. Ask about the construction of the job creation model, the buffers, the nexus, and the guarantees. Ask about the history of the regional center backing those commitments. That is what matters.
Michael Harris (38:12):
This is a multi-year relationship. You are going to be working with a regional center for the duration of your conditional residency and beyond. Being treated well by a firm that knows what it is doing and genuinely understands how to work with its investors is enormously beneficial.
Closing Remarks
Peter Calabrese (38:33):
Michael, this was a tremendous amount of valuable information. I hope this was as helpful for our audience as it was for me. We are always available to answer further questions about job creation, project structure, or any other aspect of the EB-5 process. Michael, principal of HarrisLaw, thank you for your time and insights.
Michael Harris (39:10):
My pleasure. Thank you again to you and CanAm for hosting this.
Peter Calabrese (39:14):
The pleasure is ours.
