Call with USCIS Economists: Transcript and Thoughts

I am officially an EB-5 hero, having spent my Saturday transcribing much of the June 22 Engagement with Director Mayorkas and USCIS Economists regarding  EB-5 investment in real estate-related projects. (Here is my recording of the call.)

After many hours listening to the voice of John Rodgers, new Chief Economist at USCIS, and typing his sentences, I am feeling sympathetic. Tone and syntax suggest that he approached this engagement as a real, unscripted discussion and was very nervous about it. Being on the spot is hard, and John Rodgers got himself lost at points. When making an uncontroversial point about land acquisition costs as an inappropriate input to an IO model, he surely did not mean to make a judgment about budget items to which EB-5 capital may be applied – a separate issue that he admitted to be outside his purview. To his credit, John Rodgers struggled partly because he didn’t come armored with polished talking points and did try to answer questions. I typed out most of the meeting so that you can review exactly what was said and consider the implications, but remember to keep this information in context. The transcript is not a guidance memo but simply the record of a discussion with plenty of mistakes and points that will be clarified or modified later. I wouldn’t have recorded this except that I suspect USCIS will not quickly deliver the promised written guidance, and we are desperate for whatever information we can get.

Here are a few of my personal conclusions from the June 22 engagement with the economists:

• USCIS still thinks that real estate developers may claim job creation associated with their tenants. The conditions are that the owner/developer must demonstrate: 1) that the tenant jobs/impacts will be new and not shifted from anywhere else in the US, and 2) that the owner/developer will have a substantial business relationship with the tenant. USCIS is not currently defining exactly what may constitute an acceptably substantial relationship, and is open to arguments from applicants. Possibilities mentioned included equity stakes, joint ventures, partnerships, rental rebates, and revenue-sharing. John Rogers resolutely declined to set in stone any particular metrics or guidelines, disavowing even those in the tenant occupancy RFE.  This gives us freedom to experiment, but no guarantees of success. If adjudicators are as unclear about the standards as we are, it’s going to be a confusing few months going forward, with many RFEs and long processing times. I haven’t decided if I should stop writing real estate-related EB-5 business plans, admitting that even I don’t know the current rules of the game, or if I should start charging an arm and a leg for plans because, lacking set metrics, success will be all about clever rhetoric and impressive presentation. I’m also not sure that developers will want to try EB-5 under the current conditions. Everyone who can show in advance that all your future tenants will house all new jobs in your building plus agree to a significant financial relationship with you, please stand up!
• The USCIS economists consider their mandate to include judging the validity of economic reports and also the viability of business plans. They want to ensure that the job creation formulas are correct and also that the inputs are reliable. The economic impact report filed with the I-924 application postulates “under X conditions, Y job creation would occur.” USCIS wants the application to convince them that X conditions will in fact occur. If your economist says that a hotel at 80% occupancy will generate a certain number of jobs, USCIS will check the economist’s math and formula and then ask you to demonstrate that your hotel is very likely to actually reach 80% occupancy in time. That explains why John Rogers spent more time talking about market analysis than about economic methodologies, and why the current review standards are not as cut-and-dry and quantitative as we might like. (USCIS may also be putting such a spotlight on demand analysis because it can be a theoretical approach to the issue of the “newness” of tenants and their job creation. Is that the case?)
• USCIS has been traumatized by poor applications to the point that it will assume your data and assertions are baseless and unrealistic unless you demonstrate otherwise. If you are going to file an application now, be prepared to go all out to source and validate every claim that you make about project costs and timing and market conditions and prospects.
• The economics team at USCIS is new, and its thinking is open to change. Director Mayorkas invited people to email thoughts to USCIS at the public engagement mailbox (public.engagement@uscis.gov), being sure that any comment clearly identifies the EB-5-related issue and suggests an approach to the issue. He also promised additional engagements with the economist. Listening to John Rogers discuss hotel job creation, I could tell that he had reviewed and been influenced by recent feedback from the EB-5 community. (Specifically, his statement about the acceptability of hotel jobs controlled by a management company modifies the stance in recently-issued RFEs from USCIS, which have been questioning such jobs.)

Enough of my thoughts. If you are concerned about options for EB-5 investment in real estate development, I encourage you to listen to the call or read my partial transcript for yourself.

June 22, 2012. Unofficial transcript of portions of the Engagement with Director Mayorkas and USCIS Economists. The primary speakers include USCIS Director Alejandro Mayorkas, Chief USCIS Economist John Rodgers, and Will Cooper, a contract economist from ICF International. Click here for Suzanne’s unofficial recording of the call. Note that I have added list numbers below for ease of reference; these numbers don’t refer to anything in the call.

1. John Rodgers: The economists at the California Service Center that are under the EB-5 team are very very much aware of the importance of all of your applications with respect to employment, immigration, and economic growth. We take that role very seriously. When we receive an application, every single data point is looked at, every source is looked at, every single word is looked at, nothing is left unturned. And I think that when we come out at the end today what I hope to be able to have us all take away is that we see the going forward of this program as valuable in getting your inputs as well, for you to help us in understanding what constitutes reasonable methodologies. As you are all aware, job creation is a science, but it is not a perfect science, and it is also an evolutionary science that encumbers [sic] new research methods, business and economic fundamentals, and other dynamics.
2. That being said, in keeping spirit with what Ali mentioned, the first substantive topic is going to be tenant occupancy. I’m going to tackle it in two specific ways after getting to some of the key points, and that is the overall issues that we see with respect to tenant occupancy and also the RFE that many of you have submitted questions pertaining to.
3. About 70% of all applications that we see from Regional Centers involve some form of tenant occupancy. Not all the forms are the same, so it is a very significant part of the program. We understand that it’s very important. What we specifically focus on is first the question: is data, methodology being presented to us in the business plan that allows us to believe reasonably that in the future, tenant jobs that move into a commercial or retail space will be new, they will not be transferred or shifted from elsewhere? The new commercial enterprise, whether it be the EB-5 directly-funded enterprise such as Limited Partnership or the tenants themselves, the job creation needs to be new and not shifted from elsewhere.
4. What we specifically look for in business plans is a linkage between the EB-5 capital and the actual new commercial enterprise that pays the wages of tenant workers for example. What we especially look favorably on are financial arrangements such as equity stakes and joint ventures between the EB-5- funded partnership or company and the tenants. As most of you are aware, we also accept as reasonable, direct job inputs into benchmark models, employees funded by management, operational support, maintenance, and things like that that go into the space, or the building if you will. In circumstances in which there is not a direct link or connection between the EB-5 capital and the tenant businesses, under some circumstances we will grant economic benefits in the form of direct employment inputs into whatever relevant model you have presented, if we can reasonably see a long-term, sustained business relationship between the facility owner and the tenant business. I’ll let you absorb that for a sec and switch to the next topic. I want to rephrase, that that is one part of the tenant occupancy core substantive aspect of EB-5, and that is ensuring that the economic benefits – and I mean direct inputs into benchmark accepted regional input-output models, are attributed to EB-5 capital. Under circumstances in which that link is not direct, we will still consider reasonable methodologies, and we look forward to having you help us out in presenting those to us.
5. The second issue has to do with the RFE. … We are very pleased actually with some of the responses that we have gotten recently. … We have been quite pleased with some of the responses that have attempted to present reasonable metrics and indicators based on that RFE. Based on questions and submissions that we have received from other forums, we also understand and believe that this is a good opportunity to help clarify some of those, again based on your questions. I think the most important thing that I want to convey to you is that the language in that RFE was not meant to create litmus tests or benchmarks that if you could not present them, we would look unfavorably at the application. They are meant to be part of a comprehensive business plan in which data is available, and we realize that sometimes it’s not, that that data relevant to local occupancy rates and the overall interplay of supply and demand for specific types of commercial tenants is available. The economists, the team that we have in place, has a very good idea of what data is available. And again, we know sometimes it’s not. Sometimes it could be under proprietary controls, and we understand that. However, we do encourage you to attempt to present to us data that focuses on the interplay of supply and demand with respect to specific types of commercial, office, retail space, and potentially important aspects of that industry like the absorption capacity of the local area. To really get to the economic science for a minute, I know that there were a few questions concerning the vacancy-unemployment ratio, and that is specifically not related to the Beveridge curve, which is a very formal mathematical model for modeling transitional probabilities in labor markets. That was not the intent of that RFE, even though the language is similar to some of the economics literature in that regard. Again, I’m not going to go into specific types of metrics right now. We could potentially follow up based on the Director’s intentions. But I just want all of you to know that not providing one or two or potentially some of those metrics, not being able to do so is not something that’s going to render your application unfavorable. Again, it should be part of the overall comprehensive business plan, which again I’m going to talk extensively about.
6. … The next topic, which again is significant in the sense that it encumbered [sic] perhaps a quarter of the questions submitted for this forum, involved the construction and development of hotels and resort-like projects. Approximately a quarter of all of the applications that we see for Regional Centers involve these types of projects, and it’s growing. We’ve seen a significant increase in the time trend over even the past several months. What I want to say first is the main shortcoming that we see with respect to this type of project is the lack of data and the lack of data sourcing. The way we see the ultimate requirement for this program being met in terms of job creation with respect to this type of endeavor, is a chain of causation that starts with local market conditions, very localized market conditions, based on occupancy rates, local occupancy rates. It is in those two categories where we feel the need for data sourcing, data robustness, and timeliness is very important. As we move along the causation chain, we get to the local concept of absorption. And I want to spend a few minutes talking about what I mean in that sense. When we look at occupancy rates, and an applicant presents data that says the occupancy rate for this area is approximately x percent, we do not look favorably upon simple extrapolation of how that percentage would fall into the new supply. In some cases it may, in some cases we may not. What we would like to see is more of a comprehensive plan for the absorption rate of the new supply of hotels, of the new supply of hotel rooms per se. And that’s where I think the modeling and methodology comes in. The sourcing is first, the methodology is second, and it really comes into play when we’re talking about how the local supply, the new supply of hotel rooms will be absorbed in the local market. So essentially what we’re talking about here is the need to match supply and demand. I realize that sometimes this is difficult to do. There are a lot of business studies on this, but not a lot of formal economic established methodologies, so we really look forward to you helping us out in presenting some of those. The single biggest metric or indicator that we look at is what’s known as REVPAR, revenue per available room, that’s we consider the industry benchmark. And it is through absorption and revenue per room that we see the method by which the job creation requirements will be met. When I talk about the matching of supply and demand, what also needs to be taken into consideration is a reasonable plan that details, justifies, or outlines, why visitors would not have visited that specific area were it not for that hotel to be built. So once again, what we would like to see is a business plan that details and frames the art of the possible for how and why these specific construction of a specific hotel relates to increased visitor spending in that area.
7. Moving on to the second component of the hotel projects. The economics team has come to recognize that there is a specific type of model the hotel and resort industry operates under with respect to development, ownership, management, and operation. If capital from the developer, partly or wholly financed by EB-5 capital, directly contributes to the equity and finance of the development and operations, then all of the operational jobs derived from that connection can be counted as direct employment inputs into the regional model. This type of arrangement is favorable. However, given the specificity and the nature of this industry, USCIS, the economics team specifically, will grant economic benefits to management functions that are hired by the developer and/or owner even if they are not directly funded by EB-5 capital. However, I want to be clear in saying that that does not include all of the employees of the management company or the people who work in various support functions. It needs to specifically involve only those that are necessary for this project and this hotel. This is very important ladies and gentlemen, so let me just rephrase it if I might. The type of financing arrangement that we consider favorable is that in which EB-5 capital directly funds the maintenance, operation, the overall functionality of the hotel, the operations. Due to the specific nature of this industry, however, we will grant economic benefits in the form of direct inputs into the – which means that they get the full multiplier effects, indirect, induced – on the grounds that in this specific type of setting one could look at potentially at those jobs and those functions as part of a supply chain for the overall ability of the hotel to operate. I imagine that there’s going to be some questions on that, so I’ll just stop there and end this section with the issue of the tenants, the non-affiliated tenants of a hotel. In this situation, too, we will grant economic benefits, and again, by that — and I’m going to say this several times because I think it’s very important – economic benefits in terms of direct employment effects into a standard-practice input-output model – if a significant, substantive, long-term business relationship is established with the tenant. Long-term, sustained, clear, and transparent business connection. And I’m going to attempt to provide specifics on what those might be, but again I look forward to your input on that.
8. … The economics team essentially approaches all of your applications as a twofold process. One is a detailed analysis, an assiduous [sic] study of the business plan. We look at the business plan, again, as framing “the art of the possible.” Is it possible, given what’s presented to us, that the job creation requirements set forth in the regulations of the EB-5 program, will in fact be met. The second part of the at is the economic impact analysis which is derived from the three of four major – with some incarnations of the standard practice – regional input-output models that are known in the academic and business literature and practical fields, as well. The way we look at the second part, the economic impact analysis, is: does that analysis give us a reasonable belief that there is decent probability that the job-creation requirements will actually be met. So the business plan is the art of the possible; the economic impact analysis tells us whether we think the projects will actually get to the requirements. So they are both very very very important, very important, and they are taken very seriously.
9. If I were to convey four – and I realize these are very broad themes, but in consulting with the team there are four general terms that I would like to convey to you as important: 1) We want them to be concise, which means only talking about the projects that are encumbered in the plan, and specifically related to the projects in the plan with respect to the data sources that are necessary to support that plan. If the data sources are not relevant, not necessary for that plan, you can certainly include it, but we don’t necessarily need to see that. 2) Robust is the next one, and that means models and methods that are as current as possible and that are standard practice in the sense that they are accepted by the supporting literature or business community. 3) Appropriate data sourcing. In this, one of the key take-aways is the timeliness. Again, we have a very good idea of what data is out there and what data is missing and what the timelines are. We like to see the most up-to-date data. 4) And then transparency, and that is to provide mainly the relevant information on the specific key components of the plan. Those are four very broad buckets.
10. Now I want to turn to more specificity with respect to the questions you’ve submitted as to what should be in those business plans and what we consider favorable. Foremost: real estate transactions, reserve funds, and contingency funds cannot be used for EB-5 job creation purposes because they are not place in at-risk, job-creating investment position. If you feel you need to include that data in your business plan to give us better situational awareness of the overall project, that’s fine and we welcome that, but funds that are not place in an at-risk position in productive service of capital cannot be used for EB-5 job creation purposes.
11. Secondly, the applicants do have the option of providing expenditures or projected revenues as the inputs into the model. We accept both, and we defer to you as to which you think is most appropriate at the time of application.
12. A third topic is the construction timelines. One of the key aspects of business plans that we would like to see improved a bit is construction timelines that reflect industry standards. Those are available, those are widely available, in business correspondence, and we would like to see how the applicant projects correspond to those industry generally-accepted standard practices. If there are situations in which construction timelines do for some exogenous [sic] reason exceed what we would consider industry standards — and our general approach is that most construction projects should not last more than two years – in the event that they could, we would ask for specific reasons, specific constraints on materials, supply, transportation mechanisms, whatever, that would give rise to that need. We would evaluate that on a case by case basis.
13. Okay, soft construction costs. There are soft costs that can be included in the input-output models for purposes of EB-5 job creation. I’m not going to go through the whole laundry list. But for instance, things like architectural and engineering fees could potentially be used. Land acquisition costs cannot be used. There are a number of others that we would consider, but again those are just some potentials that we would consider. Again land acquisition expenditures should not be considered part of EB-5 capital.

• [Selected portions of the Q&A period. Note that I abbreviated a number of the questions and did not type out all exchanges. No offense intended to any of your good comments and questions; I just got weary of transcribing. You are welcome to listen to the recording, type out sections that I missed, and email them to me for inclusion here.]

1. Q: You said on the tenant occupancy that you were concerned that the jobs will be new and not transferred from elsewhere. Where is “elsewhere”? How would you define the market area within which you don’t want those jobs being transferred?
2. Will Cooper: The region is the US. If it’s a new US job, it’s a new US job. If you move a job from Palm Beach to Nevada it’s not a new US job; it’s simply being transferred from one location to another.

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1. Q: My name is David Shiver, Bay Area Economics, and I wanted to address the tenant occupancy. I’m maybe a little unusual. I’m new to the EB-5 but I’m a real estate economist, worked a lot with federal agencies and developers on the projects. What’s funny about this process as I got introduced to it is the tenant occupancy issue. If you’re looking at new jobs or job shifting, it seems to me that that’s solved by the real estate feasibility studies that simply show that there’s demand for the product or business activity being proposed in the market area which the analyst would define in an appropriate manner. So I wanted to point out that using some of the real estate industry standards for preparing your look at demand for the real estate-oriented Regional Centers is really the simple way to go. There are methodologies out there, there are plenty of different ways that you can document demand. When you look at when you grant economic benefits, I think you can get into a slippery slope with respect to defining and monitoring the relationship between the property owner or developer and all of the tenants. What is long term? What is equity stake? Would tenant improvements count as an equity stake? If it’s part of the property, or do you have to transfer improvements to the tenant to have it count? There are a lot of issues that you’re raising with these standards. And I think the simplest way to go is to look at it as any bank or developer themselves would look at it, which is: does this project make sense in the marketplace? Thank you.
2. John Rogers: You raised a good point with respect to the tenant occupancy issue, and I want to be clear. You said that you’re new to this. What you’re specifically referring to as far as the real estate component reflects the construction side of the project. If you look at the overall tenant occupancy issue, we don’t see it as completely separable but there are two phases if you will of projects that involve this, and that is the construction/refurbishment/renovation of a space and then the employment effects. So when we look at the construction phase, we do look at the local real estate conditions. Again, we have a good idea of what data is available. And that is the key component of our understanding what the art of the possible with respect to demand is. We do address that specifically in the way we look at the construction phase of the project. The tenant component of it is related, but it engenders an additional component of the business plan. And I’m going to leave it at that, but I just wanted to respond. Thank you for your question sir.

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1. Q: I hire a management company to manage my hotel but the employees are mine. There is a third party management company but I am the one paying the salaries of the employees – a typical hotel model. For what I understand, that would allow us to receive credit for those direct jobs in the operational phase of the hotel. Can you please confirm that?
2. John Rodgers: You know that is a very good question but it is a very specific one. Again, I’m going to repeat what I said before, and that is that we realize the unique structure and operational system of the hotel. If in the business plan a reasonable and comprehensive plan can be proposed that shows that the functionality of the hotel depends on a specific company that was hired via operational or management employees, we would grant economic benefits in terms of job creation.

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1. Q: I wanted to ask a question based on the vacancy-unemployment ratio which was mentioned in that RFE. You said that that was not related to the Beveridge curve, and I was hoping that you shed some light on what exactly that was related to and what kind of information you are looking for. You are aware that some of this data doesn’t exist on a local level, so if the economists could shed some light on what kind of data would be sufficient and what kind of relationship do they want applicants to demonstrate.
2. John Rodgers: What we’re looking for is data that provides a reasonable picture that demand for specific types of space is sufficient to generate future occupancy that will meet the job creation benefits of the program. I’m not going to get into the specific types of data, but what I would say in terms of that general metric is that a relationship between supply of specific types of space, demand based on local market conditions, and the interplay of that supply and demand with the respect to the ability of the market to absorb the increased capacity such that new jobs will be created.

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1. Q: You mentioned that there needed to be a “significant relationship” with the tenant and the EB-5 capital. Does that significant relationship specifically mean “lease”? When you say “long term,” do you mean five years, ten years? Is there a certain period of time? And secondly, but part of that, when you talk about the supply-demand dynamic, by way of illustrating an exception, many of our build-to-suit transactions may be in an area where there is significant vacancy for office space, yet our lessor wants specific space built for them and would not take that space.
2. John Rodgers: Let me speak more generally and then hone it more toward your specific question. When we talk about “financial relationship” there is obviously a very wide umbrella of what that could potentially be. In the event of joint ventures, in the event of a partnership … there are many many options available that you could present to us. In circumstances, for example with [intel?], where there may be a time or situations where normal businesses process by which those are not practical – well I don’t want to get into specifics we are seeing, but I will say that things like rental rebates, revenue sharing with the tenant would be things that we would potentially look favorably on. And I invite you to provide some thoughts to us, given your expertise in this area, what types of arrangements you think would be in tune with that type of industry that would present a link to the EB-5 capital germane to the developer. …
3. More important than “long term,” I would say, is a substantive business relationship that is presented to us with the [right?] documentation and the [right?] evidence. I don’t want to try to answer what specific time length we’d be looking at. But the second part of the question, I think is very important too, because it goes back to my statement that the metrics that were conveyed in the Request for Evidence were meant to be part of a comprehensive business plan, not specific litmus tests by which we would look at an application unfavorably in their absence. What you’re bringing up is a situation in which there may be overall high vacancy rates, we may be talking about an underserved area, a blighted area – in those situations when you are referring to a specific type of business that needs a specific type of space, all we would request is that you submit whatever evidence you can provide in the business plan. And we would not consider it unfavorable even if it is a high vacancy area. It all depends on the type of business and the type of space. If you can make that case to us, we would be happy to take a look.

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1. Q: You said you’d like to see construction timelines. So if we had the construction company provide a timeline that says we break ground here and receive a Certificate of Occupancy here, is that sufficiently credible to show a timeline longer than two years?
2. John Rodgers: On the timeline, we in the research and the consultation that we have access to, many of the industry standards that we see do in fact conform to the two year window. However, absolutely we agree that there are certain local conditions, certain types of projects that may require expansive timelines. We are absolutely amenable to looking at that on a case by case basis and the evidence presented to us. As far as providing certification from the construction company, we would rather have certification ensconced in your business plan not from a third party. You can present the evidence, the sourcing, but we don’t necessarily ask for third party correspondence.
3. Will Cooper: I think that if you submitted the construction timeline from the construction company, we would look at that very favorably. What we have been seeing are a lot of unsupported and unjustified construction timelines that simply say “it’s going to last this long.” They don’t tell us what activities are happening, they don’t tell us what these individual activities will cost, and there is in general a lack of detail that we would like to see. In response to your first question, I think we would look at that very favorably. Our agency also understands that sometimes these data are propriety, and in those cases our agency would like to see validating data that shows that this construction timeline is in a reasonable range when compared to industry standards. In terms of the second question with respect to direct, indirect and induced jobs, I think in general if you provide the agency with a detailed construction timeline that is either well validated or from a construction company – if we consider it reasonable and other circumstances – then direct, indirect, and induced jobs in those cases would be attributable to the EB-5 capital.
4. John Rodgers: Added to what Will said, and something that’s extremely important is, in the overall construction segments of the business plan, we really want to see as precise as possible itemization of the hard costs as well as projected milestones and timelines. We understand flexibility, changing fundamentals and changing dynamics, but the more you can provide specific data, the more you can tailor the plan industry standards, and the more you can provide reasonable justification to fall outside of those normal intervals, so to speak, the better it is in terms of our ability to analyze the business plan.

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1. Q: Ron Klasko, Philadelphia. I am merely a lawyer, trying to understand what you’re saying. I do represent many developers, involved with very large projects, maybe hundreds of millions of dollars at stake. And what I see as a lawyer trying to advise developers is a big difference between what you’re saying and what I was dealing with and advising-on say six months ago. Six months ago, it seemed to be a more quantifiable process. I could, as a non-economist, review the economic report; look at the inputs, look at the multipliers; and make a determination to be able to advise a developer, who may not move forward with this multi-million, multi-hundred million dollar project, unless he’s pretty sure he can get EB-5. Previously, when it was more quantifiable, I could give advice on that. From a macro sense, what I’m hearing from you is “This is really not very quantifiable.” There was almost nothing in what I heard you say that is quantifiable. If that’s where we’re going, and if there isn’t a way to quantify this, where we can’t say how long a lease has to be for a long-term sustainable relationship; if that’s the case, it seems critical to have some procedure to vet a project in advance, whether you call it an advisory process, or whatever, rather than saying “Well, we don’t have a quantifiable standard, but you have to create a shovel-ready project, you have to spend hundreds of thousands or millions of dollars to get to that point, and the we will let ya’ know what we think based on fairly subjective factors. I would appreciate your comment on that. And then I would have one other question (though I may have just misunderstood). The question specifically is: did you say that for the purposes of hotels and guests, did you say we have to show that guests would not visit that city were it not for building the hotel? For example, do I have show, if I’m building a hotel in New York, that these folks would not visit New York if I don’t build this hotel?
2. John Rodgers: I’m going to tackle the first part of your question and then let Will take up the second. […] The first, with all due respect, I don’t believe that I said that things are not “quantifiable.” They are quantifiable. What I said is that very specific industry conditions differ, and that what we would like to see is you present the case to us as to what the reasonable time lines and reasonable length of contracts […] etc should be. So it’s not that they’re not quantifiable. It’s just that we don’t impose benchmarks and litmus tests which we […] could convey to the officers if something’s unfavorable. Thank you. […]
3. Will Cooper: In general, the agency just wants to see justification and some supporting data that the demand will be new demand as opposed to demand that’s not simply transferred from elsewhere.
4. Q: So, again, there would be no quantifiable vacancy rates we can look to? So, say, if there’s 90 percent occupancy in a city, does that get me anywhere?
5. Will Cooper: We would consider that in combination with a bunch of other things. It really would, again, be a case by case basis. I can’t really say anything too specific.

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1. Q: My question is a question of clarification. In the past EB-5 money has been spent to acquire land in the course of building something. One of you made a comment that the cost of the land would not be included in the calculation of the job creation. Are you now also saying that EB-5 funds cannot be used for the acquisition of the land as well, or just that the project has to have excess job creation such that the job creation from the other spending in the project must cover the funds used for the land?
2. John Rodgers: We do not consider real estate transactions to be part of the EB-5 job-creating input into an IO model. We realize that it’s very important, and if you feel that for purposes of our awareness that you include that in the business plan then we welcome it, but we do not include real estate transactions in job-creating methodology.
3. Q: So if I have a $100 million project, and $90 million of it is EB-5 funds, and my land costs $20 million: I’m clearly using some of the funds from EB-5 to purchase the land, but I have excess job creation, which if the project only costs $70 million I have enough jobs for my $90 million of expenditure. Where am I?
4. John Rodgers: I think that’s a question that we would take up with Counsel and Policy.

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1. Q: My specific question has to do with the market studies which seem to be requested in the RFEs. Could you provide some guidance as to what type of area that market studies should cover? Should it be the entire region of the Regional Center? Should it be the town? Should it be the business district? This is something that’s very unclear.
2. Director Mayorkas: The issue of the geographic area is actually something that we are looking at internally, so we’re going to take at that internally and engage on that separately or include it in our forthcoming policy memo.

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1. Q: How long are the RFEs going to be pending? Are you going to work on RFE responses not related to the tenant occupancy issue, or are you waiting to process all RFE responses together?
2. John Rogers: That’s an adjudicative question.

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1. Q: I have the data related to vacancy rates, rental rates, absorption rates, and they’re all over the board, from vacancy rates funder 5% to over 25%. Each one of these clients is thinking they qualify for excess demand, and I’m trying to weigh, where is that cut-off point? Is it quantitative, is there a metric, or is more qualitative, comparable to other places in the area? I just need some direction.
2. John Rodgers: In the recent RFEs that have come to us, we have seen attempts to provide good data in a comprehensive way that can potentially overcome some of the tenant occupancy concerns that we have. In other cases we have seen business plans retooled and recalibrated as necessary. I don’t want to give the impression that we encourage or discourage either of those, but what I would say is: I understand that those numbers are all over the place, they can vary significantly even within cities. What I would ask is that you present the most comprehensive and relevant data to us with respect to the most localized area you can, and not go into it a priori thinking that a certain vacancy rate is a cut-off for what we think is unfavorable. I wouldn’t want to convey that at all. What I would say is: present a plan as accurately and comprehensively and accurately sourced as you can, and we will take it into consideration on a case by case basis.

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1. Q: You indicated that the portion of the budget related to land acquisition is not a job-creating expenditure. However, is it still the case that the purchase of a vacant building in which a business will be operated and funded with EB-5 money is in fact a job-creating expenditure?
2. Will Cooper: I believe that under the facts of that case we would consider the acquisition of real estate as analogously a non-job-creating activity.
3. Q: Even if it’s improved real estate? I’m referring to buying a vacant building and putting a business in it, like buying a vacant restaurant building and putting a restaurant in it and funding and operating the restaurant. Would that acquisition be considered EB-5 job-creating expenditure?
4. Will Cooper: I think we would need to see some more detail of the actual acquisition and how the money was spent.

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