Public Engagement with Director Mayorkas Tenant Occupancy on April 27, 2012

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Public Engagement with Director Mayorkas Tenant Occupancy on April 27, 2012

Public Engagement with Director Mayorkas

Tenant Occupancy on April 27, 2012

 
Introduction:
On April 27, 2012 USCIS held a public engagement meeting in Washington, DC with Director Mayorkas aiming to address the issue of “tenant occupancy” presented in the economic methodology. Mona Shah & Associates participated in the meeting on the teleconference. The meeting was conducted in a conversation and discussion format, with 25 representatives from Regional Center, law firms, think tanks and projects interested in EB-5 finance. The meeting lasted approximately 2 hours.
 
What is Tenant Occupancy?
Tenant occupancy is an economic methodology utilized to count job creations by counting tenant leasing business in a real estate EB-5 project.
 
A memorandum released by USCIS on February 20, 2012 states:
 
“The ‘tenant-occupancy’ methodology seeks credit for job creation by independent tenant businesses that lease space in buildings developed with EB-5 funding. USCIS continues to recognize that whether it is economically reasonable to attribute such ‘tenant-occupancy’ jobs to the underlying EB-5 commercial real estate project is a fact-specific question. Each case filed will depend on the specific facts presented and the accompanying economic analysis.”
 
USCIS has been vigorously hiring independent economists to look into the comprehensive business plan to assure the submitted projects are viable and credible, given that the collapse of several private and governments sponsored EB-5 projects. Mona Shah & Associates predict that there will be more RFEs on the project’s reasonable methodologies adopted to support the job creation in the economic impact report. More conservative methodologies will be preferred. Economic methodologies such as tenant occupancy that tend to show more job creations will be continuously challenged.
 
Questions Raised in Recent RFEs:
 
The questions raised in recent RFEs on the tenant occupancy issues include: the tenant occupied the leasing space in a real estate project may not be counted as new jobs created. It may simply be a relocation of the existing employment. Other questions such as which entity shall the tenant jobs be contributed to? Whether it is the regional center real estate project or the existing tenant business?
 
A redacted RFE shared by a regional center states:
 
“Contemporary economic methodologies appear to indicate that such jobs would be more appropriately be attributed to the tenants themselves and not to RC because the demand for labor precedes the decision about where to house that labor as a general economic principle. For example, if a federal agency determined that additional federal employees needed to be hired to fulfill the agency’s mission at a particular location, the federal agency would see to hire the requisite number of employees and as part of that process, would also take steps to lease the appropriate physical premises to provide sufficient workspace for the new hires. In this instance, it is the federal agency that is creating the jobs through its decision to hire more employees, not the landlord who will ultimately lease the workspace to the federal agency.”
 
Inconsistent, Retroactive and Unpredictable Policies?
Director Mayorkas in his opening statement mentioned that the reason the “tenant  occupancy” issue is because there are significant concerns in the EB-5 community that USCIS’ recent adjudication raises uncertainties in the economic methodology. The Director assures the EB-5 community that the USCIS gives “deference to previous approval” in the analysis and methodology for the job creation submitted for the I-924 regional center petition. However, in the actual I-526 petition if specific fact patterns are introduced, there is a possibility that the economic methodologies previously submitted will be revisited.
 
The Director also mentioned that the USCIS is well aware that the law does not require the regional center to provide a particular methodology in support of a petition. Rather the law requires a “reasonable” methodology. Whether a certain methodology is reasonable depends on the specific facts. The Director did not discuss the technicality of the economic impact methodologies, policy wise, the director stated USCIS has not changed any policy regarding the tenant occupancy, nor did they change the applicable criteria.
 
Regarding the USCIS “deference policy” the director states:
“If we approved an I-526 petition for an immigrant investor based on a specifically-identified project, not associated with a Regional Center, we will not revisit the determination that the business plan was reasonable when adjudicating the investor’s related I-485 or I-829 petition.”
 
Questions and Concerns from the EB-5 Community
Despite Director Mayorkas’ effort to assure there is no change in USCIS policies, representatives from regional center, law firm, the economists who work with regional center, think tanks, project principals raised a number of interesting questions regarding the USCIS policies.
One economist mentioned that in his 30 years career, never did he hear once the term “contemporary methodology”, which is frequently used in the project RFEs regarding tenant occupancy. In addition, since most of the projects are located in an area with high unemployment rate, it is fundamentally contradictory to require the area to have “excess demand” for goods or service the project provides.
Mona Shah & Associates believes the USCIS adjudication may cause an interesting phenomenon in economic academia. As it appears that the economists hired by the USCIS adopted a certain analysis methodologies that are rejected by other economists. It concerns the economic views on the economic impact of the development activities on job creation in a certain area. The academia should give its participants freedom to express its views, in the case of the job creation, the more liberal views that the activities may create more jobs; or the conservative views that the activities may create less jobs. It is certainly not a matter of black and white. However, since the economists working with USCIS adjudicators tend to prefer the conservative views. It may cause an academic monopoly in the economic impact analysis for the EB-5 projects.
Another regional center principal raised the question that USCIS rule making is in violation of the Administrative Procedure Act. It is inconsistent, retroactive and unpredictable. If a regional center submitted its petition 1.5 years ago, long before independent economists were hired within the Service, the new rule should not apply to the said regional center because at the time of the petition, the tenant occupancy rules simply did not exist.
A think rank representative raised the point that to answer the questions raised in the project RFE regarding the tenant occupancy, it places undue burden on the projects because only confidential data from the tenants business can answer the particular questions raised in the RFE.
 
What Happens to the P.remium Processing?
On a side note, many regional centers are interested in the shovel ready projects that might be granted p.remium processing by the USCIS. The Director confirms that it is not likely to happen any time soon, since the Service is significantly concerned about the general integrity of the EB-5 programs. The fast track process may jeopardize the Service responsibility to guard the foreign investors from fraud.  Though it is not exactly good news for the EB-5 projects, generally speaking it may better serve the interest of the individual investors because to some extents by adjudicating each and every project thoroughly the USCIS can prevent the fraudulent projects from polluting the market.
 
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