White Paper: Top 10 Qualifying Rural Areas for EB-5 Investments

METHODOLOGY:

This section outlines the methodology employed in this white paper to identify top Micropolitan areas that qualify as rural areas for EB-5 investment purposes (less than 20,000 people) and are within a 1.5hour drive from a Metropolitan Statistical

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Area (MSA) with a population of at least 1.5 million people. The analysis utilizes Heartlandforward.org’s top Micropolitan areas rankings as the basis for filtering and identifying suitable locations for investment.

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Data Collection:

The initial step involved collecting the list of Micropolitan areas and their respective rankings from Heartlandforward.org’s latest report. This ranking considers various socio-economic factors and indicators to assess the economic performance and growth potential of these areas.

Filtering for Rural Areas:

The next step involved filtering the Micropolitan areas to identify those that qualified as rural areas for EB-5 investment purposes. Rural areas were defined as having a population of less than 20,000 people, aligning with the EB-5 program’s requirement for investment in areas with low population density.

Identifying Metropolitan Statistical Areas (MSAs):

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The analysis then focused on identifying MSAs with a population of at least 1.5 million people. This criterion was used to ensure proximity to major urban centers, which often offer robust economic opportunities, resources, and infrastructure.

Calculating Distance and Drive Time:

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Geospatial analysis was conducted to calculate the distance and drive time between the filtered Micropolitan areas and the identified MSAs. The drive time was limited to within a 1.5-hour radius to ensure reasonable commuting distance and access to the larger urban center.

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Ranking and Final Selection:

After applying the filters and determining the Micropolitan areas that met the rural and proximity criteria, a final ranking was established based on various factors, including economic indicators, growth potential, infrastructure, and regional context. This ranking aimed to identify the top Micropolitan areas that offer favorable conditions for investment.

It is important to note that the methodology described above is based on publicly available data and standard analytical techniques. Limitations may exist due to data availability or evolving economic

conditions. Therefore, the findings should be interpreted with caution and verified through further due diligence and in-depth research specific to individual investment requirements.

INTRODUCTION

The EB-5 Reform and Integrity Act (RIA) has brought about significant advantages for EB-5 investors who choose to invest in rural projects. These advantages, including priority processing and the highest allocation of set-aside visas, have led to increased demand for rural EB- 5 investments.

However, misconceptions about rural investments being riskier have prompted the need to systematically identify rural areas that are ripe for investment. This white paper aims to address these concerns and provide insights into the top rural areas in the United States for EB-5 investing.

What is a Rural EB-5 Area?

A rural area, in the context of an EB-5 investment, is an area outside the limits of a Metropolitan Statistical Area (MSA) or a town with more than 20,000 residents.

These rural projects often encompass hotels, master-planned community home development, or energy-related ventures. The surge in demand for rural EB-5 projects has led investors to conduct thorough due diligence to assess the likelihood of project success.

In a previous blog, we outlined ways to mitigate risk by evaluating three key project aspects: its proximity to an MSA, the use of EB-5 funds for utility development, and the developer’s ability to cash out/exit before EB-5 investors. To access our previous blog, please click here.

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HEARTLAND FORWARD REPORT

HeartlandForward is a think-tank that provides resources for states and predominantly rural communities through studying broad economic trends and compiling of data.

As a basis of this white paper report, we have used Heartland Forward's recent report on The Most Dynamic Micropolitan Areas of 2022 as it provides critical insights into America’s top performing

rural areas. In addition to the criteria listed below, Heartland’s report is an ideal basis for this white paper because micropolitan areas are, by definition, areas located outside of MSA’s, which pairs well with the EB-5 definition of Rural Areas.

Heartland Forward’s report used the following criteria to rank the top 536 micropolitan areas in the US:

Resilience and Rebound from the Pandemic: Communities that demonstrated the ability to rebound from pandemicrelated challenges, including changes in employment patterns.

Natural Amenities and Connectivity: Areas with a combination of natural amenities and reliable broadband connectivity attracted individuals seeking an outdoor-centric lifestyle, especially due to the pandemic’s impact on urban amenities and remote work trends. When COVID-19 shuttered the urban amenities that draw many residents to large metropolitans and forced desk-based employees to work from home, the intrigue of an outdoor-centric small town with sufficient internet quality only increased. Two years since the pandemic, the trend towards nature based destinations has continued.

Diversified Economies:

The principal factor of sustainable economic development has always been diversification. Micropolitan areas with diversified economies fared well during the pandemic. Many of the top ranked micropolitans have more than one strong industry to rely on. For example some towns scored highly for tourism AND agriculture or agriculture AND mining, or mining AND tourism.

TOP MICROPOLITAN AREAS

Here are the top 100 micropolitan areas identified by the Heartland Forward report:

TOP QUALIFYING EB-5 RURAL AREAS

Heartland’s study defined a micropolitan area as an area outside of an MSA with a population of more than 10,000 but fewer than 50,000 residents, however, a few areas in the study have populations above 50,000 as the report included adjacent

counties’ populations with the town populations. For the purpose of this white paper report, we filtered Heartland’s Study to show which of the top micropolitan areas have a population of less than 20,000 to conform to EB-5 rural qualifications.

Post filter, there are 74 micropolitan areas identified by the Heartland Forward top 100 report that also qualify for a rural EB-5 project:

Additional filter: Proximity to MSAs

While all the listed micropolitan areas in the graphic above qualify as rural, it's important to consider their proximity to MSAs. Investing in areas within a 1.5-

hour drive from a large MSA containing more than 1.5 million residents offers several advantages:

Larger Market Potential: Projects can draw visitors or customers from both the rural area and the nearby MSA, enhancing the potential for success through a larger target market.

Trends in Urban Migration:

As cities become more crowded, residents are moving to suburbs and surrounding rural areas, a trend amplified by the pandemic. Proximity to an MSA capitalizes on this shift. With that said, areas that are considered rural now may not be in the future due to increased migration and will have higher demand.

Economies of Scale: Areas near an MSA benefit from lower material costs, reduced logistics expenses, and more competitive subcontractor pricing, which lowers the overall construction costs. This in turn reduces the requirement of higher sales and rental rates to achieve a higher profit margin than a costlier project.

TOP RURAL MICROPOLITAN AREAS IN CLOSE PROXIMITY TO A MSA

Here are the top rural micropolitan areas identified by the Heartland Forward report that also are located in close proximity to a large MSA:

CONCLUSION Selecting a Strong Rural EB-5 Investment

Due to sparse data and a general lack of reporting metrics, it is hard for investors to make informed decisions regarding the location of rural EB-5 investments. Investors cannot solely rely on project promoters for their information and should seek objective information from 3rd party sources. This strategic selection attempts to help rural EB-5 investors make confident decisions by aligning with Heartland Forward’s robust findings.

The EB-5 Reform and Integrity Act has ushered in a new era of opportunities for rural EB-5 investors.

By focusing on micropolitan areas with resilience, natural amenities, and diversified economies, as well as considering proximity to MSAs, investors can confidently pursue rural EB-5 investments located in strong, growing markets.

If you would like to receive more useful EB-5 due diligence information like this or have any questions regarding our methodologies, please contact us at: