The Changing Landscape of the EB-5 Program
by Foster LLP, on Immigration
Since 2015, the EB-5 industry has been caught in limbo in anticipation of new legislation and USCIS regulations that will revamp the EB-5 immigrant investor program. These lingering proposed changes are still not final, not to mention agreed upon amongst government officials. While the government continues to drag its feet, those involved with the EB-5 program have witnessed its significant growth, with more than $20 billion in total investment since 2008 and more than 30,000 I-526 immigrant investor petitions filed with USCIS from 2015 to 2017. However, those who have been following developments closely can attest that this growing popularity has driven two notable changes to the day-to-day use of the EB-5 program.
Change I: Change in Investor Profile
At the 2018 IIUSA EB-5 Conference held in Washington, DC, Charlie Oppenheim, Chief of the Visa Control and Reporting Division for U.S. Department of State, announced that backlogs for Chinese and Vietnamese EB-5 investors will grow to 10 plus years and five plus years, respectively. While Vietnam remains a strong market for EB-5 investors, EB-5 players have taken to traveling to other countries, such as India, Brazil, South Korea, Mexico, South Africa, and others, in order to make up for the dramatic decrease in EB-5 investment funds coming from China. There has also been a push within the United States to seek out foreign nationals who may be interested in the EB-5 program. For example, the ever-growing backlog for Indian nationals waiting to immigrate under the EB-2 immigrant category for individuals with advanced degrees and the EB-3 immigrant category for skilled workers and professionals has spurred an increased interest in EB-5 for this demographic. With the exploration of new countries has come new terms for working with EB-5 investors. Unlike EB-5 dealings in China, which almost always involved working with a migration broker handling most of the interaction on behalf of the EB-5 investor, individuals from countries that are newer to the EB-5 space require much more one-on-one interaction and relationship building between the client, attorney, and EB-5 project. A potential client from India or Mexico will likely require that he or she personally meet and evaluate a number of EB-5 projects and attorneys before making a decision.
Change II: Change in Investment Terms
The changing landscape in the EB-5 industry is also reflected within the investment documents offered by EB-5 projects. Interacting with new foreign nationals and the effects of extended EB-5 immigration timelines has caused the need for updated investment terms. In the past, because Chinese investors preferred the type of model in which the EB-5 fund loans pooled EB-5 investor funds to a project, this model made up the majority of the projects. However, as new countries are being targeted, another investment structure has become popular, which involves the EB-5 fund using pooled EB-5 investor funds to make an equity investment in a project. As a result, we see EB-5 projects now offer both investment options in order to accommodate investors from around the world.
Furthermore, the EB-5 backlog and the related extended EB-5 immigration timeline for Chinese and Vietnamese investors must be discussed in the project investment documents. The longer backlogs for Chinese and Vietnamese investors causes a need for revised language in the investment contracts regarding child age-out concerns and clarifications on timeframes for investors receiving credit for job creation. Aspects of how the EB-5 funds are handled by the project must also be incorporated into the contracts due to extended EB-5 timelines, such as anticipating longer EB-5 loan terms and describing options for redeployment of EB-5 investment funds.
Overall, these changes mean that the need to make connections, cultivate relationships, and think creatively is more important than ever before in EB-5. For those getting involved with an EB-5 project, be prepared to structure an immigration-compliant, competitive project that checks all the boxes under the current EB-5 landscape.