The EB-5 Immigrant Investor Visa program begun in 1990 as a federal program to promote job and economic growth here in the U.S. by tying foreign investors and capital investments in qualifying projects in the U.S. These foreign investors were then given a path to a green card in return for their investments into the U.S. economy which are directly tied to creating at least 10 full-time positions for U.S. workers. While it was little-used at first, during the Great Recession of the late 2000s and early 2010s, EB-5 investment funds became an important source of capital funding during a time when bank financing and other types of traditional credit dried up.
Since 2015, Congress has repeatedly attempted to modify the EB-5 program in one way or another, but has thus far fallen short of implementing any change and has simply extending, the program as is. The latest extension, in March of this year, has caused U.S. developers and investors to look elsewhere for funding to complete projects. The following are three things to watch for (and be aware of) as we wait to see how the EB-5 program changes in the near future.
Some developers will hesitate on future projects.
Although this is to be expected, there are developers this year who may wait to initiate projects they had hoped to fund by EB-5 investors. Some of these developers are simply waiting until the end of the current six-month extension to see if Congress extends the EB-5 Regional Center Program yet again or substantially raises the minimum investment amounts, while others are looking elsewhere for project funding. The good news is, developers with projects already underway using EB-5 funds are typically still operating with a “full steam ahead” mentality.
Projects may seek less EB-5 funds in the future – or not.
Some projects are likely to seek less EB-5 funding out of caution of the changing program; however, EB-5 remains a consistent and important driver of these projects. The percentage of development funds that originate from the EB-5 program tends to grow larger as the scope of the project grows larger. In relatively small development projects, such as those with a total budget under $40 million, it is not uncommon to see only around 20-30% of funds coming from the EB-5 Visa program.
Existing projects may scramble to raise EB-5 funds during this latest extension.
Some good news for investors is that developers currently in the midst of fundraising for projects are viewing this latest extension as a golden opportunity to get investors in at the current minimum amounts before there is any chance of the U.S. government raising the minimum investment amounts. Investors who can get their required funds and application materials in order prior to the end of the current extension are encouraged to do so, since it could be the last chance to invest at the $500,000/$1,000,000 levels. While the construction industry is optimistic about the future of EB-5, now may be the best time to invest, since it is unclear when the U.S. government will increase the investment amount for the program or enact changes to the program. Failure to extend the EB-5 Regional Center Program could be fatal to EB-5 Regional Center project investors who have not yet been admitted as conditional permanent residents
One of the best decisions a potential EB-5 investor can make is to partner with an experienced EB-5 attorney working on their behalf, long before their application is drafted or filed. Whether you are committed to the EB-5 program or just considering it as one of many avenues, call David Hirson & Partners, LLP. Our attorneys are experienced immigration attorneys who have helped a multitude of investors successfully navigate the EB-5 and other U.S. visa programs.