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EB-5 industry preparing to restart amid new rules

The EB-5 industry received some welcome news in early March. The industry is back in business, nearly eight months after the regional program ends at the end of June 2021, pausing to raise both capital from new applications and processing existing applications.

Congress re-authorized the program when it approved the EB-5 Reform and Integrity Act of 2022 linked to the Universal Appropriations Bill on March 10. However, it is not business as usual. EB-5 regional centers are working to attract new investors and line-up new investment projects, all while adapting to program changes, new regulations and increased regulatory oversight. “It’s a great relief to have the program reauthorized, even though there’s a lot of work to be done,” says Christine Chen, COO of CanAm Enterprises, the EB-5 regional center operator.

EB-5 is an incentive program for foreign investment in the US that trades green cards for capital. Its proponents have long touted it as an important economic stimulus tool for economic growth and job creation, attracting billions of dollars in capital since the program was first launched three decades ago. Developers love it because it provides an attractive source of low-cost credit to the capital stack. Also, some believe that the program was in dire need of reforms.

Reed Thomas, managing director and chief revenue officer of JTC Americas, a company that provides fund administration solutions and services to EB-5 regional centers, says, “The whole reason the program ended was because the program has become plagued by some bad actors. ” , The positive aspects of the program have been tarnished by cases of fraud. The new law aims to address some of the program’s vulnerabilities and protect immigrant investors.

Industry reacts to new rules

Recent legislation introduced a number of changes, including expanding the designations for Target Employment Areas (TEAs) and increasing the investment amount for EB-5 participants to $800,000 for TEAs and $1,050,000 for non-TEAs. However, there are three big issues that are front and center for industry participants. Most important, the program has been reauthorized for five years and will be effective till September 30, 2027. It’s a big step forward for a program that had previously suffered a series of short-lived renovations and eleventh hour extensions over the years. , “This brings incredible stability to the EB-5 ecosystem, and it allows for more definitive planning on the part of regional centers and project developers,” said Aaron, executive director of Invest in USA (IIUSA), a trade association for EB Gray says. -5 Regional Center Program.

The second main focus of the bill authors Senators Patrick Leahy (D-VT) and Chuck Grassley (R-IA) is a set of integrity measures intended to make it more difficult for bad actors to take advantage of the system. EB-5 regional centers will be required to comply with more stringent transparency and reporting requirements to the Department of Homeland Security (DHS).

The third is a grandfather clause that protects good-faith investors from being mired in the balance if the program is terminated again at some point in the future. Waiting times for a conditional visa range from one year to 15 years depending on the country of origin. Having a program that ends every six to 12 months was causing a lot of anxiety for potential applicants, notes Chen. He further said that the grandfathering clause which protects applicants even if the program ends in future, is seen as a major improvement for both existing and new investors.

When Congress failed to reauthorize the program last year, it sparked a backlash from applicants stuck in limbo. According to IIUSA, 32,600 households who had made their EB-5 investments through a regional center were affected by the default. Behring Co. is a real estate developer and regional center operator that filed suit in February 2021 against DHS, the State Department, and the US Citizenship and Immigration Services (USCIS). The lawsuit claimed that federal agencies were unilaterally exceeding their authority. Cancellation of the EB-5 Regional Center Program.

The EB-5 Reform and Integrity Act has received industry support. For example, the Real Estate Roundtable recently issued a letter appreciating bipartisan reform legislation that puts the program back on track, while reducing the risk of litigation from existing investors who had capitalized and pending There were applications.

The processing of existing applications was expected to resume immediately. Regional centers are in place over a 60-day period where they are tasked with complying with new reporting requirements before capitalizing for new projects. “There is an obligation on regional centers to comply with all these new requirements to participate in the program,” Chen says. Monitoring fees range from knowing who the regional center operator is partnering with in the US and abroad to being transparent with investors. “We are all really excited about reauthorizing the program, but there is a lot to be done and a lot of questions that need to be answered,” she says. “So, it’s going to be interesting a few months ahead.”

obstacles remain

The reauthorization of the Regional Center program is expected to be completed with some stalled demand. “There is a tremendous worldwide demand for people who want to come to America, live and become citizens,” Thomas says. Yet another hurdle for the industry is the long backlog of applications, which can be a deterrent for people in countries that have long wait times. “Investment in EB-5 projects will pick up again, but may not return due to the long queues of 2017 and 2018,” he says.

The deadlock of applications for high-demand regions such as China, India and Vietnam has been an ongoing problem. Applicants from China faced the longest waiting times of up to 15+ years in some cases. However, the average processing time for I-526 petitions cited by USCIS for all other countries is between 35 and 58.5 months. “The lights have been turned back on, and there are a lot of people interested in investing,” Gru says. He said a question that remains to be seen is how quickly the government can act on the processing and approvals to restart the pipeline.

Despite the bumpy road the EB-5 program has had due to a series of short-term renewals over the years, several months have passed and now that new regulations have changed, there is still tremendous demand. “A lot of investors are still very interested in coming to the United States. This country offers a lot of opportunities, especially now that things are starting to open up again post-COVID,” Chen says. How the US Government Handled COVID , there’s been a lot of transparency about it, and immigrants are more confident in vaccination rates and there’s a good way forward. Immigration is also viewed more positively under the Biden administration.” What makes the EB-5 so attractive,” she adds.

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