By Ronald R. Fieldstone, Esq., Partner, and Rohit Kapuria, Esq., Partner, Saul Ewing LLP
The lobbying efforts set forth below ensured certain immigrant investors using the EB-5 Program will not be restricted by Florida S.B. 264, creating restrictions on certain nationals owning direct or indirect real estate in the State of Florida.
Thanks to the efforts of lobbyists at The Advocacy Partners, all EB-5 investors are exempt from the applicable law.
S.B. 264, which went into effect July 1, would have applied to EB-5 petitioners who invested preferred or common equity in an EB-5 project, but not to those who invested in a loan model EB-5 project. (The former equity scenario may create an ownership in real estate in the event of a foreclosure. The latter loan model would not.)
A preliminary injunction was thereafter filed, and the U.S. District Court for the Northern District of Florida denied the motion—confirming that the Plaintiffs had standing to bring the action but that failed to show a substantially likelihood of succeeding. That ruling has been appealed to the Fifth Circuit Court.
The Florida Legislature overwhelmingly approved S.B. 264, which provided in part for restrictions on certain domiciliary individuals from directly or indirectly owning an interest in Florida real estate. The law applies to a specific group of nations labeled a “foreign country of concern;” including the Russian Federation, the Islamic Republic of Iran, the Democratic People’s Republic of Korea, the Republic of Cuba, the Venezuelan regime of Nicolás Maduro, the Syrian Arab Republic, and notably the People’s Republic of China.
The Florida Department of Commerce publishing a proposed rule to specifically exclude EB-5 investors involved in an equity model. Clarification was provided to note that “foreign principal” has the meaning as defined in Section 692.201(4), F.S., stipulating that individuals approved by the federal government to participate in the EB-5 Program are excluded from this definition. As such, the proposed rule confirms the exemption for applicable EB-5 investors involved in an equity program and eliminates the requirement that only a loan model could be utilized.
“We hope this exemption will be followed by other states should they go down the same path as FL with respect to limiting foreign ownership of certain real estate assets,” said Gar Lippincott, Managing Partner at Atlantic American Partners.
“I had also heard some rumblings about this in … Congress as well. Let’s hope not.” Mr. Lippencott added, “Florida is wide open for EB-5 investing, so the Department of Commerce was very willing to accommodate the exemption.”
There are several reasons why this result is positive for the EB-5 sector. Florida has been a significant market for EB-5-real estate projects. According to U.S. Citizenship and Immigration Services (“USCIS”), Florida has 59 out of the 640 approved regional centers as of April 4, 2023—almost 10% of the total. It is hopeful that the EB-5 carveout for equity real estate investment in Florida will serve as a template for other states that are considering the adoption of legislation similar to S.B. 264.