IIUSA Executive Director, Aaron Grau, recently shared his insights on the redeployment of EB-5 capital during the regional center program lapse. The analysis is part of IIUSAs continued efforts to ensure that industry stakeholders and investors are well informed during this critical time for the industry.
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Originally Published in Investment Migration Insider
by Aaron Grau. Executive Director, IIUSA
EB-5 investors, developers and program administrators are scrambling to prevent (anymore) fallout caused by the uncertainty since the Program’s lapse in June. One area most impacted is the question of redeploying EB-5 investor funds. EB-5 investors are required to keep their capital invested at risk until the completion of the investor’s USCIS’ defined “sustainment period.” However, during this lapse in the EB-5 Regional Center program there is a great deal of uncertainty.
An additional twist is the federal government’s “guidance” published during the summer, 2020. The long-awaited “guidance” read much more like a policy shift than direction on implementing existing redeployment protocols. Specifically, the guidance disallows a regional center’s ability to redeploy an investor’s capital anywhere other than the geographic area in which the regional center is licensed to make initial investments.
Regional Centers receive a geographic designation where their job creating investments can be made. For example, if a regional center‘s designated area is New York State, then the job creating project must be in New York State and EB-5 investors’ capital must flow to the job-creating project in New York State.
The summer 2020 “guidance” has a considerable impact; limiting the number of places where dollars can be reinvested and therefore jeopardizing an immigrant investor’s application status.
For example, a regional center that is permitted to make investments in rural communities in Alaska executes a successful investment which returns the invested EB-5 capital back to the NCE. However, since none of the EB-5 immigrant investors have completed their USCIS defined “sustainment period” (which must be completed before an EB-5 investor can be repaid) the EB-5 investor’s investment must remain in the NCE and at risk. Under the new “guidance” to keep that investment at risk, the NCE must redeploy the repaid capital in that same rural area in Alaska (in the Regional Center’s designated territory). This presents a problem for Regional Center’s with designated areas which are very small geographic areas and rural areas because there are likely far fewer opportunities to make such redeployment investments in those areas. Typically, these redeployment investments are more easily made in urban areas, but urban areas are not immune to this challenge either, i.e. whether or not there is an investment opportunity, let alone an appropriate investment opportunity that allows for EB-5 dollars…Continue Reading
