EB5 Investors Magazine has published their top-25 immigration lawyers list, with the lawyers commenting on recent changes and current trends. While some call the changes “devastating” and “shocking,” the consensus is the market will adjust, and EB-5 will still be a coveted immigrant investor program. Many also predict a more sophisticated investor pool, as well as smaller and more diverse projects.
New investment amounts: after initial ‘sticker shock’ the market will adjust
Devastating. Shocking. Chilling. Stifling. These are words some immigration lawyers use to describe the regulatory changes made to the program on November 21, 2019. In 2019, some high-profile lawyers predicted the death of the program because of the sharp investment increases; but a review of current comments by top immigration lawyers gives confidence that reports of the demise of EB-5 have been premature.
As much as the program has slowed down — one lawyer says it will remain slow until early 2021 — many agree that a rebound will happen; it will just take some time for the investor market to adjust to the new investment amounts.
Darren B. Silver states, “from a fiscal and inflationary view, the changes were reasonable and have been long overdue.” He does comment, however, that the increase was a lot to take at once, and a more staggered increase in investment amounts would have been easier for the market to accept. Instead, “we are seeing sticker shock and slow acceptance.”
While it’s hard to argue that a program with no investment amount increases since its inception in 1992 rose 80% almost three decades later, many lawyers agree that the increase was too much at all at once.
Other comments on the regulatory changes include praise for the priority date retention for investors in failed projects, and some criticism of the failure to address processing times and the backlog. Jennifer Hermansky offers, “They also made some beneficial changes for investors processing I-829 petitions, including new protections for dependents.”
Despite mixed opinions, more than one lawyer describes the changes with the phrase “a step in the right direction”; and while it’s hard to get 25 lawyers to agree on anything, the general feeling is that EB-5 will adjust to the investment amount increase and move forward.
Targeted Employment Area changes
Changes to TEA designation were another major aspect of the new regulations. “TEA criteria has pushed out most attractive urban projects from the market,” declares Rohit Kapuria.
The industry knew many of the projects that qualified for this designation in the past would not be able to do so going forward. Edward Beshara estimates that 90% of older TEA projects would not qualify today.
The most common comment about TEA changes is that they have created uncertainty. Brandon Meyer calls them more negative to the program than the investment amount increases, and says the industry will struggle with these new rules. On a positive note, Mitch Wexler describes giving federal authorities the power to make TEA designations as “a healthy evolution of the program.”
The new EB-5 investor: deeper pockets, deeper wrinkles & deeper knowledge
It was clear that a hike in investment amounts would attract more affluent immigrants. Robert Gaffney declares this: “The 80% increase in the minimum capital requirement has altered the profile of the investor pool, effectively pricing out many early to mid-career immigrant investors who would be able to contribute their talents and energies to the development of U.S. communities.”
The consensus is that the new EB-5 investors will be more sophisticated, knowledgeable, and diversified in terms of worldwide markets. The numbers are indisputable: the pool of qualified investors has to be smaller, but with each investor bringing 80% more capital to a project, fewer investors will be needed. Once again, the EB-5 industry will adjust and move forward.
EB-5 Projects will be more competitive, smaller and diverse
Just as the new regulations have altered the complexion of the new investor market, they are changing the types of EB-5 investment projects we are likely to see. There will also be change to the structures of deals moving forward: “They are also becoming more creative on their capital stacks,” states Rakesh Patel.
The immigration lawyers are on the same page with regards to this: competition for a smaller and more sophisticated investor pool will result in better returns and a more versatile pool of investments.
Matt Galati is positive about the new direction of EB-5 projects: “Here are new opportunities. The new EB-5 rules will drive regional centers to explore new and creative offerings that will be to the benefit of the U.S. economy, especially in areas previously overlooked.”
Marketing in EB-5 will evolve
Marketing is always predicated on two things: the product and the target audience. Thus, in EB-5 a new variety of project types and an evolved investor market will lead to a new kind of marketing in the industry. Dillon R. Colucci states, “As investors become or are more sophisticated, prior tactics to encourage investments and market investments will need to change to reflect a different investor pool.” The introduction of online marketplaces, such as EB5Marketplace.com, will meet the needs of more savvy investors seeking not just EB-5 offering details but third-party due diligence as well.
Immigration lawyer Carolyn Lee embraces the change: “Industry folks, old and new, are thinking outside the box to turn up new opportunities. I believe good things will come out of it.”
It is also noted that more sophisticated investors often have a better grasp of English these days and that will be a factor in promoting investment projects and stakeholder services as well.
More scrutiny will require ‘stronger’ petitions
This group of top lawyers have several comments about how we can expect USCIS to adjudicate now and in the future. Increased investment amounts will cause the agency to more closely examine source and path of funds including any currency exchange issues.”Once allowed practices, such as single intermediary currency exchange, bridge loan and minor investors, are now resulting in a Request for Evidence,” says Vivian Zhu. Notices Of Intent to Deny (NOID’s) are also expected to become more common.
I-829 petitions will have to bear intense scrutiny for being at risk during the two-year conditional residency period. Daniel Lundy opines: “Investors will have to work harder to file strong petitions.”
Litigation is expected to increase
Lawyers predict a trend of increased litigation related to a greater number of USCIS petition denials and an increase in mandamus lawsuits, as a response to the agency’s exceptionally long processing times.
Processing times & retrogression
Multiple lawyers express a desire to see Congress pass legislation that will increase EB-5 visa numbers to reduce program backlogs. There are differing opinions on the future of one retrogressed country, India. Rohit Turkhud believes the new regulations may have dampened Indian interest for the time being, however Nima Korpivaara thinks that the oft-projected Indian wait of five to six years is, in reality, closer to three years, and thus foresees more Indian I-526 filings in 2020.
Redeployment and disputes related to it will become more prevalent
Those lawyers who reference redeployment of EB-5 investor funds predict much activity and a subsequent increase in RFE’s relating to it. “Disputes over redeployment are also likely to become more prevalent,” projects Daniel Lundy.
The future of EB-5: ‘The world is full of $900,000 investors wishing to move to the U.S.’
While it is conceded that the U.S. risks losing some investors to other countries (an inevitability with a higher investment amount) the consensus is that EB-5 still has much global interest. David Hirson says that many immigrant investors will still see the U.S. as “their number one choice.”
Brandon Meyer is similarly optimistic: “The world is still full of $900,000 investors wishing to move to the U.S.” And Darren B. Silver echoes that sentiment: “Investors will come to the realization that $900,000 is still an extraordinary reasonable investment amount for U.S. permanent residency.”
Twenty-five lawyers will never agree on everything, but the majority of them seem to believe that EB-5 holds a promising future.
Read the EB5 Investors Magazine article “Top 25 Attorneys 2019: Top 25 Immigration Attorneys”
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