Wealthier Investors
On November 21, 2019, EB-5 investors saw an increase in the required investment amounts to $1.8 million, or $900,000 for a targeted employment area (TEA). But new TEA requirements mean that most EB-5 projects no longer qualify for TEA designation, which has led to an increase in rural project investment. These and other new restrictions have naturally resulted in a smaller number of investors from which to draw.
These investors are both wealthier and more cautious, showing greater concern for safeguards and due diligence. Because of the COVID-19 pandemic, many high-net-worth individuals are experiencing a liquidity crisis and are reconsidering their options for achieving U.S. permanent residency. However, the pandemic’s limitations on in-person contact has led those in the EB-5 industry to increase digital marketing and video conferencing—positive developments that could become a lasting part of the EB-5 industry.
In the 2020 market, things the sophisticated investor is looking for in an EB-5 project when considering an EB5 investment include advanced planning in certain industries, such as hotels and hospitality, for impacts from the pandemic; financial backing from sources other than EB-5; security of funds; capital stacking—a larger equity commitment from a developer; an I-526 guarantee and a completion guarantee; and, of course, job creation.
Changes in Specific Markets
Vietnam’s EB-5 investment activity has increased significantly in the last few years. Although the COVID-19 pandemic has decreased investor activity due to investors facing liquidity challenges, EB-5 application are expected to rise even further in Vietnam, making it one of the dominant players in the region.
In South Korea, a handful of migration agents dominate the market, with many sub-agents working through them. Despite the pandemic, South Korean investors have been relatively active regarding EB-5 investment.
China’s visa backlog has proven challenging for EB-5 investors there, and political tensions between Hong Kong and China have not yet resulted in the expected boom in Hong Kong investor activity. However, the political situation in Taiwan is still likely to increase EB-5 investor activity there.
South Africa is another emerging EB-5 market, with a large uptick in applications. There has also been a large increase in investor interest from Russia and some former Soviet states. The Latin American market has yet to grow significantly, though this is mostly due to issues with currency and the COVID-19 pandemic.
Politics and EB-5
The 2020 U.S. election may have positive impacts on EB-5. The Trump administration’s policies and rhetoric have contributed to a decline in interest in immigrating to the United States among wealthy families. The EB-5 investment program will face increased competition in future years from countries such as New Zealand and Canada. The incoming Biden administration is expected to be more immigration-friendly and may help to improve the United States’ image among international investors as the best country in which to work or raise a family.
Impacts of the Pandemic
The COVID-19 pandemic has significantly impacted every country’s economy. However, economic recovery will not progress at the same rate, with faster recoveries expected among more economically stable countries. Developing nations and underdeveloped markets will face a more difficult road to recovery. For the best EB-5 markets going forward, look to the world’s more stable economies.
Although the pandemic is expected to enter a new wave this winter, tempering EB-5 optimism in the short term, the announcement by Pfizer of a forthcoming vaccine that is 90% effective points to long-term success and a full economic recovery on the horizon.
Changes in EB-5 requirements, the ongoing pandemic, the U.S. election, and new investor trends have created some doubt among EB-5 issuers and stakeholders alike. But, in general, the outlook for EB-5 is still bright.
