EB-5 Regional Centers Resume Operations: Key Takeaways for New EB-5 Investors

On June 24, 2022, the U.S. District Court for the Northern District of California issued a preliminary injunction that fully reauthorized the EB-5 Regional Center Program. As a result, regional centers, whose certification had previously been removed by United States Citizenship and Immigration Services (USCIS), can immediately resume operations and accept new investors. Investors in EB-5 regional center projects can file their I-526 petitions with USCIS without further delay.

This ruling has reauthorized the EB-5 industry’s most popular investment option. We now summarize the main takeaways from the court’s decision and explain their impact on new investors in regional center projects.

USCIS Now Accepts I-526 Petitions From Regional Center Investors

After nearly a year, foreign nationals can once again invest in a regional center-sponsored EB-5 project and file Form I-526, the first application in the EB-5 immigration process. Choosing a regional center-sponsored project offers investors several unique advantages: more flexible criteria creating the 10 required jobs, stricter regulations to ensure that funds are handled transparently, and the ability to join a project along with other EB-5 investors.

New investors in regional center projects are now eligible for two other benefits that were introduced in the EB-5 Reform and Integrity Act (RIA) of 2022: reserved EB-5 visas and concurrent filing of Forms I-526 and I-485. We expect the pent-up demand for the regional center investment model to culminate in a large volume of I-526 petition filings, and so the first regional center investors to submit Form I-526 will have a greater chance of qualifying for these two benefits.

Reserved EB-5 Visas Through High-Unemployment and Rural TEA Projects

The EB-5 RIA stipulates that, each fiscal year, the Department of State (DOS) must set aside 32% of the supply of EB-5 visas for investors in targeted employment areas (TEAS) and public infrastructure projects. A project site qualifies as a TEA if it is in a rural area or in an urban area that experiences high unemployment.

The rural TEA category is allotted 20% of the EB-5 visa pool, while high-unemployment TEA and infrastructure projects receive 10% and 2%, respectively. This limited supply of set-aside visas will be granted to the first investors in each category who file Form I-526 as of March 15, 2022 (the date of the RIA’s enactment).

Since each participating nationality in the EB-5 program can take up no more than 7% of the total visa supply each fiscal year, some countries have a volume of EB-5 applicants that exceeds their supply. This situation is known as visa retrogression, and investors born in these countries may have to wait for many more years before obtaining their EB-5 visas. As of July 2022, China is the only country experiencing visa retrogression, but more nationalities may follow.

Foreign nationals who invest in one of the reserved visa categories will be eligible for a visa as soon as their I-526 petitions are approved—even if their country has exceeded its yearly visa limit.

Since public infrastructure is an entirely new project type in the EB-5 industry, foreign nationals seeking a reserved visa should primarily look for rural or high-unemployment TEA projects. EB5 Affiliate Network’s (EB5AN’s) regional centers currently sponsor two industry-leading projects in each of these categories: Saltaire St. Petersburg (High-Unemployment TEA) and Twin Lakes Georgia (Rural TEA).

High-Unemployment TEA Projects

High-unemployment TEAs exhibit an unemployment rate of at least 150% of the U.S. national average. This category has historically been very popular among EB-5 investors; several projects in high-unemployment TEAs, particularly real estate developments, have proven their ability to succeed financially, create at least 10 jobs per EB-5 investor, and comply with USCIS requirements.

We estimate that the first 663 or so EB-5 applicants to invest in a high-unemployment TEA project during the 2022 fiscal year will be eligible for a reserved visa in this category without facing a delay caused by visa retrogression.

EB5AN’s Saltaire St. Petersburg condominium development project (see below) qualifies for high-unemployment TEA status.

Rural TEA Projects

A location qualifies as a rural TEA if it is located outside of a metropolitan statistical area and does not border a municipality with a population of 20,000 or more. Approximately 1,325 investors in the 2022 fiscal year will be eligible for reserved visas from the rural TEA category.

Rural TEA projects have been comparatively rare in the EB-5 industry, and rural hotels, factories, and other business types that depend on often-volatile consumer demand have a higher risk of encountering financial difficulties. At the same time, rural projects whose client base has stable, diversified demand, such as affordable residential housing developments, may prove to be far safer. Investors in rural TEA projects gain the added benefit of faster processing for the I-526 petition, and the reserved visa supply in this category exceeds the other two set-aside options.

EB5AN’s Twin Lakes single-family housing development project in Hoschton, Georgia (see below) is a prime example of a low-risk rural TEA offering.

Concurrent Filing of Forms I-526 and I-485

EB-5 applicants who already live in the United States under a non-resident visa such as the H-1B, F-1, E-2, T-N, or L-1 options, use Form I-485 to adjust their immigration status after making an EB-5 investment. The EB-5 RIA now allows investors to file Forms I-526 and I-485 concurrently, changing their immigration status to “pending adjustment.” As a result, investors may be able to live, work, and study in the United States even before receiving their EB-5 visas. Non-resident visa holders whose immigration status is nearing expiration or who would like more freedom to work or study will likely be interested in this provision.

While investors from countries experiencing visa retrogression are barred from filing the I-526 and I-485 petitions concurrently, this restriction can be avoided by investing in one of the reserved visa categories—while these are still available.

EB5AN Offers Two Institutional-Quality Regional Center Projects: Saltaire (High Unemployment) and Twin Lakes (Rural)

EB5AN is pleased to announce that its two regional center projects can now receive I-526 petition filings.

The Saltaire and Twin Lakes projects are being developed by the Kolter Group, one of the top 25 private home builders in the United States. To date, Kolter has never defaulted on a loan or failed to complete a project, and it has invested in real estate projects with a total value of over $19 billion over the past 25 years. 10+ previous projects by EB5AN and the Kolter Group have succeeded financially and received USCIS approval.

Saltaire St. Petersburg Luxury Condominiums – High Unemployment TEA

This 35-story luxury condominium, which is well into construction, is in downtown St. Petersburg, Florida. One hundred percent of the condominiums have already been sold, and investors will receive repayment completion and I-526 approval refund guarantees. All the required EB-5 jobs have already been created, making Saltaire St. Petersburg a particularly low-risk option for new investors.

The Saltaire St. Petersburg offering is structured as a loan project, meaning that the new commercial enterprise (NCE)—that is, the investment fund entity affiliated with the regional center—makes a loan to a job-creating entity (JCE) in charge of creating employment. The loan structure is perceived as a lower-risk option; loans made to the JCE are often secured by collateral and take priority over any equity in the project. Moreover, the loan terms tend to be more standardized, with fixed returns, covenants, and an exit strategy to repay investors.

The latest updates on the Saltaire St. Petersburg development are featured on the project’s site.

Twin Lakes Georgia Single-Family Home Community – Rural TEA

This 1,300-unit single-family housing community is being developed in Hoschton, Georgia, and has already fulfilled the job creation requirement for all $800K EB-5 investors. Investors in this project also receive an I-526 approval refund guaranty.

The Twin Lakes Georgia development is structured as a preferred equity project, in which the NCE purchases equity in the JCE. Kolter Homes is the largest division of The Kolter Group and has successfully developed 20,000+ single-family homes since 1997.

More details on the Twin Lakes Georgia project can be viewed here.

Foreign nationals interested in either the Saltaire or Twin Lakes Georgia project can start the EB-5 process immediately by signing the subscription documentation for either the Saltaire or the Twin Lakes project and wiring in part of the $800,000 investment requirement to reserve their spot.

We invite you to schedule a call with our team to determine which EB-5 project is best for you.

Developer Independence is Critical When Selecting an EB-5 Project

It is also important to note that the Kolter Group is 100% independent of EB5AN and all its regional centers. If an EB-5 project developer shares the same name as its regional center sponsor, this is a red flag that there are conflicts of interest that increase investors’ financial and immigration risk. EB5AN takes seriously its fiduciary towards investors and is careful to avoid potential conflicts of interest.

Avoid Projects with High-Risk Conflicts of Interest and Projects with Multiple Large Tranches of EB-5 Investment

As the regional center program resumes operations, several new offerings will likely be advertised as low-risk and high-return opportunities. Other regional centers may claim to have expedited project status and that their investors can have their I-526 petitions processed significantly faster than other applicants.

Investors should be wary of unrealistic offerings and keep in mind that a higher return on investment invariably results in a higher financial risk. Basic economic theory confirms that all things equal, the safest offerings from a financial perspective will always be those with the lowest returns. In addition, expedited status is extremely rare in the EB-5 industry, and the vast majority of projects do not qualify.

As mentioned previously, it is crucial for regional centers to avoid conflicts of interest with the project developers they sponsor. If a project is controlled by the same company as the regional center, the regional center will essentially be investing the EB-5 funding with themselves. And, if a project experiences a shortage of funds, it is highly unlikely for it to repay EB-5 investors by selling its own assets or through other means. The interest payments due to investors would probably be delayed in this scenario and the EB-5 investment capital could become trapped for 10+ years.

Regional centers that sponsor large projects (with an EB-5 capital raise of $80 million or more) and carry out several rounds of EB-5 funding for this same asset are also risky. EB-5 funding is often available at below-market rates because the investors are primarily concerned with immigration instead of gaining high returns. And if a project’s capital structure is made up of a large percentage of EB-5 funding, the developers may feel empowered to take risks that would otherwise be unconscionable.

For example, a luxury hotel development in a remote area with low demand for the hospitality industry would ordinarily find it difficult to find investors. If it turns to EB-5 capital, however, the project may be able to go ahead despite the high risk. Any EB-5 investors involved would face higher risks of successfully immigrating and/or receiving their EB-5 investment capital back in a timely manner, if at all.

Unsecured Loans Are Allowed But Entail a Higher Risk

USCIS allows EB-5 applicants to use a variety of sources, including loans, to fund their investments. Even though a 2020 court ruling in the Zhang v. USCIS case set a precedent for using unsecured loans as a source of EB-5 capital, doing so implies a significantly higher risk for investors.

It is worth noting that USCIS’s source-of-funds requirements became more strict under the RIA; investors must now report their tax returns for the previous seven years. If a loan is used, the lender’s tax returns for the same period must also be reported. Moreover, should USCIS determine that the source-of-funds documentation is unclear or misleading, it may issue an outright denial of an investor’s I-526 petition.

Using secured loans or another source of funds remains the best practice for EB-5 investors.

USCIS Is Unlikely to Successfully Appeal the Preliminary Injunction and Regional Centers Will Remain Certified At Least Until the Lawsuit Has a Final Ruling

In the court order that approved the preliminary injunction against USCIS, Judge Vince Chabria made it clear that USCIS had overstepped its authority in decertifying regional centers, stating that “the agency must continue treating the existing members [that is, regional centers] as members of the newly revamped club [regional center program].” In fact, Congress has sent letters to USCIS explaining that it was never its intent to deauthorize existing regional centers. This unreasonable interpretation of the RIA would prevent millions of dollars of EB-5 investment funding from reaching businesses across the United States.

With strong evidence supporting the plaintiff, any appeal from USCIS against the preliminary injunction is unlikely to succeed. Even if the agency does decide to appeal, the process for doing so is lengthy and would likely take at least 12 months. In the interim, the EB-5 regional center program will be open and new EB-5 investors will be able to invest and file I-526 petitions without any further delays. As the preliminary injunction suggests, the court’s final judgment is likely to be in favor of the plaintiff.

EB-5 Visa Applicants Can Invest in a Regional Center Project Today

The EB-5 Regional Center Program has been the most popular investment model for EB-5 visa applicants; its many benefits, now compounded with new provisions under the EB-5 RIA, will likely help many more foreign nationals start on the path toward a U.S. visa. EB5AN is committed to helping its investors find the safest EB-5 projects that will allow them to immigrate as quickly as possible. Schedule a call with our team to answer any questions about the EB-5 process and get started on the path to U.S. permanent residency and citizenship.

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