A new federal lawsuit is throwing EB-5 investors a curveball, clouding the answer to a most basic question: \u201cWhen will I get my money back?\u201d<\/p>\n
The lawsuit<\/a>, filed by Invest in the USA (IIUSA), argues that the current two-year EB-5 investment period (as set forth in an October 2023 policy<\/a>) is too short and should be repealed by U.S. Citizenship and Immigration Services (USCIS). In place of the two-year period, IIUSA is proposing an even longer investment timeline in which money must stay committed\u2014or \u201cat risk\u201d\u2014for at least five years. Any change would be retroactive to 2022.<\/p>\n EB-5 investors who were expecting a two-year financial commitment, based on current USCIS policy, now face the possibility that their money will be held for longer. With this lawsuit, several outcomes are possible, which means investors have no clarity on just how long their money will be invested.<\/p>\n And that uncertainty leads to another question: will their capital have to be \u201credeployed\u201d (placed into a second project they do not get to choose) in order to satisfy a longer investment period?<\/p>\n \u201cYou invest in a project telling you, \u2018Hey, it\u2019s only three years, you\u2019re going to get your money back\u2019 and then, \u2018wait a minute, oops, actually no, it\u2019s a five-year minimum investment period,\u2019\u201d explains Sam Silverman<\/a>, managing partner of EB5AN, which does not support the lawsuit<\/a> nor the five-year minimum proposal.<\/p>\n \u201cEven if that project was successful after three years and it repays, you\u2019ve got to be invested and \u2018at risk\u2019 for another two years, so you\u2019re getting redeployed,\u201d Silverman says.<\/p>\n In this article, we explore the possible outcomes of the IIUSA lawsuit and their proposed five-year investment (sustainment) period rule for EB-5 investors. With Sam Silverman\u2019s insights into the topic, we look at the risks involved in redeployment and the best strategies to avoid these risks.<\/p>\n \u201cLike politics, redeployment<\/a> can be a taboo topic,\u201d Silverman says. \u201cWith redeployment, risk to investors increases and the stakes are high. But this ongoing lawsuit and the uncertainty it\u2019s causing are making this a must-have conversation.\u201d<\/p>\n Suppose an investor placed money in an urban multifamily project with a well-regarded developer. That investor could later find that capital redeployed to, say, a restaurant project or an exotic equity stake in a less-vetted, speculative real estate development.<\/p>\n \u201cWhen you give somebody control like that, they can put you in a much riskier project,\u201d Silverman says.<\/p>\n Which is why it\u2019s important to ask your sponsor about their redeployment strategy up front and understand what prior redeployment of EB-5 funds has been for earlier EB-5 investors.<\/p>\n The best way to curb the risk of redeployment is to try to avoid it altogether, Silverman advises. Doing so now means planning around three possible outcomes of IIUSA\u2019s lawsuit before making an EB-5 investment decision. We present those possible outcomes below.<\/p>\n But the safest path forward is this: pick a rural EB-5 project with a five-year holding period. This is especially true if you are an investor from India or China<\/a>. By doing this, you reduce the chance of redeployment no matter what changes are made to the mandatory \u201cat-risk\u201d period.<\/p>\n Under this outcome, the \u201cat risk\u201d period would revert to what it was before 2022. Back then, money had to stay committed for a two-year period that started when an investor obtained a conditional Green Card. Remember: under this scenario, the two-year clock does not begin at the moment of investment as it does now. Instead, it begins only after the investor applies for and receives a conditional visa.<\/p>\n For Indian or Chinese investors\u2014who face a multi-year-long backlog to even acquire that conditional Green Card\u2014this is the worst possible scenario. Their money might have to stay \u201cat risk\u201d for as long as eight years.<\/p>\n An Indian or Chinese investor who committed to a three-year urban project in 2022 will likely be waiting at least five years before they even get their temporary Green Card. Then they would have to wait two more years from that point. So these investors should expect to see their capital redeployed into new projects for at least five more years in order to fulfill the new mandatory holding period.<\/p>\n Investing in a rural project<\/a>, however, would change the math to something more favorable. A total of 2,000 EB-5 visas are set aside each year for investors in rural locations, and this visa category has no backlog for Chinese and Indian investors. As a result, a rural investment is a fast lane to getting a temporary Green Card and starting the clock sooner on the mandatory two-year holding period.<\/p>\nHow the Sustainment Period Impacts Redeployment Risk<\/a><\/h6>\n
Potential Outcomes of the Lawsuit<\/a><\/h6>\n
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How EB5AN Approaches Redeployment <\/a><\/h6>\n<\/div>\n
How the Sustainment Period Impacts Redeployment Risk<\/h3>\n
Potential Outcomes of the Lawsuit<\/h3>\n
Outcome 1<\/h4>\n