An Introduction to the EB-5 Immigrant Investor Program

The Law Offices of Julia Park, LLC assists Individual Immigrant Investors in their EB-5 petitions and businesses interested in establishing Regional Centers. The following is an explanation of how EB-5 works written for prospective investors.

The EB-5 visa for Immigrant Investors is a United States visa created by the Immigration Act of 1990. This visa provides a method of obtaining a green card for foreign nationals who invest money in the United States. To obtain the visa, individuals must invest $1,000,000 (or at least $500,000 in a targeted employment area (TEA) or rural area), creating at least 10 jobs for U.S. workers. Currently, the majority of investments that are being marketed to foreign investors are in locations that qualify for the $500,000 investment.

If the foreign investor’s petition is approved and the investor goes through the consulate interview or, if already in the United States, I-485 adjustment of status, the investor will be granted conditional permanent residence which is valid for two years. This conditional greencard will give the holder all the benefits of a permanent greencard holder and allows the investor to enter and live in the United States. The total time from choosing an investment and wiring the investment funds to entering the United States, as of January 2012, takes approximately one year. Two years after obtaining the conditional greencard, the investor must submit evidence documenting that the full required investment has been made and that 10 jobs have been created or will be created within a reasonable time period.

In 1992, Congress created a temporary pilot program called the Regional Center Pilot Program designed to stimulate investment through EB-5 visas. Under this pilot program, foreign nationals may invest in a Regional Center which is a public or private entity approved by the United States Citizenship and Immigration Services (USCIS) that will create the requisite jobs. An EB-5 investment made through a Regional Center provides foreign nationals the added benefit of allowing them to count jobs created both directly and indirectly for purposes of meeting the 10 job creation requirement. In addition, investing in a Regional Center project allows the investor to live anywhere in the United States regardless of where the investment was made. Currently, according to the USCIS, more than 95% of EB-5 investments are made through Regional Center projects (as opposed to the investor directly setting up a business and creating jobs).

EB-5 visas have been very popular in recent years. By the end of the 2011 fiscal year (September 30, 2011), more than 3,800 EB-5 applications had been filed, compared to fewer than 800 applications in 2007.

B-5 investments can be made in many different operations ranging from dairy farms to gold mines to solar power plants. In recent years, real estate development projects including hotel developments have become a very popular type of investment. Currently there are over 200 approved Regional Centers in the United States. But this does not mean there are more than investment projects to choose from. Not all Regional Centers have current projects and not all projects are of the same quality.

It is crucial for potential investors to choose the right Regional Center project for their investment because two years after the investor receives his or her greencard, a filing must be made that shows that the required jobs were created. If the required jobs are not created by the Regional Center project, the investor must leave the United States upon expiration of the conditional greencard. There is no appeal process if the required jobs are not created, which makes it crucial for the investor to choose a good project.

Regional Center investments come in two forms, direct equity investment or a “loan-based” model. Currently, loan-based investments are the more popular of the two because investors can know when their investment can be exited (i.e. their principal will be returned). Equity models refer to investments in which the investor takes an equity position, and as such, the exit of the investment depends on when it is profitable to do so. In a loan-based model, the investors will make an equity investment into a limited partnership created by the Regional Center that packages the investment and loans it out to a borrower (the owner or developer of the actual project) for a fixed term and interest rate. Generally, loan terms are for 5 to 6 years and interest rates are 1-2% annually.

This means that after 5 or 6 years, the borrower will repay the funds to the limited partnership which will then in turn repay the investors. When taking into consideration inflation and fees, the investment itself will not provide any real returns to the investor. Assuming the investment is managed well, however, the investor will be returned his or her principal ($500,000) after the 5 or 6 year loan period. (But bear in mind, the investor should add 1 year to this timeline because the funds can be sitting in an escrow account pending approval of the I-526 application.)

The spouse and unmarried children under 21 may accompany the EB-5 investor and receive derivative greencards. Considering the time it takes to go through the EB-5 process (approximately one year or more), any potential investors with older children should explore their options as soon as possible. The child’s age is frozen once initial EB-5 petition (called the I-526 application) is filed. In other words, as long as your child is under 21 when the I-526 is filed, she can also get a greencard even if she turns 21 before the greencard is approved.
As of January 2012, it is taking approximately one year from when the investor first wires the funds to the Regional Center until the investor can expect to obtain the conditional greencard to move to the United States (or adjust their status to that of a greencard holder if they are already residing in the United States on a different visa status). There is much discussion between the EB-5 community and the USCIS (United States Citizenship and Immigration Services) about introducing Premium Processing which will allow the process to go much quicker. At this time, however, the USCIS does not seem to be able to give a firm commitment as to when this will be introduced due to lack of personnel.

(Please see this blog post for a more detailed breakdown of the EB-5 timeline.)

The investment amount for Regional Center projects located in targeted employment areas or rural areas is US$500,000. This amount is the principal of the investment that will be returned after the loan that the Regional Center makes to the investment project is repaid. In addition, Regional Centers will collect subscription fees and there are separate legal and USCIS filing fees. Investors can expect to pay approximately $60,000 in fees.
In the majority of investments, your funds will be held in an escrow account until your initial EB-5 petition, I-526), is approved. Therefore, if your I-526 is not approved, your funds will be released from escrow immediately. However, if your I-526 is approved, the funds are released, and then you fail the consular interview or I-485 adjustment of status stage, different Regional Centers will deal with this differently, but generally, you can expect to have your funds returned to you once the Regional Center finds an alternative investor. (But read the fine print as practices differ from project to project.) If two years later, the petition to remove conditions on your greencard (called an I-829) is not approved, your investment will continued to be held until the term of the loan made by the Regional Center to the project developer matures and the principal is repaid.

(Please see this blog post for a more detailed analysis about what happens when.)

EB-5s are an attractive way to get a greencard to live in the United States. As with any investment, however, the investor must understand the risks involved so that he or she can minimize them as much as possible. Law Offices of Julia Park, LLC is located in New York City and works with many potential investors interested in obtaining a greencard through the EB-5 program. We have a laser sharp focus on EB-5s and can provide up-to-date, impartial and knowledgeable legal assistance in this complicated area of the law. Please feel free to contact us with any questions or to schedule a complimentary initial consultation.