EB-5 Investment Funds – Updated Redeployment Standards and Guidelines

UPDATED
WHITE PAPER: STANDARDS AND GUIDELINES FOR REDEPLOYMENT OF EB-5 INVESTMENT FUNDS

Prepared by:
Arnstein & Lehr LLP
Klasko Immigration Law Partners, LLP
Jeffer Mangels Butler & Mitchell LLP

Now that the USCIS has released amendments to its Policy Manual regarding the required “sustainment period” for EB-5 investors to retain their investments “at risk,” the authors of this updated White Paper have revised the original standards and guidelines for redeployment of EB-5 investment capital issued in February 2017 to reflect the new policies adopted by the USCIS on redeployment. It is believed that the guidelines provided in this updated report should meet the “sustainment” requirements established by USCIS in its amended Policy Manual, and it should also meet the requirements of federal securities laws and the fiduciary duties of the general partner or manager of each new commercial enterprise when making a decision to redeploy their investment capital in a new investment.

China Home Buying and Pricing Increases Trend

Arnstein & Lehr Attorney Ronald Fieldstone

Ronald R. Fieldstone

The phenomenon of escalating home buying and home prices continues in China. According to recent publications, the real estate sector now accounts for one-third of China’s GDP compared to 10% just a decade ago. Household debt has increased significantly during the last decade (now 42%). However, since it is only as a share of new loans, it is still far less than the 78% factor encountered in the United States. Home prices have dramatically risen in the major cities in China compared to other major cities in the world. Intensified government restrictions have apparently created an accelerated effect on home buying. Sources indicate that at the end of 2016, real estate accounted for approximately 69% of household assets compared to less than 60% in the U.S.

The implications of these trends support the ability of Chinese nationals to more readily leverage these real estate assets in an effort to obtain financing to invest in the EB-5 Program and have a clear source of funds to meet USCIS guidelines. Any change in the ability of Chinese nationals to be able to finance or refinance their real estate assets could result in a serious problem for their respective EB-5 related source of funds. Of course, even if the real estate market continues to prove favorable for sourcing EB-5 related funds, we still need to resolve the severe effects that retrogression has on investors from Mainland China in order to continue attracting Chinese EB-5 investors.

An interesting Dow Jones article, “China’s Bid to Curb Its Booming Housing Market Has Only Made It Hotter,” about China’s housing increases can be viewed by clicking HERE.

EB-5 Redeployment and the New USCIS Policy Guidelines

Arnstein & Lehr Attorney Ronald Fieldstone

Ronald R. Fieldstone

It seems as though the EB-5 Program is a moving target. First, we received notification in August of 2015 that loans could be repaid before I-829 final adjudication after the required jobs have been created, provided that funds were then deployed in an “at-risk” activity. Then the Policy Guidelines attempted with great difficulty of trying to clarify what “at-risk” means. One could argue that their examples and statements both directly and through footnotes created more confusion than clarification.

The main takeaway from the new USCIS Policy Manual Guidelines (the Policy Guidelines) is the pronouncement that many immigration attorneys thought was already the law that the EB-5 investment could be returned to the petitioner once the two-year conditionally residency period had expired and the requisite jobs have been created. On one hand this is a big victory for the EB-5 Program. No waiting the extra 2 years to 30 months (based upon current wait times) to receive a return of capital. Now, based upon the Policy Guidelines, the I-829 adjudication requirement is no longer relevant to the “at risk” requirement with respect to the applicable investor.

Of significant impact is the implication for non-Chinese investors who can now receive a return of capital in less than 5 years. The key factors are the aggregate time period to obtain the initial I-526 petition approval, the visa appointment to receive the EB-5 visa (or change of status pursuant to Form I-485 if the applicant is already present in the United States pursuant to a valid visa, such as an F-1 visa) resulting in the change in status to a conditional resident. A reasonable estimate for this process would seem to be 2 years to 30 months, but no longer than 3 years in total. Then you add the 2 years conditional residency requirement to determine the time period when capital can be returned – the Post Conditional Residency Period. The redeployment necessity for such investors becomes less significant given the time frames involved. Funds could still be repaid to the NCE before the 4½ to 5 year Post Conditional Residency Period estimated time period, resulting in the redeployment requirement being of a much shorter duration.

This analysis is totally different for Chinese investors due to retrogression. The time frame to obtain a temporary residency today could well extend to 7-9 years depending upon the visa backlog over time. Therefore, the necessity for the redeployment of funds seems more like a certainty for these investors since the estimated term of a loan (assuming a loan model) is generally not extended for such a long time frame.

Given the variance of the two nationalities (Chinese and non-Chinese), the structure of EB-5 projects will need to take into account these 2 variations and the necessity for redeployment liquidity for non-Chinese investors within a 5 year time frame compared to the extended period for Chinese nationals.

Based upon the above analysis, project documents may need to be amended to permit the return of capital prior to I-829 petition adjudication since until now, most offering documents have provided as a condition to return of capital to an investor that the I-829 final adjudication be determined in order to avoid a USCIS denial. Partnership or operating agreements will need to be reviewed to determine whether the general partner/manager has the authority to amend the corporate agreement without investor consent in order to obtain the desired result based upon the Policy Guidelines. It is possible that the document permits the return of capital in accordance with USCIS guidelines without the requirement of I-829 adjudication, in which event no amendment would be required.

As noted by other distinguished authorities, the Policy Guidelines create total confusion when it comes to sustaining the “at risk” requirement prior to the Post Conditional Residency Period. This includes:

  1. The concept of redeployment “related to engagement in commerce,” which in and of itself makes no sense. Is the making of a loan “engagement” in commerce? Is the acquisition of debt instruments such as bonds or the investment in a REIT engagement in commerce?
  2. The requirement that the redeployment must be “consistent with the scope of the NCE’s ongoing business.” Does this definition depend upon what business is authorized under the applicable corporate document? Can the corporate document be amended to include an expanded business model?
  3. The requirement of “similar loans” in a loan model. Is that a requirement or just a suggestion? What does that mean? Practically the only similar loan to an initial development loan would be one that involves redeployment in another development transaction. But, why should investors be exposed to a second risk of project completion after the jobs have been created by the initial investment? This makes no sense.
  4. Redeployment must occur “with a commercially reasonable time.” What does this mean? The time frame for non-Chinese vs. Chinese investors is totally different as noted above. Can there be different standards of reasonableness for these two classes of investors? It is noteworthy how long it currently takes to undertake the diligence, the loan closing (if a loan model) and the initial deployment of funds in another project. Surely USCIS does not intend to increase the risk to investors by requiring a rapid redeployment of funds into a new project that has not otherwise been properly settled and documented.
  5. Redeployment “must be adequately described in the I-526 record.” Again, if the corporate documents provide for the authority to redeploy in “at risk” activities that meet USCIS guidelines, then is this requirement otherwise satisfied? One assumes that the corporate document is part of the I-526 record. 

All of the above requirements not only create confusion from an immigration standpoint, but also create significant securities law and corporate implications with respect to advance disclosures and the provision for corporate flexibility. Offering documents will now need to be amended to take into account all of the above possibilities in addressing the ambiguities of the Policy Guidelines. It would appear as though the redeployment of NCE funds in marketable securities would not qualify under the Policy Guidelines since same would not be deemed “an actual commercial activity which involves the exchange of goods and services.” But a loan, which is a commercial activity, has nothing to do with the exchange of goods and services. The USCIS mentions as an example loans into more residential projects or “new municipal bond issuances, such as an infrastructure spending.” Does that imply that jobs have to be created? What is a similar activity? Does the asset class need to remain the same?

I pose that USCIS has created unintended consequences in establishing the above guidelines, which will hopefully be clarified and corrected based upon valid industry wide responses. But who knows how long this will take to correct? In the meantime, professionals will need to navigate the process by taking into account all of the above issues.

Processing Times Increasing for I-526 and I-829 Petitions

Arnstein & Lehr Attorney Ronald Fieldstone

Ronald R. Fieldstone

IIUSA Reports Processing Times for I-526 and I-829 Petitions at Record High

In the early afternoon of Friday, May 26th, IIUSA circulated its weekly report indicating the all-time high processing times, as stated below:

  • As of March 31, 2017, USCIS is processing the I‐526 petitions that it received before September 20, 2015 (a two week increase over the processing times published in February January); therefore, taking approximately 20 months.
  • The I‐829 petitions that USCIS received before October 12, 2014 (up from October 1); therefore, taking approximately 31 months.
  • The I‐924 applications that USCIS received before September 16, 2015 (an increase of over a month from last month’s processing times); therefore, taking approximately 20 months. 

The weekly report also cited the following Key Data Points:

  • Processing times for I-526 petitions reached 18.6 months, an all-time program high; and I-829 processing times reached 30 months another all-time high.
  • Waiting times for I-924 adjudications are now at 18.7 months, almost double the processing times from this time last year.
  • In a year-over-year comparison, I-829 adjudications are taking one year longer to be adjudicated, I-924 petitions are taking 9 months longer and I-526 petitions are taking 2.5 months longer. 

To view the full report, please click here.

Senator Grassley Prompting EB-5 Fraud Investigation

Arnstein & Lehr Attorney Ronald Fieldstone

Ronald R. Fieldstone

A very interesting letter from Senator Grassley to the Securities and Exchange Commission and U.S. Department of Homeland Security indicates he is tackling the Kushner EB-5 project marketing approach. You can read the full letter by clicking here.

EB-5 Marketplace Measurement – China and Beyond

Arnstein & Lehr Attorney Ronald Fieldstone

Ronald R. Fieldstone

I just returned from a week in China. Along with speaking at the EB-5 Investors Magazine’s 2017 EB-5 & Investment Immigration Expo, I had the opportunity to visit with many migration agents, as well as other professionals in the EB-5 industry. My impressions of the marketplace, particularly China, are as follows:

1. Many large agents are still on the sidelines waiting for new legislation to pass in order to have more certainty as to proceeding with the EB-5 Program. These agents may still be involved in meeting funding obligations on projects in process, but they are not necessarily undertaking new projects.

2. Agents are very selective in the project choice, and it is clear that the quality of the projects available in the marketplace has elevated substantially over the past few years, thus increasing the competition to gain marketing agent support to undertake a project.

3. Individual agents seem to have their own criteria as to what type of projects they will underwrite. The following factors seem to be most important:

  1. Project Location. There is clearly a preference for certain major metropolitan areas such as New York, Los Angeles, and San Francisco and, to a lesser degree, Seattle, Dallas, Houston, Miami, Chicago, Philadelphia and Boston.
  2. The nature of the project is still relevant. There seems to be a very strong preference for multi-family developments, more in the rental framework since condominium projects have timing issues as to repayment and a market perception of uncertainty. Multi-family projects during the last recession seemed to maintain market value better than other asset classes.
  3. Continuous focus on background of the Developer and equity contribution of Developer, although agents seem to be satisfied with the 20% capital contribution.
  4. EB-5 capital accounting for no more than 30% to 35% of the total capital stack.
  5. Having the senior loan in place is an advantage, since it validates underwriting criteria satisfied by the senior lender.
  6. Capital stack can be funded independent of EB-5 funding. 

4. Many agents will not undertake a project until it is under pre-development or development activities – in order to be sure that the project will be completed.

5. The most successful projects are the ones that probably do not need EB-5 capital. Since the capital stack is completed, and no matter how much EB-5 funds are raised, the project will proceed accordingly. That again is the advantage for projects that are already under development.

6. A common model includes today, since to be the Developer obtaining bridge mezzanine financing that is taken out by EB-5 capital in order to avoid a delay in the commencement of the development. In this manner, it is very simple to substitute debt for debt, and since the bridge funding is of a short term nature, the job creation component should still be applicable with respect to the entire project.

7. The market is becoming more sensitized to the concept of redeployment, given the time table for final I-829 adjudication for Chinese nationals. Accordingly, agents are becoming much more familiar with redeployment options and are learning to adjust to that situation. I believe it is somewhat of a windfall for agents since they continue to receive compensation after the initial five year loan term – based upon the fact that loans are being extended for up to eight years in total and/or funds are being redeployed into another project developed by the same Developer or another Developer.

8. The biggest immigration issue in the market place is retrogression and the need for increase in the visa cap. Many agents say that the dollar amount of the investment is not the major issue as long as there is not a significant difference between the TEA amount and a non-TEA amount. Rather, the retrogression is estimated to be up to nine to ten years, and many Chinese investors just do not want to wait that long to gain access to U.S. residency.

9. Agents are clearly pursuing other jurisdictions, such as Portugal, Greece, Ireland and certain countries that, in effect, enable an applicant to obtain residency and citizenship status very quickly (e.g., Malta and Grenada). In some of these jurisdictions, it is the back door into the European Union which is somewhat advantageous. Clearly, Chinese nationals are looking at other options, since the U.S. market, although favored, is arduous to undertake at this time.

10. There may be another concern about the Chinese investor transfer of funds and the increase currency restrictions scheduled to take place on July 1st, 2017.

All and all, one can see that there are continuous complications in the EB-5 Program that are reducing the marketing potential of all projects. I will continue to update you on the EB-5 Program – the complications, challenges, changes, and beyond

EB-5 Update – Extension and Current Senate Bills

Arnstein & Lehr Attorney Ronald Fieldstone

Ronald R. Fieldstone

It is common knowledge the EB-5 investor program received extensions through September 30, 2017. Accordingly, until further changes happen, the existing program will remain in place.

There are currently two (2) key bills that have been presented. One is the Grassley Bill, which is a modification of the old Senate 1501 Bill proposed back in June of 2015 by Senators Grassley and Leahy. The active call “American Job Creation and Investment Promotion Reformat to 2017.” The other bill was proposed by Senator Cornyn of Texas, which has also been submitted in the Senate. Basically, the two (2) factions which represent rural/urban interest are negotiating immigration points that in effect include the following:
  1. The actual definition of the TEA. This will relate to the applicable census tract to be used. Obviously the Grassley Bill has a very restrictive approach and only includes the existing census tract and possibly contiguous ones. The Cornyn Bill is more expansive.
  2. Minimum Investment Amount. The Grassley Bill has $800,000 minimum for TEA and $1,000,000 for non-TEA. The Cornyn Bill has a different amount and phase in.
  3. Set Asides. One of the big issues is that the Grassley Bill has set aside to rural and poverty, but also takes into account infrastructure and military, which would therefore leave a lesser number of visas for the non-TEA designation and greatly disrupt the program. The Cornyn Bill does not have the details of set aside. It is noteworthy that the Cornyn Bill excludes derivatives thus increasing the visa count by almost 3 times, which would be a major benefit to the program, but unlikely to get passed.
  4. Current Situation. Given the current situation, especially after the marketing fiasco in China last week involving the project involving Kushner, Grassley has kicked back and indicated that he fully intends to adopt the proposed regulations that were proposed by DHS under President Obama that would create a minimum threshold to $1,350,000 for TEA, $1,800,000 for non-TEAs. That would almost end the program itself. Grassley is using the regulations with a threat to negotiate with the Cornyn faction in order to get a compromised bill.
With respect to integrity measures, there is general agreement that the program does have degree of fraud and that integrity measures are necessary to police against this. Integrity measures include matters such as the following:
  1. Higher burden on regional centers to review projects from both an immigration and financial standpoint and issue annual certifications.
  2. Grassley Bill actually provides for an independent fund administrator to administer funds with joint check signing authority.
  3. There are various restrictions on who can participate in the regional center as well as who can participate in a JCE if they have certain backgrounds.
  4. Foreign enterprises are prohibited from participating in the regional center and the NCE and providing capital to the JCE, with certain exceptions for governance of fact organizations.
It is difficult to predict the timing of all of these working, although it is expected if by September 30, 2017 a new bill will be passed. Likely, the deal will not have retroactive effect so that those investors that file their I-526 petitions prior to the passage of the bill will be grandfathered. Challenging to determine is if there will be any grandfathering of projects with phase in as otherwise being proposed by Cornyn. Grassley has no concept of phase in, but does allow for grandfathering of I-526 petitions.

From a market standpoint, it is tough to predict the effect of all these recent undertakings except that there is another push to get I-526s filed in order to be grandfathered under the system. Grandfathering should also apply to TEA designations. In addition to the above, the following is worth noting:
  1. There seems to be a heightened emphasis on redeployment of funds since projects are reaching their term as far as the loan repayment is concerned and those funds are repaid, they need to be redeployed to maintain the “at risk” requirement of Izumi. I have commented on this several times. As noted, USCIS has yet to determine what it means to be “at risk”, but it is clear that a redeployment of funds back into a loan program or equity program involving a real estate project would for sure qualify since that is generally the original intent of the initial investment. Accordingly, we are seeing many redeployment programs with the same developer on different projects with a detailed due diligence process accompanied by a very extensive investor where they have most of the exhibits.
  2. It is also noteworthy that the SEC has been very active enforcing claims against bad actors. The promoter of the Chicago Convention Center, LLC just got sentenced to a three (3) year term. The SEC just settled on a multi-million dollar judgment against Sima Muroff involving the Idaho State Regional Center, LLC’s EB-5 projects in Idaho. The receiver just settled with Raymond James for a reported $150,000,000 as a result of alleged mishandling of funds by Raymond James on behalf of one of the promoters.
  3. USCIS has announced that it will undertake regular compliance audits of regional centers to ensure that they are complying with elements of the program. The SEC still intends to do spot audits in checks of projects. We are advising clients to make sure that all records are properly downloaded and available for review, including not only the immigration documents, but the corporate security documents and the loan documents.
It will be very interesting over the next several months to see how things unfold, but the industry is definitely going through a degree of stress that will hopefully get resolved with an extended bill which properly vets all the various interests.

EB-5 Investment Funds – Standards and Guidelines for Redeployment

WHITE PAPER: STANDARDS AND GUIDELINES FOR REDEPLOYMENT OF EB-5 INVESTMENT FUNDS

Prepared by:
Arnstein & Lehr LLP
Klasko Immigration Law Partners, LLP
Jeffer Mangels Butler & Mitchell LLP

The EB-5 investment community is now facing a new challenge, as many of the more seasoned EB-5 investment projects begin to mature and the original investment capital is returned by the project owner to the new commercial enterprise. USCIS has clearly stated its policy that EB-5 investment capital is required to remain “at risk” in the new commercial enterprise until each EB-5 investor’s I-829 petition is adjudicated. However, USCIS has provided no guidance on what requirements that new investment is required to meet, other than that it must meet the definition of “at risk.”

As the authors of this linked White Paper, we have undertaken the task of proposing a set of standards and guidelines for redeployment of EB-5 investment capital. It is our hope that the principles of redeployment stated in this White Paper will be accepted by USCIS and by the EB-5 investment community. We believe that the standards expressed in this White Paper should meet the “at risk” requirements established by USCIS, and it should also meet the requirements of federal securities laws and the fiduciary duties of the general partner or manager of each new commercial enterprise when making a decision to redeploy their investment capital in a new investment. We acknowledge that this is an evolving issue and that new developments may occur that require changes in these proposed standards and guidelines. At the same time, we believe it is important to the EB-5 community that these standards and guidelines are offered as a model now, so that new commercial enterprises have a basis for analyzing their options when the need to redeploy their investment capital becomes a reality.

EB-5 Program – Updated Statistics and Information

Arnstein & Lehr Attorney Ronald Fieldstone

Ronald R. Fieldstone

USCIS recently published a statistics report on the impact of the EB-5 Program for the fiscal years 2012 and 2013 (downloadable on the Economics and Statistics Administration’s website by clicking here). Furthermore, IIUSA has published statistics on various performance factors concerning the EB-5 Program. Both are summarized below, since the results are quite interesting.

USCIS Report

  1. The national estimates are that more than 11,000 immigrant investors provided $5.8 billion dollars in capital, roughly 35% of the total investment in the applicable projects ($16.7 billion dollars). Projects operated through Regional Centers generated an estimated 170,000 jobs based upon the total investment. The balance of the project costs came from non-EB-5 sources. The aforementioned USCIS statistics report includes a chart (on page 15 of the full report PDF) showing total investment and job creation from active EB-5 projects for the fiscal years 2012 and 2013.
  2. For number of jobs created, the states, in order of priority, were California, New York, Florida, the District of Columbia and Maryland. California accounted for the 30% of the jobs. 

IIUSA Report

IIUSA also issued comprehensive data reports of the Program updated through the 4th Quarter of 2016. The reports show charts with the statistical results related to I-526 receipts, I-526 approvals and denials, and the number of pending petitions, as well as I-829 Petitions. It is noteworthy that the number of I-526 receipts in the 4th Quarter was down, the number of approvals was up, and the number of denials was down. For informational purposes, the USCIS I-526 summary for fiscal years 2008-2016 can be viewed on the USCIS government website by clicking here. With respect to I-829 Petitions, it is also notable that the backlog keeps increasing so that there are more petitions pending as a result. Therefore the number of receipts has increased dramatically and the number of approvals has decreased significantly.

NES Innovation Summit – Miami, FL

As a separate matter, I attended the NES Financial Annual Innovation Summit held in three different cities – Los Angeles, Miami and New York. León Rodriguez, the former director of USCIS, was the featured speaker. Some of his takeaways included the following:

  1. The key states were Florida, California, New York, Pennsylvania and Texas, with Ohio being a relevant state as well.
  2. He saw the focus more at the local level and the energy level of trying to attract foreign investment and create jobs for the local areas. The EB-5 Regional Center Program supports this movement. The capital expenditures in particular location not only create jobs, but increase the tax base and economic productivity and stimulate further development in certain sectors.
  3. He indicated that the government can be strategic in stimulating development. Local and state governments are providing incentives, including favorable zoning, tax breaks, etc., in order to stimulate jobs and enhance development. The EB-5 Program fits into the same format of targeting high employment areas, either directly or through the creation of jobs for employees, which may be located at a reasonable commute distance to the applicable project. Mr. Rodriguez noted that not only is there stimulation in job creation, but also stimulation in the overall economy.
  4. He indicated that it was very important to get the message out to the public that the program helps local governments stimulate development and create jobs and that there are other important effects in these developments, since it stimulates additional commerce in the applicable area.

EB-5 2017 – Where Are We Now?

Arnstein & Lehr Attorney Ronald Fieldstone

Ronald R. Fieldstone

Following the December 9, 2016 extension of the EB-5 Regional Center Program until April 28, 2017, there have been additional developments from an administrative, legislative and practical standpoint. Needless to say, the Program remains in limbo as to where it will end up and at what point in time legislation will be passed, especially considering the advent of a new administration and Congress. There could be final legislation current as of the April 28, 2017 deadline. That being said, given the change in administration and the political lobbying, related to the Program, that is taking place in Congress, there is no clear time limit as to when legislation will be finalized. What is apparent is that the situation is extremely complicated, with many political interests being represented that have yet to come to the table and resolve outstanding issues.

At a recent conference sponsored by the EB5 Investors Magazine, Senator Jeff Flake of Arizona, a very proactive EB-5 proponent, hinted that given the current political climate, it would seem realistic to assume that legislation may not be passed by the end of April and that the EB-5 Regional Center Program would, therefore, be extended beyond the upcoming deadline, until Congress and the administration can agree on new legislation. Senator Flake further stated that he is in favor of increasing the visa count given the benefits of the Program and the significant backlog that has occurred as a result of the retrogression in China.

The industry is questioning the effect that the Trump administration will have on policy-making and the operations of USCIS in the future. Overall, there are many positive signs in connection,  given the following:

  1. President Trump is obviously a real estate expert and presumably understands the benefits of the EB-5 Program to the U.S. economy.
  2. President Trump has announced his desire to reduce regulation across the board, and this may carry over into USCIS and matters related to its administration.
  3. There are many legislative competing interests in the process and it is presumed that President Trump and many members of the Congress, on a non-partisan basis, will be proactive in trying to salvage the positive components of the Program in a bid to reduce the burdensome nature of the current system. This would, nevertheless, still include a provision for increased integrity in the Program, which concept seems to be non-controversial.

In assessing the process, it is apparent that the Program is facing the following key issues:

  1. The finalization of legislation to provide certainty to the marketplace that is right now confused as to when and what will eventually happen.
  2. Revising the definition of a TEA in a manner that will not otherwise severely restrict EB-5 projects in the future.
  3. The issue of increasing the EB-5 investment amounts and to what extent that will affect the marketplace.
  4. Potential carve-outs of certain uses within the ten thousand visa cap and what affect that would have on the market. In connection therewith, potentially (a) establishing separate visa caps for rural, infrastructure and other types of programs that may spur the economy; and (b) increasing the visa cap so as not to prejudice the existing program that relies upon a large portion of the EB-5 investment capital being deployed into urban developments.
  5. Curtailing the ever growing backlog in the administration of pending petitions.
  6. The potential increase one way or another in the visa cap in order to accommodate the needs of the industry.

Clearly the Program has become more complicated, expensive, and time consuming. Such additional costs and time delays may serve as a serious detriment to the demand for EB-5 capital as compared with traditional financing sources that may become more affordable and available. I believe that the take away as to the existing marketplace reflects the following:

  1. The delay in finalizing legislation has created confusion and uncertainty. Some agents are waiting for new legislation to be passed before taking on new projects in an effort to avoid the hassle with potentially re-structuring deals that will not comply with new legislation.
  2. On a related note, some agents are taking the fire sale approach and pushing to empty their respective inventories of existing project units.
  3. The reality of retrogression has necessitated the need to undertake redeployment planning in all new projects given the predictable delay in Mainland Chinese investors receiving I-829 adjudication within what was once a five (5) to seven (7) year time frame.
  4. Increased marketing efforts outside of mainland China in order overcome the negative effects of the above referenced retrogression.
  5. The continued rise in projects going into the marketplace that creates more competition and potentially increases the cost of the financing as a result thereof.
  6. Increase in currency control restrictions in China and other jurisdictions.
  7. Developers and regional centers taking more of a boots on the ground approach to marketing to investors abroad and possibly in the United States through the use of registered broker-dealers and not just relying upon the traditional agent market.
  8. The focus of many regional centers and developers pursuing smaller agents to raise EB-5 capital at potentially more affordable rates, and the marketing of projects in multiple jurisdictions. It is noteworthy that specific markets, such as Vietnam, South Korea, India and various Latin American countries are being pursued more aggressively as potential EB-5 marketplaces in an effort to mitigate the retrogression effects in China.

This will clearly be a transition year that hopefully will end up with a resolution that results in an overall solution that is beneficial to the Program.