Thursday, September 10, 2015

The Uncertainty in EB-5 Regional Center Program

Real estate developers and business owners have been flocking to EB-5 Program conferences and networking events since the great recession trying to learn and utilize the unique federal program administered by United States Citizen and Immigration Services (USCIS) called EB-5. Even though the Direct EB-5 program is permanent, the regional center program was introduced as a pilot and set to expire after 3 years. It has been renewed every time since the inception and will expire in a few weeks on September 30, 2015. This time around Congress has introduced new legislation in both Senate and House of Representatives to update the 2 decade old program and make it more transparent. However, some of newly proposed language by Congress could potentially kill EB-5 for majority of projects.

The uncertainty of the program from new legislation, to the expiration date only 20 days away is causing a scene in the China EB-5 market. In FY2014, 9,128 visas or 85% of all EB-5 visas were issued to Chinese citizens (mainland born). The established marketing system set up in China is main way US projects are able to utilize the EB-5 capital at a rate cheaper than traditional lending. Without China, the costs of raising capital in other countries would not be cost-effective and developers would turn to other expensive sources of financing. In addition, it has become extremely difficult and more costly for projects to find EB-5 capital in a competitive market with over 250 EB-5 projects actively sourcing investors.

Now uncertainties in the Chinese market put the EB-5 marketing efforts in jeopardy as recent stock market crash and real estate cool down has forced the Chinese government to restrict foreign currency exchange for outbound investment to the US.  The economic conditions in China will continue to add hesitations to EB-5 investors who may have lost up large percentages of their net worth. The continued uncertainties surrounding EB-5 program will make US developers to stop and think about whether the potential risks of dealing with EB-5 regional center program are worth the final reward.  

To learn more about current market conditions, contact us today!

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