Hitting the Reset Button on EB-5 with Julia Park – Episode 56
USCIS is changing EB-5 regulations in the very near future, and a dramatic shift in the industry is inevitable. Today, Mark and Mona are joined by Julia Park, Managing Director of AAEB5, to discuss the increased interest in EB-5 leading up to the likely policy changes. They cover the minimum investment increase and its consequences as well as the pros and cons of the two types of Regional Centers.
Change is on the horizon. In fact, USCIS has been working on raising the minimum EB-5 investment since 2014, and responsible Regional Centers have put measures in place to account for these likely changes. Today’s guest anticipates that an increase in the minimum investment will function as a ‘reset button’ for the industry. What does that mean for investors?
Julia Park serves as the Managing Director of Advantage America EB-5 Group, a firm which operates six USCIS designated Regional Centers. Julia is also the CEO of Multivista Securities, a registered broker-dealer, and Principal Attorney at the Law Offices of Julia Park.
Today, Julia joins Mona and Mark to discuss the increased interest in EB-5, especially among Indian nationals in the US on an H-1B visa. They discuss the minimum investment increase, outlining how the change is likely impact projects raising a large amount of capital as well as the size of projects moving forward. Listen in to understand the difference between a third-party Regional Center and one that functions as the financing arm of an existing developer.
H-1B and EB-5
- Indian nationals in the US on an H-1B visa have expressed an increased interest in EB-5 over the past year. Julia attributes this to a combination of the EB-2 and EB-3 backlog, the threatened increase in the minimum investment, the noise around family-based immigration and the changes to H-1B adjudications.
- Mona has noticed a trend of H-1B visa holders seeking to put $500K into the companies that sponsored them, but she anticipates that USCIS will deny those proposals. Julia agrees, pointing out the difficulty in demonstrating how your investment created ten new jobs in an existing company.
- The other complication for H-1B visa holders stems from source of funds. H-1B visa holders are only allowed to engage in employment through their sponsor. Therefore, if they earn K-1 income as a partner in an LLC, for example, that may be considered ‘unauthorized employment.’
- The IIUSA FOIA request for approval numbers broken down by country revealed that the I-526 approval rate for Chinese investors is 89%. By contrast, the approval rate for Indian investors is only 55%. Julia suspects that the denials are coming from the project side of things.
The Proposed Minimum Investment Increase
- USCIS has been working on an increase in the minimum EB-5 investment since 2014. They held off when Congress began working on proposed legislation but stepped back in when it became clear that legislators were not making progress.
- USCIS has announced that new regulations will be unveiled on February 16th. Mona anticipates that the rules will go into effect at the end of April or beginning of May. The minimum investment is likely to be increased from $500K to $1.35M and $1.8M in non-TEA areas.
The Consequences of a Minimum Investment Increase
- Julia predicts that the changes will function as a reset button for EB-5. She believes that the industry will return to a model that supports smaller projects in which investors have a larger stake.
- Mona is concerned that projects needing a great deal of capital will have a shortage of investors in light of the increased minimum investment. Julia is optimistic that USCIS will not jeopardize existing petitions if the capital stack for a particular project has to be restructured.
- Responsible Regional Centers are likely to have taken these proposed changes into consideration. While planning for her current project, Julia operated under the assumption that her area might lose its TEA status and that the minimum investment would be increased.
- Regional Centers that have already raised funds cannot disband in light of the proposed changes. Julia argues that Regional Centers must maintain support for their existing funds—which will keep them in business for at least ten years.
The Two Types of Regional Centers
- AAEB5 is an independent, third-party Regional Center not affiliated with a developer. The benefit of this structure lies in the fact that the group choses projects based solely on merit.
- The second type of Regional Center is one that functions as the financing arm of an existing developer. Julia has also seen hybrid Regional Centers run by smaller developers willing to sponsor other developer’s projects.