Ronald R. Fieldstone of Arnstein & Lehr.

I recently attended the EB5 Investors Magazine Conference in Los Angeles and the takeaways from this national event are significant. The mood of the conference, held in late July, was somewhat mixed given the significant slowdown in the EB-5 industry and the substantial reduction in the number of new transactions. What was most telling about the EB-5 industry is the fact that EB5 Investors Magazine now publishes two different programs: the traditional EB-5 program and a new global initiative that focuses on immigration opportunities outside of EB-5.

The conference gave me an opportunity to speak with foreign agents, who help connect EB-5 investors with U.S.-based EB-5 projects, as well as professionals in the industry and their feedback was not good. They said we are now facing an approximately six-year retrogression in Vietnam. According to one of the agents I spoke with, the retrogression is having a serious impact on that market, given the fact that the potential investors are not used to the retrogression concept unlike in China where retrogression is expected. Retrogression occurs when EB-5 applications from a country surpass the quota of EB-5 visas assigned to that nation and investors have to wait several years for their Green Card.

With respect to China, the main consumer of EB-5 visas, it seems as though China is still relevant but not nearly at the level it used to be. I hear there still are Chinese investors who are patient and expect that things may get better in the future and that retrogression may be less onerous than expected. That remains to be seen.

It was interesting that the keynote speaker at the conference was an official from the country of Malta promoting its programs for residency and citizenship. That tells me other nations are actively looking to capitalize on the United States’ inability to improve and protect the EB-5 visa program.

I was on a redeployment panel that featured experts in the industry. It was made clear by the panel that redeployment of EB-5 capital currently invested in EB-5 projects across the United States will far exceed new EB-5 funding given the fact that over the course of the next three to four years around $13 billion of funding will become available for redeployment. It will far exceed the amount of new EB-5 capital coming in.

Another takeaway and area of interest is the increase in litigation by investors and, in particular, those from China who use WeChat to organize and form groups. These groups are being solicited by litigation attorneys seeking to bring claims against regional centers, managers, general partners and other parties. They typically claim securities fraud and other securities law violations. There are numerous corporate, securities and immigration issues relating to these claims. Given my firm’s involvement as a nonlitigant in some of these cases, I will not comment on the merits of the cases that are being filed. These types of cases are entirely distinguishable from the SEC investigations and complaints, which actions tend to be more grounded in fact and supported by the law.

There were some very good presentations on addressing requests for evidence (RFEs) and the complexities related thereto. It is quite apparent that there are many examiners, and they can often take different positions that are inconsistent with other examiners. An interesting RFE issue that our firm has encountered is the voidability of the subscription documents including a minor applicant (usually under the age of 18). We have supported this issue with opinion letters on the enforceability of the documents based upon the parent/guardian signature on documents as either the guardian of the child or the custodian of the applicable funding source.

My impression from the conference is that new EB-5 legislation seems to be stalled and is unlikely to gain traction by the end of the year, or even early the following year. There are just too many other issues that Congress is dealing with, especially when it comes to immigration.

Another takeaway from the conference is the marketing focus on non-Chinese jurisdictions with heightened retrogression concerns for Vietnam, India and even Brazil. The interesting factor here is not necessarily the visas issued currently per country, but the number of I-526 petitions being filed that will in the future significantly offset the visa backlog in targeted countries, as well as the number of family members to be included in each application. This area of the industry is difficult to discern due to the lack of published information on the I-526 country of origin filings and the average number of derivatives that are included in such applications.

Overall, EB-5 capital continues to play an important role in the funding of real estate projects across the United States. The program continues to attract foreign capital to local economies, create jobs and give foreign investors a path to citizenship.

Ronald R. Fieldstone focuses on corporate/securities and taxation law. He serves as corporate/securities counsel for multifaceted industries involving EB-5 immigrant visa investor offerings. He represents developers and regional centers in EB-5 matters, currently handling more than 300 EB-5 projects with combined capital raise in excess of $7 billion.