EB-5 Project Restructuring and Priority Date Retention

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EB-5 success stories often occur but are rarely publicized. On the other hand, news about “failing” EB-5 projects, or the involvement of the U.S. Securities and Exchange Commission (“SEC”), or lawsuits brought by EB-5 investors against project developers or Regional Centers attract readership and are aplenty.

Of course, the definition of a “failing” EB-5 project is subject to interpretation. Ideally, what most EB-5 investors seek is full green card status for the principal applicant and derivative beneficiaries, return of the principal investment, and a return (usually nominal) on that investment.

But if the principal goal of the EB-5 investment of permanent residency within the U.S., then is a project that creates sufficient jobs for I-829 approval a failure, even if the EB-5 investment is not returned? Is it in the interest of EB-5 investors if a new commercial enterprise agrees to subordinate its position, if it allows a senior lender to provide a job creating entity the necessary financing to complete construction on an EB-5 project? Here, the goal of obtaining full green card status may conflict with an EB-5 investor’s financial considerations. Or what if EB-5 investors are willing to input additional capital – and obtain equity in the EB-5 project – to prevent a receiver from selling undeveloped or partially developed land, if deemed by the receiver to be in the best interest of the receivership estate? In this case, a “white knight” in the form of an EB-5 investor group is willing to go the distance to save the EB-5 project from development delays and financial insolvency, with the goal of saving the immigration benefit as well.

“EB-5 Project Restructuring” is a general way of describing the modification of the corporate or financial structure of an EB-5 project, as indicated in an investor’s Form I-526 petition, during the EB-5 process to achieve an EB-5 investor’s immigration goals. It can occur because a job creating entity is underperforming and severely behind schedule, because market forces have increased projects costs or demand for goods and services, because job creation won’t support I-829 petition approval, or because of a federal receivership appointment after an SEC investigation, among other reasons.

Note, EB-5 investments are statutorily required to be “at risk,” and USCIS has previously indicated – though only in a draft policy guidance – that it’s possible to obtain full green card status even if the job creating entity is sorting through a bankruptcy proceeding.

EB-5 Project Restructuring can begin – and will likely become even more common – before conditional permanent residency is achieved due to incredibly long EB-5 visa backlogs for Chinese investors, but must be carefully handled to prevent the issuance of a Notice of Intent to Revoke (“NOIR”) a Form I-526 approval due to “material changes.” Moreover, because most EB-5 projects get a portion of capital from Chinese investors, it’s possible they have strength in numbers in voting rights to force a new commercial enterprise to act in a particular manner to achieve their respective immigration goals. EB-5 Project Restructuring will also become more common as EB-5 loans become due after job creation has occurred to ensure compliance with USCIS’ June 2017 policy guidance on redeployment .

Finally, USCIS’ proposed regulations include relief to allow an EB-5 immigrant petitioner to use the priority date of an approved EB-5 immigrant petition for a subsequently filed EB-5 immigrant petition. The stated reasons for this regulatory change relate to similar concerns as “EB-5 Project Restructuring”: (1) to address situations in which petitioners may become ineligible through circumstances beyond their control (e.g., the termination of a regional center) as they wait for their EB-5 visa priority date to become current; and (2) to provide investors with greater flexibility to deal with changes to business conditions. If this proposal becomes finalized, there will be even more opportunities for EB-5 investors to switch to better EB-5 projects to support green card eligibility.

While increased minimum investment amounts and long visa backlogs may lower new demand, there will be no slowdown in assisting current EB-5 investors to achieve their immigration goals. Regional Centers, project developers, migration agents, and other professionals in the EB-5 industry must become educated on how to do this properly, in a corporate, immigration, securities, and communications perspective.

I will be speaking on this cutting-edge topic during a panel titled “Redeployment and Project Restructuring: How to Get It Right” on Tuesday, April 24, 2018 at IIUSA’s 11th Annual EB-5 Advocacy Conference in Washington D.C.


About The Author

Joseph Barnett is an Associate Attorney at Wolfsdorf Rosenthal LLP and a member of the firm’s EB-5 and business immigration practices. He is licensed as an attorney in Illinois and Wisconsin and practices exclusively in immigration and nationality law.


The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.