EB5 Investors Magazine Volume 7, Issue 1 - Page 11

EB5INVESTORS.COM 9 “ If an EB-5 fund does not provide for staggered distributions to EB-5 investors as they become eligible for repayment, the EB-5 sponsor is not authorized to make distributions in that manner. CONCERN 2: EB-5 INVESTORS FACE LONG VISA WAIT TIMES AND, AS A CONSEQUENCE, LONGER DURATIONS THAT THEIR INVESTMENTS MUST REMAIN “AT-RISK” CONCERN 1: EB-5 INVESTORS DO NOT HAVE THE RIGHT TO SELECT THEIR OWN REINVESTMENT EB-5 investors made their original decision to invest in a specific EB-5 project based upon their own review of detailed offering documents describing the project, the developer, and other relevant facts. When their capital is redeployed, however, EB-5 investors have little, if any, choice in how their funds will be invested in one or more new investments. Even if an EB-5 sponsor offers more than one option for reinvestment and allows each EB-5 investor to select among those options, the investor does not have the ability to select a reinvestment outside of those pre-selected options. EB-5 i nve stor s a re u nde r st a nd ably conce r ne d t hat t he rei nvest ment has been sele cted for t h e b e n e f i t o f t h e E B-5 f u n d s p o n s o r o r t h e orig i na l project developer, a nd not necessari ly w ith the best interests of the EB-5 investors in m i nd. In some cases, EB-5 i nvestors have fi led or threatened legal action against the sponsors of their EB-5 funds, claiming that the sponsors have selected reinvestments that have a higher level of r isk t ha n t he or ig i na l i nvest ment, a nd t hat t he sp on sor s have made t he sele c t ion for their own economic benefit. The U.S. government’s visa control office first imposed the “retrogression” policy on EB-5 investors from mainland China in 2015, but it was not until 2018 that it was estimated the delay caused by this policy could be as long as 10 to 15 years for these investors. As a result of these extremely long anticipated delays, the children of some EB-5 investors will “age out” (meaning they will no longer be eligible for a visa based on their parents’ EB-5 application) before these EB-5 investors obtain their visas. Some EB-5 investors have filed or threatened litigation against EB-5 fund sponsors, seeking a return of their capital on the grounds that they were never informed that they would have to wait so long to obtain an EB-5 visa. The difficulty is that while some EB-5 investors have abandoned their visa petitions and received a return of their capital, other EB-5 investors in the same EB-5 fund may wish to proceed with their visa petitions. Their capital must remain “at-risk,” according to USCIS policy, until they have completed their two-year sustainment period. CONCERN 3: NOT ALL EB-5 INVESTORS WILL BE ELIGIBLE FOR RETURN OF THEIR CAPITAL AT THE SAME TIME It is possible, and even likely, that some investors in an EB-5 fund will be eligible to receive a return of their capital in five years. Other investors in the same EB-5 fund may not be eligible for 10 or more years. Most EB-5 funds were originally designed to have the ability to make distributions of capital to all EB-5 investors at once when the original investment was repaid, but those EB-5 investors who are eligible to receive a return of their capital do not want to wait to be repaid