EB5 Investors Magazine Volume 7, Issue 1 - Page 13

EB5INVESTORS.COM 11 t he i nte re st s of t he EB-5 i nve stor s. The re a re several redeployment programs and funds created by experienced third parties that offer multiple reinvestment options and are open to any EB-5 fund seeking to reinvest capital. Some of these programs offer independent review, ongoing due diligence and administration as part of their program, as well as a selection of potential reinvestment options. There are also experienced regional center operators that have established their own redeployment funds in which EB-5 proceeds from multiple EB-5 funds are pooled and reinvested into multiple projects. This practice offers the benefit of diversification of investments and, in some cases, more liquidity than investing in a single loan or equity investment. REVIEW THE EB-5 FUND’S GOVERNING DOCUMENTS & FOLLOW THE PROCEDURES REQUIRED BY THOSE DOCUMENTS FOR REINVESTMENT If the partnership or operating agreement of the EB-5 fund does not authorize the general partner or manager to select a reinvestment at all, or if it only allows reinvestment with the consent of the EB-5 investors, then the consent of the EB-5 investors must be obtained. Rather than asking for approval of a specific reinvestment option, it may be preferable to request approval of an amendment to the partnership or operating agreement to allow the general partner or manager to select all reinvestments for the EB-5 fund, subject to defined standards that apply to selection of the reinvestment. These standards should include an independent review process. The benefit of this approach is that it covers not only the first reinvestment, but all future reinvestments that may be necessary for as long as the EB-5 fund has EB-5 investors who are not eligible for repayment. PROVIDE WRITTEN DISCLOSURE TO EB-5 INVESTORS PRIOR TO REINVESTMENT OF THE MATERIAL TERMS OF THE REINVESTMENT Whether or not an amendment is required to approve reinvestment, an EB-5 fund manager should provide written notice to EB-5 investors prior to every reinvestment, informing them of the repayment of the original investment and the details of the proposed reinvestment. The notice should include a disclosure of the project in which the reinvestment will be made, the experience of the owner or developer of the project, the terms of the reinvestment, the process used by the EB-5 fund manager to select the reinvestment (including any independent advice and reports obtained as part of the process), and the reasons why the EB-5 fund manager selected or recommended the particular reinvestment for the fund. ALLOW EB-5 INVESTORS WHO HAVE WITHDRAWN THEIR I-526 PETITIONS TO GIVE NOTICE & RECEIVE A RETURN OF THEIR INVESTMENT PRIOR TO REDEPLOYMENT A s pre v iously descr ibed, some EB-5 i nvestors, particularly those from mainland China who are now subject to substantial delays in obtaining their visas under the EB-5 program, have or will choose to withdraw their visa petitions rather than continue the immigration process. A ny investor who has withdrawn his or her visa petition would be eligible to receive a return of their investment. EB-5 fund sponsors should offer those EB-5 investors who have withdrawn or desire to withdraw their visa petitions an opportunity to give notice to the EB-5 fund, so that their investments may be repaid from their share of the repayment proceeds, rather than having their capital reinvested. It is important to note that this is not a guaranty of repayment, because repayment would only be made to EB-5 investors if and when the EB-5 fund receives repayment of its investment, and only to the extent of each EB-5 investor’s pro rata share of the repayment. The re fore, a l low i ng EB-5 i nve stor s to re ce ive repayment, rather than reinvesting proceeds, should not be considered an impermissible guaranty of repayment Whether or not an “ amendment is required to approve reinvestment, an EB-5 fund manager should provide written notice to EB-5 investors prior to every reinvestment...