By Marta Lillo
Investors often wonder when they will get their investment back during the EB-5 process. However, the answer to this question varies.
Unlike other stages in the EB-5 process with marked time ranges, the timing of the repayment depends on specific requirements the investors and their projects must meet so they can close the final chapter in this U.S. permanent residency journey.
After the capital has remained “at risk” during a two-year conditional permanent residence period (CLPR) and proves it has created the minimum requirement of ten direct jobs, the moment the money returns to the EB-5 investors also depends on specifications stated in the EB-5 project offering documents and the type of financing used.
Rebecca Bodony, U.S. immigration lawyer and managing attorney at BMB Immigration Law PLLC, explains that “the terms dictated in the offering materials and the success/failure of the project itself determine if/when an investor gets their investment capital returned.”
The wording of these terms varies on a case-by-case basis.
Dennis Tristani, the managing attorney at Tristani Law, LLC, adds: “It generally varies based on the regional center and project, but most clauses include language that confirms specific triggering events that will cause the NCE to repay funds to the investor, namely the repayment of the loan/investment from the developer to the NCE, along with other events depending on the project.”
EB-5 investment repayment before and after RIA
No standard repayment clause is required in any of the EB-5-related legal documents. The USCIS doesn’t offer specific guidelines about the matter either.
“It is important to remember that USCIS does not dictate when an EB-5 investor receives repayment of their investment capital, the EB-5 law (and USCIS interpretations of the law) can only set certain limitations on when an investor can get their investment funds returned if they want to get an EB-5 green card,” Bodony says.
The EB-5 Reform and Integrity Act of 2022 (RIA) and the following updates to regulation established specific guidelines about redeployment, a reinvestment practice legally accepted in the EB-5 process. The law mandates that the EB-5 invested capital remains “at risk” until a two-year CLPR ends. “At risk” means that the project’s New Commercial Enterprise (NCE) must reinvest the money in a commercial activity rather than stocks or bonds in that period.
“The RIA changed the landscape and timeframe an investment was required to be sustained at risk by including language stating that the investment had to be at risk for not less than two years – this is very different than the pre-RIA law, which required an EB-5 investor’s capital to remain sustained at risk during the entirety of the two-year CLPR period,” Tristani says.
The two years begin on the date the entire EB-5 capital is “wired to the NCE,” the attorney adds.
This period specification also influences how EB-5 developers, regional centers, and investors’ legal counsel approach the fund’s repayment in the project documentation. It also depends on whether the investment involves loans or equity.
“The project’s offering documents will generally control the return of capital to the investor along with the relevant loan/investment duration between the regional center and developer,” Tristani affirms.
“Every project will have a different repayment schedule/structure,” he adds. “Generally speaking, construction loans have a fixed duration with possible extensions that the developer can make use of. Equity investments may have more complex repayment structures to the regional center depending on the class of investment and other creditors involved.”
Repayment varies for pre and post RIA investors
For post-RIA investors, this two-year repayment timeline will allow investors to receive repayment of their investment earlier, provided the 10-jobs minimum is met.
However, these investors cannot demand their funds back from the NCE immediately after the two years end, Bodony cautions.
“The various contracts signed with the NCE dictate the exit from the investment. Given USCIS’s interpretation of the RIA investment term clause, many recent Regional Center offerings have involved shorter loan terms between the NCE and the borrower (the entity actually running the project and creating the jobs). For example, pre-RIA the relevant loan between the NCE and the Borrower was often a five-year term with several one-year extensions available to the Borrower. Now there are some projects in the market with three- and four-year loan terms (they typically still have several one-year extensions available to the Borrower). The Regional Center usually offers repayment to investors only after the borrower fully repays the loan.”
In the case of pre-RIA investors who invested before the law took effect in March 2022, they must keep their funds invested and “at risk” of loss until at least the end of their two-year conditional residency period.
“This means that many pre-RIA investors, especially those chargeable to retrogressed countries, need to have their funds redeployed by the Regional Center into another investment if the EB-5 investment is ready to return investor funds prior to that particular investor completing their conditional residency period in the U.S.,” Bodony states.
Therefore, a pre-RIA investor could be repaid while waiting for approval of their I-829 form (the final application in the EB-5 process), provided the jobs are created, Tristani adds.
In some cases, however, the repayment period could extend beyond the two-year CLPR period for pre-RIA investors, he cautions. “It is also possible that their funds were redeployed to remain at risk if the funds were repaid to the regional center during the investor’s two-year CLPR period. In this case, depending on the redeployment timeline, pre-RIA investors may have to wait longer to receive a repayment after their two-year CLPR period has finished.”
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