Venezuela is home to the world’s largest reserves of crude oil, surpassing even Saudi Arabia. While this supply led to a booming economy in the 1990s, the government’s mismanagement of money and pivot to socialism have led to the impoverished nation seen today. Because of the current political upheavaland the resulting uptick in violence, many wealthy Venezuelans will find it desirable but challenging to move to a more stable location.

Wealth and Economy

Venezuela’s spiraling economy due to falling oil prices has been gripped by hyperinflation predicted to reach 10,000,000% this year. Residents can hardly afford to buy necessities and must keep up with constantly changing prices. Shortages in food, medicine, and fuel have led to extensive looting. Affluent Venezuelans who are able to preserve their wealth are often drawn to U.S. cities such as Los Angeles and Miami as a safer alternative.

Political Landscape

The current humanitarian crisis and violent political turmoil between President Nicolás Maduro and his rival Juan Guaidó have prompted an international response. Large groups of Venezuelans have joined caravans trekking towards the U.S., and humanitarian aid has been blocked from entering the country. Mass poverty and hunger are threatening the nation’s population while Maduro favors large displays of military might. Wealthy Venezuelans have plenty of motivation to leave the country in its current state.

Crime and Safety

Venezuela holds the highest murder rate in the world, with an average of 81.4 homicides per 100,000 people in 2018. This total is slightly lower than in the previous two years, likely because some criminals have hidden among the three million Venezuelans fleeing the country since 2015. Added tensions between President Maduro and his political rival have only intensified the situation, pushing wealthy and ordinary citizens alike to leave while they still can.

Environmental Conditions

In an effort to combat Venezuela’s worsening economic crisis, President Maduro has tried to market the country’s ample mineral resources by opening up the Orinoco Mining Belt—which covers more than 12% of the country’s land—to international mining. This move has already endangered the country’s rich biodiversity and rainforestsand led to increased deforestation and pollution.Other environmental problems in Venezuela include water shortages, sewage pollution, and soil degradation.

Educational Quality

In the ongoing economic and humanitarian crisis, education has become the least of many Venezuelan families’ concerns. With hyperinflation and the current food shortage, school supplies have become unaffordable, leading to a high rate of student absenteeism. Teachers also are in short supply, with many schools asking parents to take over when teachers stop coming to class. School infrastructure is failing, and academic freedom has been jeopardized. Students themselves are often subjected to political threats and questioned about their views. Venezuelan families who can afford to move have plenty of reason to do so.

EB-5 Project Selection Preferences

Venezuelan EB-5 investors are most interested in a quick escape from the political and economic turmoil racking their country. For this reason, EB-5 investors in Venezuela prefer to put their money in projects that can move at a faster pace. They also lean towards working with regional centers for smaller projects with visible results. With the Venezuelan humanitarian crisis only getting worse, high returns on investments are not the primary concern for Venezuelan EB-5 investors seeking safetyin the U.S.

Capital Flow and Other Challenges with the EB-5 Process

Considering the near-worthlessness of the Venezuelan bolivar, it is exceedingly difficult to withdraw even a small amount of money from a Venezuelan bank. Because of this, potential Venezuelan EB-5 investors who want to transfer their wealth often have to complete the transaction from within a neighboring country.

Marketing Channels for Investors

As in Brazil, there are very few EB-5-specific brokers for Venezuelan investors to work with. The main challenge for U.S.-based brokers and agents is to simply increase awareness of the EB-5 visa program in Venezuela and other Latin American countries. They must also put in the effort to build relationships with Venezuelan tax specialists, lawyers, and wealth managers who interact regularly with the country’s wealthiestcitizens. In addition, many brokers target affluent Venezuelans who already reside in America on other temporary visas, and who are nervous about their status given current U.S. immigration policies.

The USCIS has updated its EB-5 petition processing statistics, displayed on the Immigration and Citizenship Data page, to reflect information about the petitions received and processed duringthe first quarter of the 2019 financial year (October to December 2018).

The overall number of EB-5 forms processed by the Immigrant Investor Office (IPO) during this period decreased significantly, from 4,941 in FY2018 Q4 to 3,116 in FY2019 Q1. The number of I-924 applications processed decreased from 156 to only 69, with I-829 applications falling from 746 to 474 and I-526 applications decreasing from 4,039 to 2,573. This has been the IPO’s least productive quarter since FY2016 Q3, when it processed only 2,093 applications.

Of the 2,573 I-526 petitions processed, 398 petitions were denied and 2,175 were approved.Thus, the percentage of I-526 petitions approved decreased slightly, from around 87% in FY2018 Q4 to 85% in FY2019 Q1. Additionally, I-829 application approvals decreased from approximately 97% to 93.5%, and I-924 approvals from around 54% to 36%.

The number of I-829 and I-526 applications received increased compared to the previous quarter, at 797 compared to 467 for I-829 applications, and 1,808 compared to 1,338 for I-526 applications. The number of I-924 applications dropped from 31 to only 19, a surprisingly low number considering the 855 currently approved regional centers should file the I-924A annual report during Q4 to remain in good standing with USCIS. However, it is possible that all filings were not included in the data.

In relation to all types of employment-based petitions, those related to the EB-5 program constitute a small percentage. For example, in FY2019 Q1, USCIS received 388,338 Applications for Employment Authorization, compared to only 3,116 for all three categories related to the EB-5 program (I-526, I-829, and I-924).

A total of 21,775 petitions remain unprocessed, a number that consists of 13,508 I-526 applications, 8,119 I-829 applications, and 148 I-924 applications.Processing times for I-526 applications have increased slightly for FY2019 (up to January 31, 2019) compared to FY2018, at 20.4 months compared to 22.1 months, but processing times for I-829 petitions dropped from 27.1 months to 30.9 months for the same period.

With a population of almost 212 million, Brazil now makes up the third-largest EB-5 market behind China and Vietnam, with the bonus of not yet having hit retrogression. Brazil’s interest in EB-5 visas can be attributed to the country’s recent economic downslide, its high crime and corruption rates, and its poor quality of education.

Wealth and Economy

Despite having the seventh-largest economy in the world only a decade ago, a recession in 2015-2016 shrank Brazil’s GDP by 8%, and the country is now facing high inflation and unemployment. Already 2,000 millionaires fled the country in 2017, continuing a trend seen over the last several years. Nevertheless, the number of Brazilian millionaires is expected to rise from the current 164,000 to 296,000 in 2022.

Political Landscape

Brazil has been rocked in recent years by major corruption scandals that even led to the impeachment of a former president. Bribery and fraud are commonplace in Brazil’s politics, tax management, and judicial system. The current president, Jair Bolsonaro, has authoritarian leanings and is an apologist for Brazil’s previous military regime. These factors provide a major incentive for wealthy Brazilians to leave the country.

Crime and Safety

Crime rates in Brazil have reached record highs, with a staggering 30.8 murders per 100,000 people in 2018. Organized crime, drug gang rivalries, and an under-resourced yet violent police force are all contributors. Fear of crime has dampened Brazil’s nightlife, with soldiers and tanks often appearing to keep the peace. Over 15,000 armored cars were sold in 2017 alone. A promise to curtail crime, loosen gun laws, and protect ordinary Brazilians was a large part of President Bolsonaro’s public appeal. A full 62% of young Brazilians surveyed said they would leave the country if they could, and many affluent Brazilians are trying to find a way out.

Environmental Conditions

One of the biggest environmental challenges for Brazil at the moment is deforestation. Brazil is home to the Amazon rainforest, the world’s largest tropical rainforest and a massive source of biodiversity and oxygen production. President Bolsonaro has already made moves to increase deforestation to facilitate higher agricultural production, worrying many environmental groups and activists. High pollution plagues large Brazilian cities such as São Paulo, and the country has a major crisis with waste management. On the other hand, the Brazilian government has been investing heavily in wind power for the last decade, and it is promoting international green building codes around the country.

Educational Quality

Brazilian schools have fallen far behind the recommended average in reading and math scores, exacerbating the current economic crisis. The country’s education system is troubled by inefficient spending, inadequate investment in teachers, and low-quality curricula. There are currently 2,600 public and private universities, and the government is making efforts to improve its vocational training. Nevertheless, many Brazilians are looking elsewhere for better academic opportunities for their offspring. There are already over 13,000 Brazilian students studying in the U.S., making it the tenth largest international student population in America.

EB-5 Project Selection Preferences

Brazilian EB-5 investors are keeping a watchful eye on the unstable political situation unfolding in their country. In order to protect their wealth before it is too late, many EB-5 investors in Brazil prefer to invest in projects that can produce quick results. Like other Latin Americans, Brazilian EB-5 investors lean towards working with regional centers and investing in smaller projects with physical results. However, with the time constraints posed by the current financial crisis in Brazil, the returns from Brazilian EB-5 investments are often secondary considerations.

Capital Flow and Other Challenges with the EB-5 Process

Because of Brazil’s strong trading ties with Florida, cities like Miami have become hotspots for Brazilian EB-5 investors interested in moving to the U.S. However, shifting money out of Brazil is costly and challenging, with bureaucratic banking known for its inefficiency. In addition, monthly transfers out of Brazil are limited to $10,000 BRL, or about $3,000 USD.

Marketing Channels for Investors

Brazil is the world’s fifth-largest country and providesa large source of potential EB-5 investors. However, the EB-5 market in Brazil is highly fragmented, with a nominal number of EB-5-specific immigration brokersfor investors to work with. As a result, most Brazilian EB-5 investors must go through smaller firms such as accountants, real estate brokers, travel agencies, and wealth managers. Many regional centers and project sponsors also hold workshops within Brazil to increase awareness of the EB-5 visa process, as well as targeting Brazilians already in the U.S. who are concerned about their immigration status in the current political climate.

For EB5AN, 2018 was an exciting year marked by milestones, accomplishment, and growth. Our partners collectively spent more than 200 days on the ground in foreign markets—including China, India, Brazil, Colombia, and Vietnam (along with many more)—getting a sense for where EB-5 is headed and how we can keep ahead of upcoming trends.

We have now sponsored more than 1,000 investors from more than 30 nations across our regional centers, and we continue to hold a 100% approval rate on all adjudicated USCIS petitions.

Additionally, we are proud of the recognition our company and its principals have received. We were recognized by Entrepreneur Magazine in its 2018 Entrepreneur 360 List, and Managing Members Sam Silverman and Mike Schoenfeld were recognized by Forbes Magazine.

As we enter 2019, we are excited about the opportunities ahead, and we look forward to offering our clients the highest caliber of EB-5 consulting services, Regional Center sponsorship, and document preparation. Our expanded team of specialists is able to quickly respond to client needs without sacrificing quality, and we look forward to all the new client relationships 2019 will bring.

Below, we’ll consider 2018 in light of visa issuance and petition adjudication, program reauthorization, policy updates, and industry trends. We’ve also appended a list of updates to regional centers.

Visa Issuance and Petition Adjudication

This year, the U.S. Department of State provided several key updates regarding visa issuance.

• Estimated visa wait times for mainland-born Chinese nationals increased
• A cut-off date was assigned to Vietnam
• Near term backlogs for India, Brazil, and South Korea were predicted

Beyond these updates, the discussion surrounding EB-5 visa availability has become a mainstream topic, particularly as it relates to marketing projects and making investment decisions.

Currently available data shows a drop in total I-526 Petition filings in 2018, with the total by the end of Q3 standing at just 5,086. The total number by Q3 in 2017 was 10,528, and that fiscal year ended with 12,165 filings. Total adjudications for I-526 Petitions, however, increased: by Q3, 2018, approved and denied petitions totaled 11,083 compared to a total of 9,150 by Q3, 2017. Pending petitions dropped from 24,992 in 2017 to 17,126 by Q3 of 2018. This highlights an increase in processing ability and a decrease in new applications, indicating an anticipated faster timeline for adjudications.

I-829 Petitions rose in 2018, totaling 2,816 by Q3 as compared to 2,132 by Q3, 2017. Current data also reflects a rise in total I-829 adjudications. By Q3, 2018, approved and denied petitions totaled 1,968, while in Q3, 2017, adjudicated petitions totaled only 1,292 (though Q4, 2017, saw a surge in I-829 adjudications, more than doubling this total—we won’t know until new data is available how Q4, 2018, compared to the previous year).

Program Reauthorization

The EB-5 regional center program is subject to periodic reauthorization, which typically is accomplished within appropriations bills. This year, the regional center program required reauthorization five times:

• January 19 – reauthorized on January 22 after government shutdown
• February 8 – reauthorized
• March 23 – reauthorized
• September 30 – reauthorized
• December 7 (amended to December 21) – reauthorized on January 25 through February 15 after extended government shutdown

The failure of Congress to facilitate a smooth appropriations process has resulted in a tumultuous year for the EB-5 Program and has created significant uncertainty for all EB-5 industry stakeholders.

We support legislative measures that would stabilize the EB-5 Program, particularly by either eliminating the need for regional center program reauthorization or by providing long-term authorization. Previous proposed legislation has included five-year regional center reauthorization, and the main industry groups are working to advance a bill that also includes a five-year reauthorization period. We support such efforts and hope that the appropriations drama that unfolded in 2018 does not repeat itself in 2019.

Policy Updates

Proposed regulations from 2017—which would have increased the minimum investment threshold for EB-5 investments, changed how targeted employment areas (TEAs) are certified, and more—were expected to receive a Final Rule by February 2018. The anticipated target date for the rule was then changed to November. To date, no Final Rule has been published. The public generally did not favor the draft rule, and the final details of the proposed regulations, if ever published, remain a mystery.

Despite not finalizing the proposed regulation, the Immigrant Investor Program Office (IPO) did issue four updates to the USCIS Policy Manual.

• May 2 – Reaffirmation that USCIS does provide documentation of investors’ conditional lawful permanent resident (CLPR) status to those who have pending I-829 Petitions
• May 15 – Rescission of prior guidance regarding tenant-occupancy methodology
• August 24 – Updated guidance regarding regional center geographic coverage, requests to expand such coverage, and how such requests affect I-526 Petition filings
• October 30 – Clarification concerning immigrant investors and debt arrangements

Industry Trends

This year, IPO hired a new chief, Sarah M. Kendall, held three stakeholder engagements (all in November), and issued four updates to the policy manual (as mentioned in greater detail above). As already mentioned, I-526 processing volume rose significantly and I-829 processing volume seems to have risen as well (depending on Q4 performance). The rise in petition adjudication times is welcomed, and we hope this trend continues into 2019.

The EB-5 industry in general is trending toward increased fragmentation. Investor origin is diversifying, and new investors are tending to seek out smaller, more niche regional center offerings. Investors are shifting away from larger regional centers and seem to be gravitating toward more personal opportunities in which relationship factors ultimately drive where investors are placing their capital.

Additionally, investors are growing more savvy and are being drawn to projects with reduced administrative fees, fewer intermediaries, and higher returns. Based on our information, preferred equity deals have absorbed a significant share of the market and now represent approximately half of EB-5 regional center project structures—mezzanine debt deals constituting the other half.

As we’ve observed these changes, we continue to offer clients a turnkey solution that remains flexible enough to meet fluctuations in the market. We work with our clients to find solutions that best meet their needs and are experienced at sponsoring and structuring both preferred equity and mezzanine debt deals. We see our time spent on the ground in foreign markets as an invaluable investment that has allowed us to stay on top of these trends.

For more information about how EB5AN can help you structure your project for EB-5, compile the necessary documents, affiliate with one of our regional centers, set up your own regional center, and more, please contact us at info@EB5AN.com.

Changes in Approved Regional Centers

The following regional centers were added to the approved regional center list from September 11 to December 31:

• California – Los Angeles International Regional Center, LLC
• California – Southern California EB-5 Fund, LLC
• Connecticut / New Jersey / New York – York Resources RC Funding, LLC
• Florida – BC Central Florida Regional Center LLC
• Illinois / Indiana – Ameri-Link Midwest Regional Center
• Nevada – Brilliant EB-5 Regional Center, LLC
• Ohio – Ameri-Link Ohio Regional Center, LLC
• Puerto Rico – Mayaguez Regional Center, LLC
• South Carolina – FCA South Carolina Regional Center, LLC
• Texas – American Equity Fund Texas, LLC
• Texas – National EB-5 Wealth Center, LLC

The following regional centers were renamed:

• California / Oregon / Washington – Smith Western Regional Center f/k/a Western Pacific Regional Center
• Illinois, Indiana – Native American Regional Center, LLC, f/k/a Native American EB-5 Corporation

The following regional centers were terminated throughout the year:

• Alabama

• Civitas Alabama Regional Center (9/6/2018)
• Encore Alabama/Florida Regional Center (4/3/2018)

• Arizona

• Central Arizona Regional Center (12/19/2018)

• Arkansas

• Ark of the Ozarks LLC (pending; 4/5/2018)
• Liberty South Regional Center (1/19/2018)

• California

• Altura Regional Center, LLC (4/9/2018)
• Amaxi Regional Center, LLC (5/1/2018)
• AmerAsia EB5 Regional Center SF, LLC (6/7/2018)
• American Altin Regional Center (8/8/2018)
• American Dream Fund San Francisco Regional Center, LLC (10/3/2018)
• American General Realty Advisors Regional Center (4/20/2018)
• Build America Capital Partners Regional Center LLC (7/31/2018)
• Build America Fund 1, LLC (8/9/2018)
• Cal Pacific RC LLC (7/16/2018)
• California Bond Finance Regional Center, LLC (4/12/2018)
• California Global Alliance Regional Center c/o Lewis C. Nelson & Sons, Inc. (8/31/2018)
• California International Regional Center LLC (7/10/2018)
• California Investment Immigration Fund, LLC (CIIF) (3/20/2018)
• California Pacific Regional Center, Inc (6/11/2018)
• Central California Regional Center, LLC (4/13/2018)
• Charter Square Regional Center, LLC (7/10/2018)
• EB5 United West Regional Center, LLC (7/27/2018)
• Encore S. CA RC, LLC (4/18/2018)
• Faustus Capital LLC (5/24/2018)
• Future Resources, Inc. (8/15/2018)
• Global America Regional Center (4/27/2018)
• Golden State Economic Development Fund, LLC (12/6/2018)
• L Global Regional Center, LLC (8/20/2018)
• Manchester Pacific Regional Center (3/28/2018)
• New Energy Horizons Regional Center (4/12/2018)
• QueensFort Capital California Regional Center, LLC (4/12/2018)
• Regency Regional Center, LLC (3/15/2018)
• Regional Economic Development & Investment Group (4/5/2018)
• San Diego Regional Investment Center, LLC (11/16/2018)
• SPG Regional Center, LLC (4/26/2018)

• Colorado

• ADC Colorado Regional Center, LLC (5/1/2018)
• Colorado Growth Fund, LLC (5/15/2018)
• Colorado Headwaters RC, LLC (5/24/2018)
• Encore Colorado RC, LLC (9/24/2018)
• Live in America – Colorado Regional Center LLC (9/7/2018)

• Connecticut

• High Stone Regional Center, LLC (4/9/2018)
• District of Columbia
• Civitas Washington D.C. Regional Center (9/5/2018)
• EB5AN Washington, D.C. Regional Center, LLC (9/13/2018)
• Encore Wash D.C. RC, LLC (5/25/2018)
• TBC Washington DC Area Regional Center, LLC (4/6/2018)

• Florida

• BLMP Florida Healthcare Regional Center, LLC (3/30/2018)
• Citizens Regional Center of Florida (8/24/2018)
• Civitas Miami Regional Center, LLC (9/6/2018)
• Cornerstone Regional Center, Inc. (4/6/2018)
• Florida East Coast EB5 Regional Center LLC f/k/a United States Growth Fund, LLC (4/10/2018)
• Greystone EB5 Southeast Regional Center LLC f/k/a Greystone Florida Regional Center LLC (4/13/2018)

• Georgia

• American YiYo Regional Center (4/12/2018)
• Civitas Atlanta Regional Center (9/6/2018)
• Diversified Global Investment, LLC (1/30/2018)

• Hawaii

• South Pacific Regional Center, LLC (3/29/2018)

• Idaho

• Idaho State Regional Center LLC (7/2/2018)

• Illinois

• American Pioneer Regional Center, LLC (3/27/2018)
• Chicagoland Foreign Investment Group (CFIG) Regional Center (7/16/2018)
• Civitas Illinois Regional Center (9/5/2018)

• Indiana

• Energize-ECI EB-5 Visa Regional Center (5/9/2018)
• Invest Midwest Regional Center f/k/a Civitas Indiana Regional Center (8/21/2018)
• SAA Cedisus EB-5 Projects – SW Indiana Regional Center, LLC (4/18/2018)
• The Mid-American Regional Center, LLC (8/30/2018)

• Iowa

• Iowa Department of Economic Development (IDED) (4/19/2018)

• Island of Guam

E Development Corporation dba EDC (10/15/2018)

• Kansas

• Southwest Kansas Regional Center (2/1/2018)

• Kentucky

• Midwest Regional Center, Inc. (4/5/2018)

• Louisiana

• Civitas Louisiana Regional Center (9/11/2018)
• LIGTT Regional Center (pending; 4/18/2018)
• New Orleans’ Mayor’s Office RC (2/27/2018)

• Maine

• New England Center for Business Development, LLC (5/9/2018)

• Marianas Islands

• Marianas EB5 Regional Center (5/29/2018)
• Rota EB5 Regional Center (6/21/2018)
• Saipan Regional Investment Center, LLC (8/1/2018)

• Maryland

• Maryland Area Regional Center, LLC (1/23/2018)
• USA ODI Regional Center, LLC (3/20/2018)

• Massachusetts

• Americas Green Card Regional Center (7/12/2018)
• Encore Boston RC, LLC (4/18/2018)
• Queensfort Capital Massachusetts Regional Center, LLC (3/29/2018)

• Michigan

• Civitas Michigan Regional Center (9/6/2018)
• Lansing Economic Development Corporation (LEDC) Regional Center (1/23/2018)
• Michigan-Indiana EB-5 Regional Center (3/29/2018)

• Mississippi

• Gulf Coast Funds Management, LLC (8/30/2018)
• Northern Mississippi Regional Center, LLC (9/7/2018)

• Nebraska

• White Lotus Group Regional Center (6/26/2018)

• Nevada

• Nevada Development Fund LLC (7/12/2018)
• Silver State Regional Center LLC (4/11/2018)

• New Jersey

• East Coast Renewable Regional Center, LLC (4/9/2018)
• G.R.E.E.N. Regional Center (4/2/2018)
• North American Regional Center (8/2/2018)

• New York

• North Atlantic Regional Center, LLC (5/1/2018)
• Queens Fort New York Regional Center, LLC (3/28/2018)

• North Carolina

• Carolina EB-5 RTP Regional Center, LLC (12/20/2018)
• Encore Raleigh/Durham Regional Center (4/2/2018)

• North Dakota

• Landy Resources Management, LLC (5/1/2018)

• Ohio

• Mag Ventures 1, LLC (9/11/2018)
• Northeast Ohio Regional Center (7/18/2018)
• Ohio Lakeside Regional Investment Center (5/1/2018)

• Oklahoma

• 5 Starr Regional Center LLC (4/5/2018)
• Chen Roberts Regional Center (3/9/2018)
• Civitas Great Plains Regional Center (9/12/2018)

• Oregon

• American International Venture Fund – Oregon, LLC (4/9/2018)
• APIC Regional Center, LLC (8/8/2018)

• Pennsylvania

• Encore Pennsylvania RC, LLC (EPRC) (8/20/2018)
• Liberty EB5 Regional Center (5/1/2018)

• Puerto Rico

• Commonweaith of Puerto Rico Regional Center Corporation (4/25/2018)
• Omega Puerto Rico Regional Center, LLC (2/15/2018)
• Reside in America Puerto Rico, LLC (5/1/2018)

• South Carolina

• Southeastern Higher Education Regional Center (1/2/2018)
• USHoldings Regional Center (9/24/2018)

• South Dakota

• South Dakota International Business Institute (SDIBI) (5/11/2018)

• Tennessee

• EB5 Memphis Regional Center, LLC (2/26/2018)

• Texas

• Central Texas Properties Regional Center (3/27/2018)
• Central Texas Regional Center (8/21/2018)
• Civitas Laredo Regional Center, LLC (9/6/2018)
• Civitas Rio Grande Regional Center (9/10/2018)
• Collegiate Regional Center LLC d/b/a Texas Collegiate Regional Center (pending; 5/15/2018)
• Global Century (Houston) (4/12/2018)
• Greater Houston Investment Center, LLC (1/26/2018)
• Home Paradise Texas Regional Center, LLC (4/17/2018)
• One World Development Fund, Inc. (4/12/2018)
• QueensFort Capital Texas Regional Center, LLC (4/27/2018)
• RGV EB-5 Regional Center (7/10/2018)
• South Texas EB-5 Regional Center, LLC (3/27/2018)
• US Freedom Capital-Texas, LLC (9/18/2018)

• Utah

• Utah Invest Regional Center, LLC (7/3/2018)

• Vermont

• Vermont Agency of Commerce and Community Development (7/3/2018)

• Washington

• American Bridge Seattle Regional Center, LLC (8/1/2018)
• Encore Washington/Oregon Regional Center, LLC (4/18/2018)
• Great Ocean Regional Center (7/30/2018)
• Liongate Regional Center, LLC (4/27/2018)
• Pacific Northwest Regional Center (4/5/2018)
• Pacific Viniculture (3/22/2018)
• Tacoma EB 5 Regional Center (5/2/2018)
• Washington Foreign Investment Management Group, LLC (4/26/2018)
• Washington State Regional Center (7/31/2018)

EB5AN was recently recognized as one of the “Best Entrepreneurial Companies in America” by Entrepreneur Magazine’s Entrepreneur360 List, a premier study delivering the most comprehensive analysis of private companies in the United States.Based on this study, EB5AN ranks among the top 50 companies in the nation and is recognized as a well-rounded firmthat has mastered a balance of impact, innovation, growth leadership, and value.

“We are excited and thankful to receive this honor,” said Sam Silverman, managing partner of EB5AN.“This recognition underscores our belief that EB5AN is one of the most innovative companies in the EB-5 industry, promoting un-paralleled transparency and professionalismin the field.”

“Our annual evaluation of vetted data offers a 360-degree analysis of top privately-held companies across a multitude of industries,” explains Jason Feifer, editor in chief of Entrepreneur Magazine. “They are deemed successful not only by revenue numbers, but by how well-rounded they are. The companies that make the list have pushed boundaries with their innovative ideas, fostered strong company cultures, impacted their communities for the better, and increased their brand awareness.”

EB5AN is a national EB-5 regional center operator and fund manager that owns and operates a network of 14 USCIS-approved regional centers covering more than 20 states. EB5AN was established in 2013, and since then, more than 1,000 investors from more than 30 countries have invested through the company’s regional centers.

Honorees were identified based on the results of a comprehensive study of independently-owned companies, using aproprietary algorithm and other advanced analytics. The algorithm was built on a balanced scorecard designed to measure five metrics reflecting major pillars of entrepreneurship—innovation, growth, leadership, impact,and business valuation.

To learn more about EB5AN, visit www.EB5AffiliateNetwork.com.

For additional details on the Entrepreneur360 List, visit: www.entrepreneur.com/360.

There are two questions regarding EB-5 dealings that commonly come up in the legal arena. The first is whether individuals or entities who are recruiting EB-5 investors are permitted compensation if they are not registered broker-dealers. The second is whether a limited liability company (LLC)’s interest in an EB-5-funded new commercial enterprise (NCE) can legally be considered a “security.” These are complicated questions, and looking at recent federal court cases can clarify how these situations are viewed from a legal standpoint. In a recent June 2017 ruling in the case SEC v. Hui Feng and Law Offices of Feng & Associates, the U.S. District Court for the Central District of California found that the LLC interest in that case was indeed a “security” and that the attorney and his firm had acted as broker-dealers without being registered as such.

The Application of Securities Laws to EB-5 Investments

Within federal securities laws, a “security” encompasses a wide range of instruments that could be sold as investments. Many EB-5 investments are in the form of partnerships or LLC interests, and while neither of these terms are specifically listed in the laws as being “securities,” they can be considered as falling under the umbrella term “investment contracts,” which is listed as a qualifying security. If an investment does not qualify as a security, investors lose out on having the protection of securities laws and are more vulnerable to being taken advantage of. Thus, it is important to determine whether or not the EB-5 investment can qualify as a security. In the SEC v. Hui Feng and Law Offices of Feng & Associates, the defendants contended that the LLC interests in their case should not qualify as securities and thus should not be protected by securities laws.

Investment contracts were defined by the U.S. Supreme Court in SEC v. W. J. Howey, 328 U.S. 293, 298-99 (1946). The Supreme Court established three requirements for an instrument to be categorized as an investment contract: 1) Money must be invested 2) in a common enterprise 3) with an expectation of profits. The defendants in the Feng case argued that in their situation, the third requirement was not met, as the investors did not expect any profitable return, and making a profit was not their motive since their expected return was less than the original investment combined with all the fees they had to pay. Since the motive was purely permanent resident status in the United States, they argued that this type of investment was not covered under securities laws.

When the court decided to rule against the defendants’ arguments, it pointed to EB-5 program regulations, specifically statements that investors had to keep their capital at risk for the entire investment term with the goal of receiving a return. It was also noted that the paperwork involved in this particular case referred to possible profit and also described the EB-5 investments using the term “securities.” The court also drew a clear line between fees associated with the program and the actual investment, stating that the fees would not be calculated in when calculating the actual return amount and that there was nothing given in their arguments that would support the defendants’ position.

While the Feng case defendants lost their arguments in court, they did make some reasonable points. It is a no-brainer that EB-5 investors have permanent resident status as their primary goal rather than obtaining a profit from their investment. However, because just the potential for a profitable return is generally adequate to satisfy the requirements, most court rulings would support the position of the Securities and Exchange Commission (SEC).It’s a reasonable assumption, therefore, that EB-5 investments are considered as “securities” in a court of law and subject to securities laws regulations and protections.

Entities Acting as Broker-Dealers Without Registering

Individuals and entities are prohibited from brokering securities transactions unless they have completed the required registration to become broker-dealers. This ensures that brokers are trained and educated on relevant regulations and their responsibilities towards the parties involved in the transaction, particularly the vulnerable investors. According to securities laws, a broker is any individual who is actively engaged in processing securities-related transactions on behalf of someone else. At the federal level, the courts typically refer to SEC v. Hansen in 1984 to decide if an individual or entity has acted as a broker. The ruling in this case set forth several factors that can be evaluated to determine this. All but one of these factors were identified in the Feng case and are listed below.

1. Did the individual or entity receive transaction-based compensation (like commission) rather than regular pay (like salary or hourly wages)? In the case of Feng, the individuals did receive commissions or referral fees when they sent clients to regional centers.
2. Did the individual or entity sell securities from other issuers? In the case of Feng, EB-5 transactions had been conducted since 2010, with additional securities transactions being conducted from 2003 to 2014.
3. Was the individual or entity involved in negotiations between the parties involved in the transaction? In the case of Feng, the individuals negotiated terms on behalf of their clients and worked with various regional centers.
4. Did the individual or entity advertise on behalf of clients? In the case of Feng, they did.
5. Did the individual or entity advise the investors or provide appraisals regarding the investment? Yes, this did occur in the Feng casewhen the defendants recommended particular EB-5 regional centers to individual clients and also researched potential EB-5 projects on behalf of their clients.
6. Did the individual or entity actively seek out investors? Yes, they did.
7. Does the individual or entity regularly participate in securities-related transactions. Yes, they do.

With only one factor from the Hansen case not being relevant in the Feng case, the court affirmed that the defendants had acted in the role of brokers and would not be exempt from registering as such.

With a total of eight factors that decide whether an individual or entity has acted as a broker, the process of making this determination is complicated and lengthy. There have been cases where individuals receiving compensation for a transaction have not been classified as brokers for various reasons (e.g., SEC v. Kramer). Since the SEC generally argues that compensation equals broker status, parties to securities transactions can safely assume that they will be treated as such.

Disclosure Decisions: What Is Required?

According to U.S. securities laws (both state and federal), all securities offerings must be promptly registered with the appropriate securities commissions if they are not exempt. EB-5 offerings are usually considered exempt and thus not registered. While this removes certain disclosure requirements that normally apply to securities offerings, it does not eliminate the requirement to disclose all material facts to investors as a protection from fraud.Deciding whether or not a fact is material many times falls on courts after the fact, and this can be a difficult decision to make. As a general rule, if a fact is significant to an investor’s investment decision, it should be disclosed.

In the case of Feng, the defendants had neglected to disclose the commissions they received for referrals to the investors and, in fact, had indicated to investors that they were not seeking to find investors at all. They were found guilty of securities fraud because the court determined that if the investors had known about the commissions, they may have selected a different investment that would have been less costly or asked for a portion of the commissions that the defendants received. The court also ruled that commissions for making referrals could create a conflict of interest for the parties and should be disclosed to the investors.

For securities offerings that have to be registered, issuers are mandated to provide detailed information about any form of commission, fees, or compensation that is paid to any agents involved in the process of recruiting or completing the transaction. While that mandate does not specifically include information about commissions earned by EB-5 middlemen, most agree that those amounts should be disclosed to the parties. How much detail must be disclosed is a subject of contention, however. Disclosure may include a brief statement that a middleman has been retained to guide investors or it could name the parties involved and give amounts of commission received. Once concern regarding too much disclosure is that it creates a disadvantage for the issuer during negotiations. If the compensation being received is a reasonable amount, minimal disclosure may be all that is required, whereas more detailed disclosure is needed when there are high amounts of compensation or some other uncommon aspect to the commissions being received.

Despite the current state of ambiguity regarding the need for disclosure, it is expected that legislative changes in the future will clarify regulations and mandate specific disclosures.

Violations of Securities Laws

Individuals or entities that violate securities laws are punishable by sanctions. In the resent Feng case, the defendants had to pay back all of their commissions in addition to interest and additional penalties, which added up to a substantial amount of money.

In addition to monetary sanctions, both registered broker-dealers and unregistered individuals acting as such could also be suspended from the entire industry for fraudulent behavior. Attorneys and accountants committing misconduct could be barred or suspended from cases involving the SEC. Criminal sanctions can be imposed as well, including possible fines and jail time, on individuals or entities deliberately violating securities laws.

As seen in the above case, the determination of whether an EB-5 investment qualifies as a security and whether individuals or entities receiving commission are classified as brokers” is a complicated process that takes many factors into consideration. To avoid errors and potential ramifications, all parties involved with EB-5 investments should seek out experienced counsel to understand the regulations and receive guidance on how to adhere to them.

Since the global financial meltdown of 2008, foreign direct investment (FDI) in the southern hemisphere has risen steadily, coinciding with explosive economic growth on the African continent. African countries such as Egypt, South Africa, Morocco, and Ethiopia have become both sources of wealthy investors and destinations for investment from other nations.

African Investment Barriers

Though African leaders have a stated goal of greater ease of travel between African nations (a vital component of economic development), progress toward this goal has been sluggish. In 2016, less than a quarter of African countries allowed visa-free entry or issued visas on arrival to all fellow Africans. North Americans were able to travel to 55% of African countries without a visa, while Africans themselves could travel to just 45% of their continent’s nations without one.

African countries with more welcoming visa policies have seen greater economic growth and more foreign investment than those with more restrictive policies, in part because these policies encourage wealthy Africans to invest within their own continent. Unfortunately, continued resistance to more open borders and ongoing political instability still stand in the way of intra-continental investment for Africans, leading them to look elsewhere for investment opportunities.

While the UK has been a popular FDI destination for African investors, the advantages offered by the EB-5 program in the United States have turned their heads. A glance at the statistics from 2014 to 2016 elucidates this trend.

• FDI investments by Africans into the US shot up from $1.69 billion to $4.39 billion (Statista 2018)
• The number of EB-5 visas issued to Africans grew from 89 to 110 (US Dept of State)

The Next Emerging Market

Growing foreign investment by Africans, coupled with gathering economic momentum, is why financial analysts have dubbed Africa “the next emerging market.” At the head of the pack are South Africa, Nigeria, Algeria, and Egypt.These nations are some of the most populous on the continent and account for more than half of its GDP.A combination of factors has facilitated their growth, including political changes, investment from other continents, West African economic recovery, and improved communications infrastructure.For South Africa and Nigeria, inclusion in the BRICS (Brazil, Russia, India, China, and South Africa) and MINT (Mexico, Indonesia, Nigeria, and Turkey) alliances have brought increased trade and security. These leading nations have established themselves as models and harbingers of the future for other African nations.

Advantages of EB-5 Investment

What are the perks of the EB-5 visa program for African investors?

• Itallows the investor a fast-track to permanent residency, with an unrestricted freedom to live and work anywhere in the continental US.
• It includes green card provisions for the investor’s spouse and children under 21. For investors seeking to give their families respite from political or economic instability, the American Dream is often appealing.
• It makes American schools available to African immigrant investors, including a discounted rate for college tuition—a bonus for the many African parents who want their children to be educated in the United States.
• It provides a route to potential citizenship, requiring only five years of permanent residency.
• It’s easier to obtain compared with similar programs in other countries. For example, Canada, Australia, Britain, and New Zealand have higher minimum investment requirements than the $500K required by the EB-5 program, and Canada awards only 570 investor visas, in contrast to the US’s 10,000.
• It gives investors access to economically beneficial infrastructure and technology that may be lacking in their home country, as well as the ability to transfer the technology and resources they’ve cultivated in the US back home.
• It requires no special knowledge or skills and no sponsor.
• It’s a relatively quick process. Chinese EB-5 applications are subject to retrogression because of the high demand for visas among Chinese investors, but there are no such restrictions for African investors.
• It offers a choice between investing in an individual project or combining funds on a larger project through an EB-5 regional center.

Africans who are interested in foreign direct investment have much to gain by applying for an EB-5 visa. With eventual seamless travel between countries, continued local economic growth, technological development, and greater political security, Africa’s expanding economic power will continue to provide profitability and comfort for its people. For investors who are ready to contribute to its flourishing now, the EB-5 paves the way to myriad investment opportunities.

African immigration to the US is on the upswing. According to the US Department of State, between 2014 and 2016, immigrant visas issued to Nigerians, Ethiopians, Egyptians, and Ghanaians increased by approximately 63%, 54%, 6%, and 48% respectively.As an African investor, you can not only be among the Africans seeking a better life in the US, you can enrich both your family and your home country by becoming an EB-5 investor.

Contact EB5AN today to learn more about the EB-5 immigrant investor program and find projects you can invest in.

Getting the I-829 petition approved is the final hurdle that EB-5 investors need to clear to complete the EB-5 process and become legal residents of the United States, on their way to full citizenship. In order to get his or her I-829 petition approved, the applicant must prove that the requirements of the EB-5 Program have all been met within the allotted timeframe.

Typically, regional centers will put together the documents required to prove program compliance. They must first provide documentation that investment funds remained invested in a qualifying new commercial enterprise for the entire duration of the investment period. This is usually done through the use of either proprietary or third-party programs that are able to follow the investment funds throughout the investment period.
Regional centers must also provide evidence that the required 10 jobs were created for each EB-5 investor. This is the most difficult evidence to provide, however, as there is no easy tool that can calculate job creation, taking into consideration all the direct, indirect, and induced jobs that result from the investment.

To calculate job creation, regional centers can use the initial economic report as a framework to record both direct and indirect costs of construction as well as any returns once the project is completed and under operation. If the actual amounts differ substantially from those in the initial economic report, a new one may need to be created.This will not negatively affect petition approval; USCIS does not require the ending economic report to be identical to the original as long as adequate proof of job creation is submitted with each I-829 Petition.

Unfortunately, predicting a construction timeline is not an exact science, and occasionally, the actual timeline ends up being longer or shorter than the predicted one. If the physical construction ends before the two years are up, those construction jobs cannot be used to meet the 10-job requirement and more work will need to be done to identify additional jobs that have been created. If construction takes longer than the planned two years, this can make it easier to meet the job requirement, as there will be a higher number of construction-related jobs. In either case, whenever the actual construction timeline differs from the predicted one, care should be taken to develop a new, accurate economic analysis.

EB-5 investors may enter projects at different times, thus staggering the submission of I-829 Petitions. Because the petitions for all investors are not submitted simultaneously, job creation documentation should be prepared before the first applicant is able to submit his or her final I-829 application. Our organization can assist developers and regional centers in putting together economic analyses and job creation documentation to accompany I-829 Petitions. Contact us to get started now.

To avoid a long-term government shutdown, the President and Congress just agreed to a defense spending budget for FY 2018 and FY 2019.The agreement also included a decision to provide continuing funding to several federal programs, including the EB-5 Program,through March 23, 2018. Labeled as the “Continuing Resolution,” this portion of the legislation also laid out an outline of a long-term budget agreement, which is expected to be included in an omnibus spending bill before the funding expiration date.

This latest Continuing Resolution is part of apattern that has been ongoing since September 2015. There has not been a long-term extension of the EB-5 Program since President Obama signed S.3245, granting a three-year extension to the program beginning in September 30, 2012.

Unfortunately, a short-term continuation like this recent one leaves the long-term future of the EB-5 Program up in the air. Truth be told, we don’t know exactly what will happen to the Program. There have been several bills passed around between the House and Senate over the past couple of years, but none have gone anywhere. In the first part of 2018, there have been several proposals related to immigration, but none directly related to the EB-5 Program.

EB-5 Changes Looming Ahead

The direct investment option of the EB-5 Program has been permanent since 1990 and does not require the same renewal process that other aspects of the program do. The Immigrant Investor Pilot Program, however, is another story. This part of the EB-5 Program involves indirect investments through regional centers and was created in 1992. Unlike the direct investment option, the Pilot Program allows project managers to count direct, indirect, and induced jobs in the job creation total instead of just direct jobs. This allows projects that may not result in businesses with multiple direct hires to obtain EB-5 funding.

Over the years since the implementation of the Pilot Program, Congress has become concerned with the rapid growth of the program, and as a result, there have been several proposed bills to modify the program. Up to this point in time, none of these bills have been passed, but there are several recent proposals that are still pending and may affect the future of the program.

One such bill, the American Job Creation and Investment Into Public 4 Works Reform Act of 2017 (H.R.3471), which was introduced on July 27, 2017, proposesincreasing the minimum investment amounts from $500,000 to $800,000 (for investments in projects in targeted employment areas and infrastructure and manufacturing projects) and $1 million to $1.2 million (for all other investments) as well as an extension of the Pilot Program throughSeptember 30, 2022.

A similar bill, the American Job Creation and Investment Promotion Reform Act of 2017,proposes a similar increase for target employment area investments but no increase for other investments (the $1 million would remain the same). It suggests the same extension of the Pilot Program and also proposes including military areas, rural areas, and priority urban areas in the definition of targeted employment areas and setting aside a certain number of EB-5 visas specifically for projects in rural and priority urban areas.

A third bill, the EB-5 Immigrant Investor Visa and Regional Center Program Comprehensive Reform Act of 2017,proposes an additional year’s extension for the Pilot Program and suggests changing the minimum investments from $500,000 to $800,000 and $1 million to $925,000. It also proposes setting aside EB-5 visas for rural projects and including military areas, distressed rural areas, and distressed urban areas as three separate categories of targeted employment areas.

There are additional proposed bills floating around, but these are the most recent and thus the most likely to have an impact on the future of the EB-5 program.

What Comes Next

Frustrated with the delay in reforming the EB-5 Program, United States Citizenship and Immigration Services (USCIS) has stated that it will implement its own reforms to the EB-5Program if Congress does not take action to do so by April 2018. Also campaigning for urgent reforms are Senator Grassley (R-Iowa) and Representative Bob Goodlatte (R-Virginia), who are acting Chairs of the Senate and House Judiciary Committees, respectively. Senator Grassley pushed several months ago to have a proposed reform bill passed by February 2018 and implemented in 30 to 90 days following approval.

Senator Grassley and Representative Goodlatte have specifically pushed for adjustment of the definition of targeted employment areas to include rural and urban distressed areas. Their proposed reform would also increase the minimum investment amount for projects specifically in the new category of TEAs to $925,000 instead of $500,000. It would also increase the minimum amount for other projects by $25,000. Unconfirmed rumors have circulated about additional proposals, such as setting aside EB-5 visas for projects in rural areas, requiring a minimum number of direct jobs, changing some of the interview procedures, and more.

While there is very little information currently available about all the details of the proposed reforms, it is expected to become public information before April 2018. Several EB-5 stakeholders have been actively involved in working with Senators and Representatives to advocate for reforms that include small, gradual increases in the minimum investment amounts rather than large leaps that could hamper the success of the program as well as a greater number of EB-5 visas set aside. We’ll keep you apprised of all changes as the news trickles in.

USCIS has completed its online presentation of FY2017 data for I-526 and I-829 petitions with the recent addition of Q4 data.

Fortunately, the USCIS Immigrant Investor Program Office (IPO) managed to reduce its backload of I-526 and I-829 petitions by processing more than it received during the 2017 fiscal year. This is the first time it has been able to do this since 2009, and continuing this pattern will hopefully reduce future petition processing times.

Overall, the number of I-526 forms received during the 2017 fiscal year decreased by 14% from the 2016 number, and the number of successfully processed forms increased by 31%. Similarly, 24% fewer I-829 forms were received, and 42% more were adjudicated. Despite the positive changes, the high number of I-526 forms received in 2017 combined with the number of still-pending petitions will take years to process with the current annual immigrant visa issuance limit of 10,000.

The trend over the four quarters of the 2017 fiscal year is similar to trends of previous years: sudden influxes of petitions correspond with sunset dates for regional center programs.
Despite the continued low rate of denial for I-829 petitions, it appears that fewer people with existing conditional permanent residence are filing the necessary paperwork to finalize the EB-5 process; somewhat unexpectedly, the number of I-829 petitions submitted during 2017 consistently fell each quarter.

While I-526 processing has continuously improved for several years, I-829 processing has not, making its improvement in 2017 much more impressive. In addition, I-829 processing in 2017 consistently improved as the year progressed, which differs from the less predictable quarter-to-quarter trend of I-526 processing.

The expectation is that processing times will continue to improve during the next fiscal year, adhering to the trend of the past five years. IPO is in the process of adding to its staff in its efforts to continue reducing those times.

The updated data report also displays corrected numbers for previous years and quarters, indicating recent improvement in USCIS’s ability to maintain accurate records. However, it is interesting to note that there does still appear to be some discrepancy between the sum of the reported still-pending petitions and processed petitions and the reported number of petitions received, i.e., some petitions appear to be unaccounted for.