Set Aside Visas: EB-5 Due Diligence

EB-5 Due Diligence: Set Aside Visas

Set Aside Visas: Maintaining the Proper Focus

The EB-5 Reform and Integrity Act of 2022 sets aside 32% of the yearly EB-5 visas for investors in certain types of projects. EB-5 investors who file their I-526E petitions after March 15, 2022, and invest in one of the eligible project types may qualify for a set-aside EB-5 visa.

 

These “set aside” visas can seem very attractive however every prospective EB-5 investor needs to focus on what is most important to them (US permanent residence) and not to be drawn to something just because of the lure of the possibility of an expedited visa.

Work backwards in your due diligence:

This may sound baffling to some people, but if the ultimate goal is to obtain US permanent residence, then shouldn’t the focus of an EB-5 investor’s initial due diligence be on how this will be achieved? If the second most important goal is to obtain a return of those funds that have been invested then the next area of focus becomes, what is there within the borrower/the JCE/the project that provides a likelihood that return of funds to the NCE will occur and that this return of funds will happen in a timely manner. The return on investment (ROI) is a distant third so we will skip that for now other than to say be careful of any EB-5 offering that is projecting a high rate of return to investors. There needs to be a fine balance between risk and reward so if the projected reward is out of balance the projected risk is likely to be out of balance also.

Proper due diligence would now seem to shift to any available projects that meet the above criteria and they meet the criteria for set aside visas. There is one caveat to this though and that is to look into the availability of those set aside visas and determine if there are any backlogs that have developed because of increased interest. The EB-5 Program developed a backlog of investors from Mainland China because demand exceeded the yearly allotment that was available to this group of investors. It is reasonable then that the demand for these set aside visas will exceed the yearly allotments and then how large do those delays in visa availability grow? Not only are these questions that should be asked during the due diligence, the issue is one that should be addressed in the subscription documents every potential EB-5 investor should be reviewing.

EB-5 Set Aside Visas: The added benefit should not be the focus:

This one may be a hard one for many potential EB-5 investors to rationalize but the possibility of an expedited visa should be seen as an added benefit and not the main focus. Remember, what is being offered in a set aside visa is temporary. It is not permanent residence rather it is a granting of conditional permanent residence. All of the other EB-5 Program requirements must be met in order to be granted permanent residence so, if a project falls short, there is still the possibility of failure. Granted, there are ways to overcome insufficient job creation (and we discuss this in other topics we have covered) however no investor wants to be in that situation.

Remember, what is being offered in a set aside visa is temporary. It is not permanent residence rather it is a granting of conditional permanent residence..

Minimize the worry that all EB-5 investors experience..

Part of the due diligence process is looking for ways to minimize the worry that all EB-5 investors experience. This worry does not go away until both permanent green cards and a return of capital are achieved. The focus of an EB-5 investor’s worry shifts after the permanent green card is achieved. The return of capital moves to the forefront the moment that permanent green card is issued. Look for ways to reduce the worry when conducting due diligence.

 

Feel free to contact us directly with any questions you may have. Our staff will be able to help you or to put you into direct contact with the parties that can.

Author Profile
Kraig Schwigen

Kraig Schwigen

Managing Member at American Investment Migration LLC

Kraig Schwigen is a recognized industry expert in the EB-5 business with over a decade of experience. As the former Chief Operating Officer of one of the largest regional center groups in the industry, Kraig grew the company from 40 investors to over 5,400, representing over $2.7 billion in EB-5 investment capital raised.

Today, as a key member of the American Investment Migration (AIM) team, Kraig is dedicated to sharing his extensive experience and expertise to assist developers seeking EB-5 investment capital.

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This website is owned and operated by American Investment Migration LLC. (AIM) - American Investment Migration LLC provides consulting services to developers seeking investment capital by way of the EB-5 program. American Investment Migration LLC is not a registered broker dealer. It is anticipated that any Securities that may be offered associated to a project in which AIM has consulted to a developer will be offered directly by the issuer or through a Broker/Dealer Member FINRA / SIPC.

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