As readers of this blog are likely aware by now, there is discussion taking place which may result in the increasing of the minimum investment required for EB-5 investors from $500,000 to $750,000 (or possibly more) in a TEA (Target Employment Area) project. As the EB-5 program continues to increase in popularity, the first concern among regional centers is whether or not this will reduce the size of the investor pool and therefore make raising capital more difficult in the program.
It is our opinion that this change would not severely affect the program for 3 main reasons:
(China) EB-5 demand is likely to stay high: Some leading economists are suggesting China may be in for a difficult economic period in the coming years. I will refrain from restating the analyses that lead to this conclusion, however, it is an important possibility. In the event that this forecast comes to pass, it is suggested that many in China will perhaps have an increased sense of urgency with regard to developing the opportunity for US citizenship while they can. Arguably tied to this point is the fact that many would also seek to make investments in other economies not facing similar difficulties. Even in the event that this forecast does not turn out to be accurate, the implication would be a continued rise in Chinese prosperity thereby continuing to increase the number of individuals who would be capable of making an EB-5 investment. Either way, in our opinion, we believe demand should remain high.
Bigger impact of EB-5 marketing dollars: EB-5 regional centers and/or project owners will have to recruit fewer investors in order to raise the same amount of money if the minimum is higher. Less time spent overseas marketing projects and a quicker path to getting money in the door speaks for itself.
Easier to meet job creation requirements: With EB-5 regional centers and/or project owners able to raise more dollars per investor, the ultimate requirement for job creation will be reduced. This means that regional centers will either have to create fewer jobs for the same amount of capital or in other cases they will be able to raise more capital for their projects because their project’s job creation capabilities will give them access to more capital from the same number of investors.
Ultimately, if this change comes to pass it is our opinion at Strategic Element that it will be a good thing for the EB-5 program and therefore a good thing for America.
Phil Cohen is the founder and President of Strategic Element, a company that focuses on developing regional centers, EB-5 business plans, economic impact reports, feasibility studies and custom 'direct' EB-5 projects for its clients (www.strategicelementconsulting.com).