AILA Florida Conference: the 2016 EB-5 Takeaway

Well, for the very first time, I spent my two days at the annual South Florida AILA conference sitting in a booth instead on the panel or in the audience.  American Venture Solutions Regional Center, the EB-5 regional center I formed, own and operate and which exclusively structures EB-5 projects backed and operated by the same Forbes 400 folks with which I’ve worked for almost two decades, FINALLY decided to host a booth at an AILA event, and we had a GREAT time speaking with old and new AILA friends.  (Check out the picture of AVSRC Manager Bianca Saltz, MBA and Laura Callava,  LatourLaw Associate Attorney at our new booth).

The three of us were busy explaining our current project, Lake Point Logistics (a Florida logistics/trucking company supporting the South Florida mining sector) and I didn’t attend the sessions, but did manage to catch most of the hour-long session on the future of EB-5.

Led by my old friend Tammy Fox-Isicoff (one of sharpest, most passionate immigration advocates I’ve ever met) and the venerable Ron Klasko (one of the deans of the EB-5 bar and the most respected EB-5 compliance practitioner in the country), the session was informative, provocative, and, as is usual when they are on a panel together, dynamic and entertaining.  As I’ve written so many times before, I am sooooo over the rampant, baseless speculation bombarding the Web via the well-intentioned blogs of a million EB-5 attorneys, developers, and observers.  Despite the reality that we honestly don’t know IF or WHEN or HOW the EB-5 will be amended, Tammy and Ron and the other panel members delivered an informative session which gave new context to where the EB-5 industry is today…and where it will probably be going.  Here’s what I got out of their session:

• The panel’s consensus seems to mirror my own: no matter how messy things have gotten with EB-5, reform and continued improvement is likely because there is simply too much money at stake – both in terms of the favorable job-creating results of EB-5 as well as in terms of the megadevelopers fighting to keep low cost EB-5 capital available for their urban projects — for Congress to let the EB-5 program die.
• Between Big EB-5’s multi million dollar lobbying efforts in late 2015 which resulting in Congress “kicking the can down the sidewalk” till the end of this fiscal year (that is, leaving the current EB-5 program untouched and extending it through Sept. 30, 2016) and the very proactive role federal agencies and Congress are taking so far this year, it is ENTIRELY possible that instead of the usual waiting until the law is about to expire, Congress could conceivably enact a NEW 2016 law even BEFORE Sept. 30th!
• TEA-tightening rules preventing the manipulation/linking of numerous census tracts so a developer can have their ritzy high rise property classified as a “targeted employment area” and thus allow $500,000 EB-5 investments are a given in any new bill (ergo, if an investor investing today wants to be 100% safe, he or she will ONLY consider EB-5 projects in RURAL areas, which will remain immune from these anticipated reforms.
• Despite the safety of RURAL TEA EB-5 projects, they believe – and I agree — that the push for “reserved for rural” spots will not happen.  (Despite the fact that my Regional Center has so far ONLY deployed projects which are indeed either rural or non-contrived TEA, I never thought the “rural only” idea was right.  The point is to change the rules to prevent TEA manipulation which permit megaprojects in thriving urban centers;  the truly DESERVING communities for which EB-5 was originally intended are both rural AND urban, and job creating in TRUE inner city TEAs is every bit as it is in the most rural and poor parts of Appalachia, IMHO.)
• From the nodding heads in the big room, it wasn’t just that panel who believes that the anticipated increase from $500K to $800K is all but a certainty.
• The panel seemed to agree with my position that the retroactive application of changes in the investment amount is extremely unlikely.  (Besides the injustice of retroactive application of changes to vested investors, there is the more practical consideration of the tremendous complexity USCIS would face in “recalculating” projects de novo.)

Although I can’t recall the panel specifically saying this, my impression was that they believe as I do that the troubling issue of “Tenant Occupancy” is not going away.  USCIS economists have correctly argued that while redeveloped projects certainly create an important number of NEW jobs within the context of EB-5 regulations, the current position taken by EB-5 developers that each position hired by tenants in a redeveloped business property is “new” is just silly.  It’s not like these folks were beamed down from the Enterprise, right?  But withmany EB-5 projects lacking alternative financing, anything less than 100% “Tenant Occupancy” job count will mean projects simply can’t raise enough EB-5 capital to deploy, leaving early investors in a bind.  I predict this will be one of the biggest EB-5 fights of the year, if not THE biggest.

As USCIS’ recent congressional testimony and the SEC’s announcement that the EB-5 visa is a priority for the agency in 2016 suggest,  it looks like the upcoming elections aren’t necessarily dulling the debate and slowing progress on EB-5 reform; the vibe in DC is “EB-5 is important but it is broken and it needs to be fixed”, so changes are very likely I think. [If you will be following EB-5 developments closely in 2016, be sure you subscribe to EB-5 business plan writer Suzanne Lazicki’s consistently brilliant blog (http://blog.lucidtext.com/).  I think it is the single best EB-5 resource online.]

In sum, I would say that I left the EB-5 session feeling somewhat reassured that EB-5 will not be “killed”.   I think that AVSEB5’s continued focus on conservative EB-5 projects in the boonies, creating real local economic impact and operated by the only Forbes 400 group involved with EB-5 is the way to go.  And I’ll definitely sleep better at night knowing that whatever reforms are coming down the pike, changes in TEA rules and Tenant Occupancy will have ZERO impact on our AVSEB5 investors.

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