Renowned U.S. immigration attorney Ronald Klasko recently published two consecutive articles summarizing his trip to China in March. For this top-tier immigration attorney, what were his takeaways? What are his assessments for the future? Worldway's U.S. immigration experts have summarized some of his insights.
Attorney Klasko's summary: 2015 is a turbulent year; as long as the visa queue does not take too long, the Chinese EB-5 market remains healthy.
•The biggest issue in 2015 is the exhaustion of the visa quota. Views among agencies vary; some are more conservative and have decided to wait and see, while others are actively encouraging their clients to make quick decisions to secure their place in the queue as early as possible.
•There are several aspects to the impact on children: for families with children around the age of 18, some will quickly decide on an investment project, while others will consider gifting the funds to their children, allowing the children to become the investors. Furthermore, some will make two investments—one by the parents and one by the children.
•It is highly likely that the Regional Center Program will continue to be effective in 2015. Agencies do not need to worry too much.
•There is a rumor circulating in the Chinese market that the investment amount will increase from $500,000 to $800,000. Many agencies are not worried, as they believe that even if the cost increases, investors with the intent to immigrate will still invest.
•I discussed the impact of the 10-year B1/B2 U.S. visitor visa on EB-5 with agencies. Some agencies believe that even if there is an impact on EB-5, particularly in the second half of 2014, in the long run, it will not have a significant effect on EB-5.
•Two expected pieces of bad news in 2015 are: 1) Large regional centers and immigration attorneys are being investigated by the SEC; 2) The U.S. Government Accountability Office is set to release an investigative report on EB-5. It is difficult to judge the impact now, but it feels like a series of negative news could be unfavorable for investors.
•The EB-5 market has benefited from the closure of the Canadian immigrant investor program.
•The real estate market in China's first-tier cities has experienced a downturn, and the impact on investors is hard to determine.
•Regarding China's anti-corruption campaign, feedback from agencies currently suggests it has little impact on EB-5 investments.
Attorney Klasko also presented his judgments and expectations for the coming year:
1. Project Industry: Hotel projects remain the mainstream, but projects in healthcare-related industries (such as hospitals, senior living centers, etc.), residential and multi-family housing, infrastructure projects, or other government-funded or government-supported projects are also very popular.
2. Fund Escrow: Traditional fund escrow is no longer suitable for the 14-month government approval process. Now, more projects choose to release funds upon the filing of the I-526, or at least release a portion, with the remainder released once the I-526 is approved and/or the exemplar is approved. It is important that reputable developers promise to refund investors if the I-526 is denied.
3. Geographic Location: Manhattan has become even more sought after! Los Angeles and San Francisco rank second, and Seattle is also very popular. The next tier includes Las Vegas, Florida (mainly Miami and Orlando), Houston, and Dallas. Chicago still lags slightly behind. However, agencies agree that a solid project from a strong developer always outweighs everything else.
4. Chinese Developers: Many Chinese developers have begun entering the EB-5 market. Chinese investors have mixed reactions to this; some prefer projects by Chinese developers, while others prefer projects by U.S. developers.
5. Project Management Fees: As other costs rise, these are rising too. The market currently sees fees of $45,000, $50,000, and some have risen to $55,000 to $60,000. It is currently unknown whether this price increase will face resistance or become the new norm.
6. Timing of EB-5: Many agency friends say they prefer to invest after construction projects have broken ground, as such projects are safer. This statement actually leads to another point: this project will proceed regardless of whether there is EB-5 funding or not.
7. Private Equity: In addition to EB-5 investments, agencies and EB-5 investors are increasingly interested in considering private equity investments.
8. Multiple EB-5 Projects: To cope with visa retrogression, some investors are investing in multiple EB-5 projects simultaneously to ensure their children do not age out.
9. Return of Capital: The Chinese market has mixed views on the return of capital. Some believe this is very important and will affect the future of the EB-5 program, while others believe that if capital is not returned, it will not have a significant impact on EB-5. Everyone agrees that the most critical point is for investors to successfully obtain their permanent green cards.
10. Famous Regional Centers: Some agencies mentioned that the promotion of certain famous regional centers in China has regressed; it is currently unknown if this is related to SEC investigations or other reasons.
11. Taxation: Chinese agencies and investors now attach great importance to U.S. tax issues. The current trend is for the wife and children to immigrate, while the husband uses a multiple-entry visa to travel in and out of the U.S. However, some investors' B-1/B-2 visas may be affected by their family members having already obtained U.S. permanent residency.
Editor's Note: Attorney Ronald Klasko is an old friend of Worldway and has visited Worldway many times. He also serves as the attorney for Worldway clients for the 100% government-funded Pennsylvania Turnpike project, which is currently a hot seller.
