opportunities consistent with the terms of the NCEs’ operating / limited partnership agreements. Of course, it is crucial that NCEs work with securities and immigration attorneys to ensure that any actions related to redeployment of the EB-5 proceeds are in conformity with the terms of USCIS policy and the NCE’ s operating or limited partnership agreement. At minimum, being a fiduciary for the EB-5 funds, the NCE’ s manager or general partner should provide appropriate notice to the investors.
An easy way to think about this is knowing that the investors subscribed to the NCE based on representations made in the offering documents related to the initial project. Following repayment, the NCE cannot simply redeploy the funds into another asset class that the investors have no knowledge of, irrespective of whether such redeployment conforms with the Policy Manual.
Consent from a majority of investors may be required prior to the redeployment. There are a host of other related issues, such as the term of the new investment, the projected returns on such investment, the risks inherent in such investments, the viability and potential for loss of the investment, etc.
Without proper planning and consultation with the NCE’ s list of the aforementioned professionals, the NCE could turn the success of an initial project into a tremendous loss on the reinvestment flip. The general attitude that EB-5 investors only care about acquiring green cards does need to change. The capital contributions initially made by each investor is substantive and many investors have some level of dependence on receiving most, if not all, of the funds back following completion of the sustainment period.
INVESTMENT CONSIDERATIONS
Based on the guidelines discussed above, there are four considerations that NCEs should keep in mind when considering redeployment investment options.
The first is flexibility. It is important to maintain a level of flexibility with the investment decision. While some NCEs do not have any investors who are near the completion of their respective sustainment periods in the short term, others do. Consideration for flexibility comes into play when the NCE either has a mixed group of retrogressed and non-retrogressed investors, or if the NCEs investors will be completing their sustainment periods in the short term. In such situations, the NCE should consider redeployment options that permit easy liquidation.
The second is diversification. Investments under the EB-5 program tend to offer investors few, if any, choices of investment diversity. Given that the redeployment guidance allows for redeployed investments into“ one or more similar” loans or entities, NCEs arguably could provide investors with more risk mitigation by considering redeployment of EB-5 capital into more than one redeployment opportunity. If the requisite number of jobs has already been created by the initial project, capital preservation will likely become the top priority for investors.
The third is risk mitigation. Beyond investment diversification, NCEs will want to mitigate risk as much as possible for their investors. Therefore, the higher the degree of allowable risk
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