O P I N I O N
The Pros and Cons
of Retrogression
by Phil Cohen
On April 13, Charles Oppenheim, chief of the
immigrant visa control and report division of
the U.S. Department of State, announced that
as of May 1, 2015, the EB-5 visa category would
be unavailable for foreign nationals born in
mainland China. Oppenheim also announced a
cut-off date of May 1, 2013, meaning that when
visa numbers again become available, only
investors whose I-526 petitions were filed before
May 1, 2013 will be able to continue processing
their immigrant visa applications or applications
for adjustment of status. All other applicants
will be placed in a queue based on the filing date
of their I-526 petitions and will be allowed to
process as visa numbers become available. The
backlog of visa applications is anticipated to
increase and, according to some estimations by
industry experts, the backlog may be as long as
two or three years by the end of FY 2016. While
this is certainly not ideal for the EB-5 program,
there are several pros and cons to consider as
resulting impacts of retrogression.
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A Rush to EB-5
The onset of a quota backlog probably does not mean
that Chinese investors will lose interest in EB-5 any time
soon; in fact, likely the opposite. One need only look at
what happened in Canada, where the Canadian Federal
Investor program backlog eventually grew to nearly
60,000 applicants who were willing to wait up to an estimated seven years to get processed (based on average
processing throughput). The Canadian government recently closed the program and those who were waiting to
‘get in’ lost their opportunity to participate in the program, which may well trigger a fear among Chinese
investors of something similar happening in EB5. Chinese investors are likely more aware of this
than project owners, as Canada is and has been
a popular choice for Chinese investment-based
immigration for many years. With the announcement of the
cut-off date, quota backlog and possible future retrogression,
any investor paying attention will start to feel some pressure
to make a move sooner rather than later so as to get a spot in
the queue before the cut-off date retrogresses or the backlog
increases further. This may lead to a short-term rush of investor
petition filings rather than an immediate reduction in demand.
A Forced Geographical Expansion
of the Program
Although China was the source of over 85 percent of EB-5
investors in 2014 (source: IIUSA), project sponsors should
concentrate on developing new markets for investors. For
the reasons stated above, Chinese demand is not expected to
immediately abate; however, it is possible, and even likely, that
there will be a cooling of investor demand for EB-5 in China in
the medium or long term. EB-5 stakeholders who expect to be
involved with the program for the foreseeable future would be
wise to focus their efforts on expanding their marketing horizons. Indeed, many regional centers and project marketers are
already starting to expand their marketing reach to countries
in South America, the Middle East and India, to name a few.
Ultimately this expansion will serve the program well, as early
movers will be hard at work making the market and creating
the infrastructure for recruiting investors in these and other
countries. In general, diversification in the investor base is good
for the EB-5 industry and can help limit negative impacts in
the Chinese market.
Continued on page 80
EB5 INVESTORS MAGAZINE