While the Regional Center program has lapsed and the Modernization Rule deemed invalid, both changes aren’t expected to last for long. While they do, what’s the smart move?

In Part I of our “Ask the Experts” series on June 2021’s tumultuous EB-5 changes, we asked Jill Jones and Rohit Kapuria about how issuers should respond to the District Court Ruling that invalidated the EB-5 Modernization Rule, thereby lowering the minimum investment for projects in Targeted Employment Areas to $500,000 and reverting to a previous definition of a TEA, as well as the news that the Regional Center program was not renewed. Both provided solid insights for those seeking clarity on what these immediate changes mean.

But what about a few months down the road? It’s expected that both these changes, while major, will be temporary. What will happen once the government takes action on them, and how will changes to one affect the other? To get some guidance, we spoke to Ron Klasko. H. Ronald Klasko (Ron) is widely recognized by businesses, universities, hospitals, scholars, investors and other lawyers as one of the country’s leading immigration lawyers. A founding member of Klasko Immigration Law Partners, LLP and its Managing Partner, he has practiced immigration law exclusively over three decades.

First of all, he says, don’t give up on the Regional Center program. “Everyone expects the program will be extended. No one knows when that will happen. However, many believe the lapse could last two to three months.”

As we discussed before, there are still options for direct investment during that time, but for Klasko, the real opportunity might come when reauthorization is coupled with the lower investment minimums currently in place after the court ruling.

“The Regional Center program will likely be extended,” he says, and “the investment amount will likely be increased, whether by statute, regulation, or court order. The big issue is: which comes first? If the extension predates the increase in investment amount, there will be a window – perhaps small – for investors to invest in Regional Center projects at the $500,000 level. If the investment amount increases first, there will be no such window.”

There’s no way to tell as of yet which will occur first, but Klasko thinks issuers need to be ready in case they get lucky.

“In order to take advantage of a potentially small window,” he says, “which could result in an unprecedented deluge of investors, issuers have to be ready with revised offering documents that take into account the reduced investment amount and that reference the possibility that the investment amount may increase,” along with the added complication that “there may be investors investing at different levels.

“Also,” he adds, “a greater amount of investors for the same amount of total EB-5 capital will result in an increase in the necessary jobs. This must be reflected in the business plan and the economic report.”

Taking care of the jobs requirement is a high priority, but so is getting investors on board a project in the first place. Investors will want to take advantage of the lower minimums, and issuers need to be ready to attract them while they can.

“Issuers/Regional Centers need to have enhanced marketing networks in place in order to capitalize on a potentially very short time to attract investors,” says Klasko.

Beyond that, this time can be used to prepare for the future. While we don’t know when the RC program will be renewed, for how long, or under what rules, it’s good to be prepared.

“A lapse in the program, and likely legislation on the horizon that would specifically increase compliance responsibilities, dictate that issuers should use the opportunity to revisit and enhance their compliance systems.”

Working with the right partners who can help you stay on top of reporting and compliance responsibilities will ensure you can deliver results for however many investors you’re able to attract when the time is right. That’s why JTC Americas prides itself on its ability to offer transparency and efficiency in reporting.

While the lapsing of the Regional Center program does present difficulties, anyone with a belief in the future of EB-5 should view this time with optimism, says Klasko.

“This is a time of unprecedented challenges and possibly unprecedented opportunities for EB-5 issuers. It is an excellent time to prepare for the next era of EB-5.”

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