Since we held our last EB-5 webinar, the world has been turned upside down. The global spread of COVID-19 has upended entire economies, and the EB-5 Program touches three areas which have been severely affected: employment, immigration and real estate development.
On Wednesday, August 12, JTC Americas, Formerly NES Financial, hosted an important EB-5 webinar, EB-5 Trends and Redeployment During COVID, with industry leaders about the current state of the industry, including the July 24th update on the USCIS EB-5 Policy Manual. A recording of the conversation can be found here.
Prior to the webinar, we spoke with our guest panelists, including Moderator Jeff Drinkwater, and asked them candid questions about the industry, including EB-5 redeployment. Read what Jason Orlosky, Head of Bridgeway Asset Management at Bridgeway Wealth Partner; Joseph Haggenmiller, President & COO at LCR Capital Partners, Ronald Fieldstone, Partner at Saul Ewing Arnstein & Lehr, and Rohit Kapuria, Counsel at Saul Ewing Arnstein & Lehr, had to say below.
How has COVID changed the EB-5 market for you?
Jeff Drinkwater: Our clients are having a more difficult time raising capital.
Ronnie Fieldstone and Rohit Kapuria: Because we are involved on so many levels with the EB-5 program (i.e. corporate securities counsel, immigration counsel, representing investors, representing borrowers, representing senior lenders, etc.), the effect has been diversified. Certainly, there has been a tremendous drop in new investor inquiries and related filings. However, given that USCIS continues to adjudicate petitions, we are busy with adjustment of status applications and I-829 applications. Separately, given the impact on the Covid-19 pandemic on the market, we have also been very busy preparing notices, on behalf of various NCEs, to their relevant investors as to project status, etc. To the extent the projects have been impacted, we have also been working on any loan workout/forbearance issues and even assisting with bringing in new capital to prop up failing projects. While we have quickly navigated the shelter in place rules, there does remain the restriction on traveling, meeting new clients and visiting with existing clients. Our EB-5 Issuer clients also face the same restriction. We are all in this together.
Joseph Haggenmiller: Paid and Unpaid channels are not operational; live meetings aren’t happening (important for LCR); digital is not making up for above; and general paralysis in decision-making.
Jason Orlosky: The impact of COVID-19, both the resulting quarantines and the slowdown in the growth of the U.S. Economy has had a large impact on our EB-5 Strategy in the marketplace. Our firm has designed a more liquid solution that enables NCEs and their investors to keep capital “at risk” and “engaged in commerce,” but does not require a long lock-up period or high levels of risk. As a result, we are having numerous conversations with NCEs and their investors who are interested in using our strategy as they navigate the COVID-19 Recession and find the next project to further deploy capital. Additionally, investors and NCEs are more interested in utilizing our strategy as they enter the Sustainment period of the application process due to the lower level of risk.
Where are you finding investors?
Jeff Drinkwater: Our clients are finding investors in India and South America.
Ronnie Fieldstone and Rohit Kapuria: Our legal practice has, fortunately, not been reliant on the China and Vietnamese markets. As such, the other markets, specifically India, East & Southern Africa and Latin America, have been jurisdictions we have had tremendous exposure to.
Joseph Haggenmiller: India, Latin America, Western Europe.
Jason Orlosky: As we are focused on redeployment only, we are primarily engaged with NCEs as a solution for further deployment during this challenging time.
Are you seeing any EB-5 redeployments?
Jeff Drinkwater: Yes, but mostly people are reinvesting in other projects that need capital that they have an ownership stake in.
Ronnie Fieldstone and Rohit Kapuria: Absolutely! This is a space we are extremely active in and given our experience on all parts of EB-5, we are uniquely placed to address redeployment needs. We have closed several redeployment loans over the last couple of years and are actively involved in a number of them at the moment. We have also dealt with issues related to seeking investor consent or dealing with litigation raised by investors who seek redemptions of their interests in NCEs. The latest quirk now is dealing with the effects of the July 24, 2020 update on the USCIS EB-5 Policy Manual. That has thrown an added layer of complexity in the re-structuring process.
Joseph Haggenmiller: A lot of redeployment ideas, but no transactions.
Jason Orlosky: Our conversations are focused exclusively on EB-5 redeployment, as our fund was designed to meet the investment of capital that needs to be redeployed prior to the completion of the EB-5 application process.
For additional information about JTC Americas’ EB-5 Administration Solution Suites, including Immigration Workflow and the Retrogression Report, please click here.