First created in 1990, the EB-5 Visa Program remained largely dormant for many years, until it was discovered as a viable funding source for development projects when traditional sources dried up during the Great Recession. The program’s original goal was to stimulate the US economy by encouraging foreign investment in rural or economically disadvantaged areas. Under the EB-5 program, individual foreign investors who contribute a minimum of $500,000 (or $1 million in some areas) to projects that create a minimum number of jobs per dollar invested are qualified to apply for permanent residence in the US.
While the EB-5 program is a good, well-intentioned platform, many EB-5 investments in commercial real estate projects have been poorly underwritten and conceived, exposing foreign investors to potentially catastrophic losses. And, there have been many abuses of the program, which should come as no surprise because the EB-5 investors are primarily concerned about obtaining the immigration benefits, rather than carefully evaluating the investment risks. As a consequence, we are seeing an ever-increasing number of EB-5 projects experiencing financial and operating difficulties. Most EB-5 investors are ill-prepared to address the complex challenges they will face if and when their projects get into trouble.