One of the top questions in the mind of every prospective EB-5 investor is “How long does it take to get my money out of the EB-5 investment?” To answer that question, we have to examine that question from three primary perspectives: 1) immigration legal requirements for how long the investment must be maintained; 2) contractual legal restrictions; and 3) market, economic obstacles to cashing out of the investment.
USCIS requires that the $500,000 of investment funds and the program fee charged by the regional center be paid either into escrow, pending the approval or denial of the I-526 petition, or paid directly into the EB-5 enterprise before the I-526 petition can be filed. Therefore, the funds must be held in escrow or in the EB-5 project the entire time that the I-526 petition is pending, which can range from one month to one year. From recent experience in 2012 and 2013, the processing times have gone up from 4-6 months to 10-12 months. Once the I-526 petition is approved, USCIS requires that the investment be maintained until USCIS approves the I-829 petition to remove conditions from the conditional permanent residence. This means that we need to add another 3-6 months (sometimes longer) for consular processing of an immigrant visa or adjustment of status in the U.S. in order to begin the two-year period of conditional permanent residence. Then, in the final 90 days of the two-year period, the EB-5 investor must file the I-829 petition to remove conditions from the conditional permanent residence. It typically takes anywhere from 2 months to 10+ months for USCIS to decide the I-829 petition. So, if we figure the processing times on the longer end, with 10 months for the I-526 petition, 6 months for the consular processing, 2 years of conditional permanent residence, and 6 months for the I-829 petition, then we have 46 months, which is just 2 months short of 4 years. I generally tell clients to figure on 3.5 to 4 years to go through the EB-5 immigration process from start to finish, which is how long the client’s funds must be tied up due to immigration legal requirements.
In addition to the immigration legal requirements, the investment funds are tied up due to contractual obligations and sometimes also market forces. EB-5 investments can typically be categorized as loan-based or equity-based. “Loan-based” means that the EB-5 investor invests the $500,000 into an entity such as a limited partnership or a limited liability company, and that entity loans the funds out to a project developer that spends the money on carrying out a project that has the effect of creating jobs. The EB-5 investors own the lending entity, but they have no ownership interest in the project business (viewed by USCIS as the Job Creating Enterprise), although the lending entity might have a security interest in an asset, typically real estate, owned by the project business. “Equity-based” means that the entity, in which the EB-5 investor invests, actually owns the project business, or the commercial building where the project business (Job Creating Enterprise) operates.
In loan-based projects, the investment funds are tied up for the duration of the loan’s term, which determines the deadline for the borrower to repay the loan. Loan-based EB-5 projects typically involve loans with terms ranging from 4 to 6 years. Understandably, the loan term begins to count down only once the funds are loaned out. When the funds are loaned out depends on whether the regional center holds the funds in escrow pending approval of the I-526 petition or the investment funds go straight into the investment and are loaned immediately to the project developer/borrower. In the case of the funds being held in escrow, the loan term does not begin to count down until the funds can be removed from escrow, which typically follows the approval of the I-526 petition. If there is no escrow, then the funds would most likely be loaned out immediately, and so the loan term would begin to count down immediately. The bottom line is that with escrow the EB-5 investor’s funds will be tied up for the processing time of the I-526 petition plus the loan term, or, without escrow, the EB-5 investor’s funds will generally be loaned out sooner and so the loan term will be begin counting down sooner without regard to the processing time for the I-526 petition.
With an equity-based project, the EB-5 investor typically owns a share in an entity that owns a large commercial property or owns a functioning business with production equipment and possibly business premises. Where a commercial property is involved, it is typically necessary for the property to be sold in order for the investors to cash out, and so the time frame for selling the commercial property will be open-ended. Alternatively, with production facilities and equipment, the EB-5 investors’ shares might be subject to transfer restrictions for a minimum holding period during which the shares cannot be sold. In addition, once the transfer restriction period passes, the investors will still have to wait whatever time it takes in order to find a buyer for individual shares or for the business in its entirety.
The time frame for cashing out the EB-5 investment depends on the time period for completing the EB-5 immigration process, the time restrictions imposed on the investor by contract, and, in the case of equity-based investments, the time that it takes to sell the property or business. In general, the shortest possible time frame for cashing out from the investment would be after 3.5 to 4 years, which is the time frame for completing the EB-5 immigration process. Loan-based projects, provided that the loans are repaid on time, have the greatest potential for repayment in the shortest period of time, since they offer a specific repayment date, typically after a loan term ranging from 4 to 6 years. Equity-based programs typically have open-ended time frames for cashing out, and so they should be entered into only by those investors who are able and willing to make a longer-term investment.