What is EB-5 Redeployment and How Does It Work?

Redeployment of EB-5 capital is one of the most important concerns for both existing and prospective EB-5 investors today. CanAm’s investor-focused EB-5 redeployment platform provides its investors the flexibility to select an EB-5 redeployment investment option to suit their specific needs depending on the duration of their respective redeployment periods, liquidity needs, desired capital returns, and risk tolerance.
 

Why is there a need to deploy EB-5 capital?

Investors whose countries of origin reach the annual EB-5 Visa country cap are subject to visa backlogs and face visa retrogression until visas become available either through a subsequent year’s visa allocation or if the US government passes regulations to add more visa numbers. However, USCIS still requires that visa backlogged investors keep their EB-5 investments “at risk” during the entire conditional permanent residence period until their Form I-829 petition can be filed, which can be many years after the original EB-5 investment has been repaid. The concept of redeployment has now been incorporated into the USCIS Policy Manual.

Who has to redeploy their EB-5 capital?

Any EB-5 investor who has not filed the Form I-829 petition but whose investment capital has been repaid by the original EB-5 investment must redeploy the repaid funds into another investment vehicle to satisfy USCIS’ EB-5 Program conditions.

Do I have to redeploy into another EB-5 project?

USCIS does not require repaid EB-5 capital to be redeployed into another EB-5 project. Investors are permitted to redeploy their capital into various investment vehicles within the scope of their original EB-5 investment.

Examples of CanAm’s EB-5 redeployment solutions:

As a leading regional center operator, CanAm Enterprises has developed an investor-focused EB-5 redeployment platform that prioritizes investors’ specific immigration and financial needs and objectives. CanAm recognizes that each investor has different goals in terms of the redeployment timeframe, expected returns, and risk tolerance – and ultimately, it should be the investor’s decision. CanAm requires that each investor vote for the redeployment investment option that they want. In fact, because it is likely that there are material differences between the original EB-5 investment and a redeployment investment, it is a best practice for any regional center operator to seek investor consent before any redeployment arrangement is made. And for those investors who decide that they no longer want their green card, CanAm offers such investors the opportunity to withdraw and receive a capital repayment.

  • Municipal bonds intended for infrastructure-related spending
  • Mezzanine loans to qualifying real estate developers
  • Longer-term preferred equity investments in real estate projects

Municipal Bonds

Municipal bonds are issued by local governments, territories, or their agencies. They are generally used to finance public projects, including schools, airports, roads, utilities, and other infrastructure-related repairs. Income generated by municipal bonds is usually exempt from federal taxes. Municipal bonds generally offer lower yields as compared to a traditional real estate investment; however, they also tend to entail less economic risk and are usually more liquid because they can be readily sold to investors on the secondary market.

Redeployment Timeframe:

Short-term

Liquidity of Investment:

High

Expected Returns:

Low

Mezzanine Loans to Qualifying Real Estate Developers

For investors who prefer higher returns, CanAm’s redeployment solutions offer the opportunity to invest in conservatively-structured mezzanine loans to qualifying real estate developers who seek additional short to mid-term funding on top of their senior loan and own equity. In a real estate development’s financing structure, a mezzanine loan is subordinate to the senior construction loan in order of payment priority; once the developer pays operating expenses and the senior debt payment, revenues must go to pay the fixed coupon of the mezzanine loan before preferred equity investors can receive any distributions.

Redeployment Timeframe:

3-5 years

Exit Strategy:

Repayment of loan

Expected Returns:

7-8% annually

Preferred Equity Real Estate Investments

The majority of PERE projects invest in commercial real estate – office, industrial, retail, multifamily, and specialized properties like hotels. Depending on the property type and investment strategy, PERE projects can generate internal rates of return of 8-20%; however, the attractive rate of return comes with inherent risk. PERE investments, in general, require a long-term capital commitment (5-7 years) with very little liquidity during the investment term. Investors must accept some degree of illiquid assets as a trade-off for higher projected returns.  Although there can be small cash distributions during the investment period once the project becomes operational, the investment principal plus most of the capital gain will be distributed to investors upon exit of the investment, typically through a sale or refinancing of the property. CanAm’s PERE offerings offer attractive risk-adjusted returns focused on geographies and assets where CanAm has informational, operational, and other competitive advantages.

Redeployment Timeframe:

5+ years

Liquidity of Investment:

Low

Expected Returns:

10%+ annually

The content on this webpage is intended for informational purposes only and does not provide investment or legal advice. Past performance is not indicative of future results.

Interested in learning about EB-5 capital redeployment in more detail? Contact us today.

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