What do the new EB5 regulations mean after Nov 21 2019

Most people interested in EB5, know by now that the Investment amounts have gone up from $500,000 for a TEA project to $900,000 ($1 million to $1.8 Million for non TEA). Another major rule change that hasn’t quite gotten the same coverage is the new rules requiring DHS to assign the TEA regions, as opposed to the current method of allowing states the benefit to define TEAs.

Unlike the earlier method of Regional centers gerrymandering multiple TEA areas to their project and getting TEA status rubber stamped at the State level, the change in TEA criteria* has much deeper implications for future investors and current alike. As quite a few of the projects which are in major cities currently with TEA status will not be eligible for TEA status after Nov 21.  Rural areas are the big winners as per the new TEA criteria. This was infact the original intention of the EB5 program – helping backward areas get investment dollars.

Investments into projects that lose their TEA status after Nov 21, have to be made at $1.8 million, not the $900,000 level. This is a huge concern for the viability of an EB5 projects fund raise. For eg., lets say a project currently open for new investors has 40 slots, and if they manage to get 20 investors for $500,000 before the Nov 21st deadline, The remaining 20 investors need to invest a minimum of $1.8 Million as the project doesn’t comply with the new TEA guidelines after Nov 21. This can lead the project not to hit it’s fund raising target jeopardizing the investments of the previous 20 investors also, if the project is not fully capitalized.

We are currently only working with Projects that satisfy the new TEA criteria, have atleast 50% developer equity and are exemplar approved. If you are looking for an EB5 project, get in touch with us below.

*Note that the definition of TEA has been severely limited by the new regulations. Not only is the DHS the determiner of TEA, any project within a Metropolitan Statistical Area- MSA (more than 50% of the country is in an MSA) is automatically a non-TEA. So for probably 90% of the projects currently out there, the investment will be $1.8MM on Nov 21. A TEA can only be designated for a high-unemployment MSA, county, city, single census tract, or limited group of census tracts. DHS, not the states, is responsible for TEA designation.

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