Author: Julia Yong-hee Park
The Pre-Approved EB-5 Project
Exemplar EB-5 projects are also known as “pre-approved” projects. When an investor makes the decision to invest in a Regional Center EB-5 project, she files an I-526 petition. If the Regional Center project is raising $20 million dollars in a TEA (and they are almost always in a TEA), 40 investors will each file an I-526 petition. The I-526 petition consists of two parts: one involving specific project information and the other part pertaining to the individual investor’s source of funds (SOF). This means that the 40 petitions have identical project information. As nobody really knows the inner workings of the USCIS, we can’t be sure, but today it seems like the same adjudicator (or team of adjudicators) review a single project. A few years ago, however, when the EB-5 program started growing at a very rapid rate, it wasn’t unusual for two investors investing in the same project to receive different RFEs (Request of Evidence) asking for different things on the identical project information. To alleviate this confusion, the AILA EB-5 Committee started to push for an “exemplar” procedure in 2008.
An “exemplar I-526” is filed by the Regional Center on Form I-924 which is the same form that you file an initial Regional Center application. In short, you are filing a “sample I-526” petition where the investor’s SOF information is left out, but all the project information would be put in as if the project were going ahead tomorrow. Once the USCIS approves the exemplar petition, the project is deemed “pre-approved” by the USCIS.
Sounds pretty straightforward, doesn’t it? But if you’ve spent a bit of time in the EB-5 world, you should know by now that nothing is simple when it comes to EB-5 .
When the exemplar process was first introduced the USCIS agreed to only look at investor SOF for an exemplar approved project. While they first honored this, after a year or so maddeningly they didn’t keep their promise to not review the project portion of the I-526s. So Regional Centers who got their exemplar designation approved, would go out to market and tout that their project was “pre-approved”. Then individual investors would still get RFEs for the project information.
Then in 2012-2013 we did see some projects with exemplar approved status get a more expedited review. But recently, especially since the EB-5 team moved from California to Washington DC last year, it seems like the exemplars approved by the California team are being ignored by the Washington DC IPO team.
However, for all practical purposes, you will not see many exemplar approved projects (also called “I-924 approved” projects) out on the market today. This is because it takes approximately 1 year for an I-924 exemplar application to be approved. This means that either the Regional Center and Project Developer have to get a project ready to go (i.e. all the permits, other financing, etc.), file for the I-924 application and then wait around for the I-924 application to be approved – which realistically would not make sense as time is money in a real estate project.
Therefore in real life, projects that have exemplar I-924 approval on the market today will fall into either one of the two following categories:
1. Very large projects where the Regional Centers file for exemplar approval at the same time as they start marketing and because of its sheer size, there were still slots left for the investors to fill after the exemplar was approved. By doing this, Regional Centers are foregoing the marketing benefit of having an exemplar approved project to market (because by the time the approval is received, in the case of projects that aren’t super large, all the EB-5 slots would be sold out anyway) but it could help speed up the individual I-526 adjudications if the applications are still pending.
2. First projects for brand new Regional Centers. When someone files for a Regional Center, they can choose between filing for a Hypothetical Project and an Exemplar Project. Because getting an approval for your Regional Center takes a year or more anyway, it could make sense for a developer who is applying for a Regional Center designation to, if feasible, put in the application as an exemplar and get approved for an exemplar project at the same time the RC application is approved. That said, an exemplar approval received in this scenario might not be honored if the project has changed in a material way during the time they were waiting for approval because exemplar approvals are only honored when there are no material changes to the original application.
(To be continued…)