By Marta Lillo
Helping EB-5 stakeholders make informed decisions from the investor and developer front is the key driver behind attorneys Rakesh Patel and Shae Armstrong’s legal services.
Immigration attorney Patel is the founding and managing partner of Patel Law Group. In his eight years representing EB-5 investors in the U.S. and worldwide, he has witnessed the evolution of the immigration industry and the improvements to the EB-5 investor visa program.
Meanwhile, Armstrong’s practice focuses on project finance with an emphasis on EB-5 financings for developers, having represented sponsors in over $5 billion in EB-5-involved projects.
A crucial aspect of their services is for their clients to understand who does what and when; from third-party promoters, including migration agents, to investment funds and regional centers.
Putting EB-5 investors’ interests first
From the immigration counsel side, Patel says, the relationship between the EB-5 investor’s attorney and the migration agent must be advantageous for everybody. “It’s extremely important that the agent and the attorneys have a good working relationship and understand the processes of each other’s work.”
He adds that this understanding includes understanding the agent’s goals for the clients and making sure that regulations are followed. The new EB-5 regulatory framework since the EB-5 Reform and Integrity Act of 2022 (RIA) has improved these associations. “I think the process is actually a little bit better, leaner, and easier to communicate because I think the regulations are a little bit more straightforward than they’ve been in the past. So, I’m confident in the relationships between agents and immigration attorneys as we move forward,” Patel says.
The EB-5 attorney explains investors from overseas and in the U.S. are now more cautious and savvier when it comes to hiring the services of agents. “We’re seeing a lot more investors with the laws and the regulations, and concurrent filing. We’re seeing a lot more investors within the U.S., and there’s just more education and more information available.”
As to referring agents to clients, Patel is adamant previous EB-5 experience and reputation are key. “Attorneys are very hesitant in referring to groups they’ve never met, heard of, or talked to, and they just all of a sudden came around in 2023 and have no experience in EB-5,” he says. “We want to protect the investor and make sure that they’re investing in a project that will deliver as proposed. And that would mean that they’re working with an agent that has the right connections with the proper regional centers and or developers,” he adds.
Structuring EB-5 funds and projects for developers
For Armstrong, the same thing applies when dealing with third parties like capital raisers and fund and investment companies when representing developers.
Lately, Armstrong says, this relationship has been facing specific challenges, which include an increase in exclusivity requirements and higher upfront marketing fees requested by overseas EB-5 investment finders, “which raises concerns about risk for developers,” he explains.
“There are legitimate [administrative] costs involved,” he clarifies. “But my concern is, like we saw under the previous regulations for EB-5 ten years ago, is that you have non-proven raisers that haven’t raised significant amounts of EB-5 asking for upfront marketing fees that essentially for the developer clients won’t result in any EV.”
Armstrong emphasizes the importance of underwriting and reviewing third-party finders, suggesting that EB-5 developers ask for referrals, history, and details about their involvement in past projects to reduce risk. “If there are no details indicating, no evidence indicating that these third-party finders have ever raised a dime in EB-5, of course you don’t want to go pay them a significant upfront marketing fee,” the lawyer cautions.
He insists that proven EB-5 capital raisers are willing to offer referrals from prior projects they have worked on. “It’s investigating the principles behind the entity, asking for referral sources and numbers to get a better idea.”
As EB-5 investors and developers increase their scrutiny, Armstrong expects the market to mature as it did over the last decade. Patel agrees and adds that this maturity will also apply to immigration attorneys.
“I think that you’re going to see a lot more defined and refined EB-5 as we move forward in 2024,” he concludes.
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