CRE Industry Preps for New EB-5 Regulations

The U.S. government's modernization of the immigrant investor program goes into effect tomorrow with new rules—most notably, an 80 percent increase in the investment minimum.
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The U.S. government’s modernization of the EB-5 (employment-based, fifth preference) Immigrant Investor Program goes into effect tomorrow, Nov. 21, sparking a change for the commercial real estate industry. The new regulations, determined by the Department of Homeland Security, will raise the minimum required monetary commitment for foreign investors, marking the first increase in the figure since the EB-5 program’s establishment in 1990.


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The new minimums have been adjusted for years of inflation. The minimum investment in assets in a targeted employment area will increase by 80 percent, from $500,000 to 900,000, and the standard minimum investment will rise by the same percentage, going from $1 million to $1.8 million.

“The biggest impact will be felt by the EB-5 investors who now need to invest almost double than before,” Alejandro Navia, managing director with hotel investment company Driftwood Acquisitions & Development told Commercial Property Executive. “In general, the changes will see investors wanting to secure bigger returns in exchange for greater investments they will be making. To secure this, they may want to take a preferred equity position to secure those returns.”

Driftwood has made this model available in its EB-5 offerings for three years.

Foreign investors can expect to see the minimum investment amount go on the upswing again—and again. The new regulations call for the minimum to increase automatically every five years to account for inflation. In its final rule on the EB-5 program on July 24, 2019, the DHS wrote that given that uncertainty and perceived risk affect investment decisions, the automatic adjustment provides predictability and consistency to stakeholders so they can tailor business plans accordingly, without needing to wait for DHS’ determination.

Consequences: To Be Determined

The new EB-5 regulations also call for a change pertaining to TEAs. The DHS, through the U.S. Citizenship and Immigration Services, will designate TEAs, taking over the responsibility of identifying these geographic areas from the individual states. In a prepared statement, Nicholas A. Mastroianni, president of U.S. Immigration Fund, an official EB-5 Regional Center, said that it is important for investors to understand that the projects they are used to seeing qualify for TEA investments and the lower investment threshold will most likely not qualify under these new regulations.

It’s unclear just how soon the effects of the new EB-5 regulations will be seen in the commercial real estate market; however, many industry experts aren’t expecting a watershed event.

“The changes to the EB-5 program should have a negligible impact on the overall commercial real estate market given that this source of funding is such a small percentage of the total capital that’s available to developers today,” said Michael Bellisario, senior research analyst with financial services company Baird.