EB-5 Centers Reopen For Now, Bringing Back Key Capital Source

A preliminary injunction issued by the U.S. District Court of the Northern District of California allows existing EB-5 regional centers to operate, reopening an important channel for real estate capital, at least for now.

The injunction sets aside the deauthorization of the centers, which occurred as part of a reform of the EB-5 visa program earlier this year.

As part of the reform, U.S. Citizenship and Immigration Services required that all of the existing regional centers “redesignate,” but the precise steps the centers needed to take were unclear.

The upshot of the USCIS requirement was that regional centers could not function.

Regional centers facilitate visa applications for non-U.S. investors under the EB-5 visa program, which awards immigrant visas in return for investments that create a certain number of U.S. jobs in distressed places, particularly high-unemployment urban areas or blighted rural areas.

The program, which started in the early 1990s, is a popular source of capital for real estate projects.

Congress let the EB-5 program lapse in 2021, but revived it earlier this year via the passage of the Reform and Integrity Act, which President Joe Biden signed in March.

A number of lawsuits have been filed over the matter. The one that U.S. District Judge Vince Chhabria ruled on was by Behring Co., a real estate developer and the operator of Behring Regional Center.

The suit alleged that the USCIS wrongly interpreted the reform as deauthorizing the more than 600 previously authorized regional centers. 

"The agency thus announced that the existing regional centers were deauthorized, effectively cutting off their revenue streams. That was almost certainly legal error," Chhabria wrote in the injunction.