Investing in the American Dream Podcast

Ep.8_ Bob Kraft Shares Positive Insight on the Decoupling of the EB-5 Program from the Omnibus

February 11, 2021 Investing in the American Dream Season 1 Episode 8
Investing in the American Dream Podcast
Ep.8_ Bob Kraft Shares Positive Insight on the Decoupling of the EB-5 Program from the Omnibus
Show Notes Transcript

EB-5 Program Decoupled from the Omnibus - Why this is an opportunity rather than a challenge as presented by Bob Kraft, IIUSA President, and FirstPathway Partners CEO.

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On this episode of investing in the American Dream podcast, we have II USA President and First pathway partners CEO Bob Kraft discussing the recent decoupling of the EB-5 regional center program from the omnibus with Emily Collins of first pathway partners. Let's get into it. Thank you for joining us today, Bob, we're excited to get your insight on the recent decoupling of the Eb-5 regional center program from Omnibus. And Bob, we understand your long standing involvement in the EB5 industry has made you a very trusted source for insight. So for our listeners who are not as familiar with the history of reauthorization, what does the process look like in the past? And how is this reauthorization different? Yeah, thank you very much, Emily. It's a pleasure to be here. Yeah, it's complicated. I mean, the, you know, the program, I think those have been involved with it. for any period of time, though, it was established as law in 1990. And then adjusted in 92. To It was called the regional center pilot program, which is basically what we're talking about today. The regional center program allows for a lower minimum amount, if it's in a qualifying TEA. Over the years, the program had been reauthorized many, many times, sometimes as long as five years, sometimes as long as two months. And the vehicle that it would write on typically was an omnibus spending package, which is the authorization for the federal government to spend, spend money, so Congress would meet on a regular basis, and then sometimes they would authorize the full fiscal year, which ends in September 30. Sometimes, because there were disagreements, they would have a extension for a couple months, and then reconvene and then another couple months, and then ultimately, they'd end up till the end of the fiscal year, and then start all over again, the EB5 program would many times be attached, like many other bills were to the omnibus spending bill. Because once they agree on spending levels, you know, it's easy to have that attached, and people want to see that get done. So we would kind of ride along. In this past session. We were decoupled. That's the word that's been used in Congress, because we have not been able to successfully implement integrity reform changes, which were driven by a couple of very powerful senators, and felt necessary to protect the investors to protect the regional centers, and to make the program better. And they decided this was Senator Grassley, Senator Leahy have been the big proponents of reforming the program, which they did partly through the regulatory changes that were implemented last November, which increased the minimum amount from 500 to 900,000. And also changed how TEAs were viewed. Those were major changes that both those offices felt strongly about, they were unsuccessful in getting them in a new reform bill attached to an omnibus. So without getting into too much of the ins and outs of Washington DC. They decided along with some of the other leaders in the Senate and in the house, that maybe the best thing to do would be to remove the EB5 program from the omnibus and create a basically a standalone bill which all members of Congress would have to argue and voice or objections and or support of the program in session and be on the record publicly. In the past, when the bill was attached to the omnibus, it only took one senator or one representative to block it in you really didn't know whether they're going to black at the last minute or not object to it. So you know, it made it easy to stop any substantial reform to the program. So Bob, would you say this decoupling is an opportunity for widespread support. So we're actually very, very optimistic and excited about the opportunity to get this thing finally passed. We've been going through this short term extension game for probably 10 years. So finally, we're in a place where we have an opportunity to kind of put that all to bed, improve the program, have a long term runway that everybody understands, and just be great for the industry. It'd be good for the investors. Thank you very much, Bob. So you You touched a little bit on the Grassley, Leahy bill, regarding that bill who is in support of that and who is not. And in addition, why is this bill EB5 best path forward? And what can stakeholders or the public do to help? Well, Senator Grassley, excuse me and Senator Leahy have been known very front and center on EB-5, and have been the leaders in initiating changes that would protect the investors and the industry. And it's really good for the regional center as long term as well. They have actually written a bill. IIUSA has reviewed that bill, we thought it was going to be attached to the omnibus, but it was separated. Because there are a couple other changes that needed to be made. And there were some some groups that felt maybe it was not in the best interest of the industry. But that was a handful of people versus a majority of the house in the Senate. So, you know, that's kind of been the battle, the program over its history has actually lapsed a couple times, but then be been reauthorized A few months later. And we hope that won't be the case now. But in terms of subject matter experts, that that rests clearly with Senator Leahy and Senator Grassley, the bill has been written, there's no one else that is writing the bill. Although in the past, there have been a number of efforts to write bills. But they are all over this, and have assured us and that's the IIUSA executive officers in our lobbying group that a bill will be introduced here shortly. They were awaiting the course until the election was over. cabinet members were appointed. And the executive orders that we expected to be issued would be issued, which is all very good for EB-5 long term. So we feel actually pretty good about where we are right now. Awesome thank you for breaking that down for us. Switching gears a little bit, in light of the beginning of the Biden administration. What would you say their thoughts are on reform? And would you expect any Judiciary Committee hearings? With respect to judiciary committee meetings, I would expect that's possible, but it's not necessary. The support for the program, you know, across the both houses is very, very, extremely strong. And obtaining the majority vote to support the program, assuming that everybody is in agreement that integrity reforms are required with chopping up against integrity reforms. So we're, we're pretty confident the bill provides for a five year reauthorization. It's it'll give us some stability in terms of the choppiness of the program in the past where we've been, you know, living with, in some cases, one month extensions. That's not good for the market. And it'd be nice to clean the program up once and for all have it on the table. I am pretty confident that this is going to get done. We've got a date of June 30, when the program would lapse if not reauthorized. Although I really don't anticipate that happening. I think we'll get there transitioning into the newly appointed Secretary of Homeland Security joining the by that administration, Alejandro Mayorkas, could you discuss his EB-5 program support and how hi past position as director of US IS positively impacts with ind stry? Yeah, it's a it's a really important question and it's one with a very positive answer to it. Mr. Marcus was director of USCIS is during a period when ca e processing was efficient as it s ever been under a y administration. Over the la t four years, we've seen a dr p off in terms of case processin, some some very troubling n consistencies with respect o adjudication of files. Duri g Mr. Marcus's term as USCI is Director, he took a very ac ive involvement in EB-5 he wa strongly supportive of th program. He liked it very much He was accessible. And so w were all in the EB5 in ustry. Very excited when he wa nominated to be a director of Homeland Security and a ca inet member. And we were ho eful that he would be co firmed He was with a strong majority, that's going to be very good for the program. He understands it intimately. He knows how important it is. There are two other things that have happened that are really encouraging for EB5, which I'd like to just spe d a quick minute on. Excuse me, the President signed an executive order that everybody's trying to understand right now is recently released, that addresses immigration. And within that there's reference to employment based immigration, and the need to provide more visas to we're not sure exactly whether they'll reach back into unused visas or not in the importance of the employment based category to help get the economy moving. The third thing that's very encouraging is there's been recent, just within the last few days, communication, press releases from the White House, stating the importance of driving the unemployment rate back down to where it was, at the end of 2019, before this pandemic hit, because they understand that's, that's very, very critically important in the employment based investment categories are going to play a big part in that. So we're pretty optimistic, there was also a reference to derivative treatment differently. And that's something that IIUSA h s been lobbying hard for, to r move the derivative piece as a c unt against the total visas a ailable. Along with that there h s also been discussion in the a ministration, that they may i crease the number of visas a ailable. So there are a lot of t ings to be seen that may or may not develop, but the dialogue, and the messages we're getting are very positive, and that would be huge for EB5. So we're pre ty confident that our pro ram, which is an economic dri er, in similar to the 200 2009, financial collapse, whi h EB5 helped get the country back going again, EB5 will b a big driver in recovery fr m this pandemic. Thank you, Bob. And more specifically, looking into the future. How do you see this industry proceeding? And how do you credit the consistent improvement we've seen from quarter to quarter four, after the regulations were introduced in both actually, before the 900,000, minimum, a number went into effect in November of last year, there was what you would expect a rush of people to get in at the $500,000 levels. So EB 5 is one of those programs th t people rightfully take a lo g time to consider. Make sure th y're with the right regional ce ter, make sure they un erstand the full impact of a de ision to move to the United St tes. You know, it takes a nu ber of years, our experience ha been people, people look at it for as long as five years be ore they finally make a de ision. So those people that ha been evaluating EB-5, and we're on the fence, if you will, understandably rushed to participate in the program at the lower level. And that cleaned out, you know, big number of people that have been considering EB5 as a viable opt on to come to the United Sta es. So there was regardless of hether a pandemic had hit or not yet two things you had peo le that had been looking at the program a long time, fin lly, you know, kind of dec ded to move forward quickly to eat that increased date. And so hat that took away from the pool of potential people considering the program, which you have to reload as an industry. And then you've got the $900,000. That's an increase that is significant, but it's also much lower than a lot of other country programs. But if you want to call it a sticker shock, or just an adjustment, mentally to now you've got to pay almost doubled to what you could have paid before. It takes people a while to think about that and get comfortable with it. Then we had the pandemic hit. So you had those two things that really affected negatively the program participation last year. And basically, there was no activity for the first three quarters of the year. But we began to see, in the end of the year, an uptick now It wasn't a real strong uptick, but it's coming back. And I think that that will continue and then once we get back to normal, hopefully sooner rather than later and people can travel You will see an increase in the program and I believe the market will adjust to the 900,000 over the next year, so in will still still see real strong interest in the program, United States is still a very desirable location. In spite of all the challenges we've had, I think, globally, we've still done as well, if not better than anybody inhaling the pandemic, and our healthcare systems have done a really good job of figuring out how to handle cases. And you can see that in the hospitalization rate. And then now with the vaccines that are available, they seem to be kind of getting their act together in terms of accelerating the number of Americans that are vaccinated, that'll help. So there are a lot of good things that are happening, and that'll impact in a positive way, EB-5, but we re definitely, you know, go ng through a rough patch he e, not just with EB-5, but just he economy in general. But we'll be back. Well, it's wonde ful to hear that positive insig t. To conclude here. I'd like o thank you, Bob, for being here with us today, and for s aring your knowledge. And would you like to add anything else n this topic? Yeah, I guess IIUSA has been the leader in th consistent leader in terms of support in both the House and the Senate. And we have very, very close relat onship with Senator Grass ey and Senator Lee's offic s, and they've been absol tely terrific. With us, there s a high level of trust. So we feel the changes that are going to be made, will be enhan ed with some of the execu ive orders that have recen ly come through and the persp ctive and objectives of the g vernment. So we feel real good about it. I USA has also just recently hired a public relations firm out of New York City to publish good strong articles in major metro areas around the country to help support the program in terms of its economic development to our communities across the United States. So I'm very proud to be involved with the organization. We have a very hard working group that represents the industry and we haven't stopped working through this whole pandemic. And the first pathway partners front. We just recently launched another project we feel very good about. We've continued to work and we continue to promote EB5 and first pat way partners and we've had gre t success since we started in 008. We're very proud of our tra k record. So we're looking for ard to a return to normal, wha ever that is here sooner rat er than later, and will con inue to do the right thing for our investors and for our com unities that we operate wit in. Well about thank you once again for breaking everything down for us. Your advice and projections have been very helpful. And thank you all for listening. Thank you. If you would like to know more about first pathway partners, and how they can help you with a direct EB5 investment or if you re looking for other visa opp rtunities such as an E2 visa, lease contact them direct y online at WWW.firstpathway.com