Redeem My Investment--Exit Strategy
NYCMRC has indicated a clear and concrete exit strategy and fixed term for the return of your investing capital and profits.
Generally speaking, once the “conditions” of the Green Card have been removed for the alien investors; the investment can be liquidated, sold or refinanced. Recently, the USCIS has decreed that EB-5 related investments must be held for no less than five years. Specifically, the exit term for investment is a 3-5 years horizon after the investors get the conditions removed in NYCMRC program.
Hold the investment
To remove the “conditions” from the green card, the investment must be held effectively for approximately additional 2 years and 3 months. After 1 year and 9 months of admission as a conditional permanent resident, the alien investor must submit a completed Form I-829 (Petition by Entrepreneur to Remove Conditions) to USCIS within 90 days before the second anniversary of admission with supporting materials. The admission is the date of approval of I-485 or of admission into US territory.
According to the latest data from USCIS, the current process time for removing conditions (Form I-829) is approximately 6 months.
However, the EB-5 Program regulations and recent USCIS decisions require that alien investors’ investment be “at risk” for at least five years. No redemption or liquidation shall be made within 5 years after alien investor’s investment has been “at risk”.
For NYCMRC program, after all of its investors have received permanent resident status and have had their conditions removed, and after all of the securities law, immigration law, corporate law, and tax law have been complied with, NYCMRC may start to liquidate the underlying partnership and the partnership interest or permit redeeming part or all of the investment.
The exact strategy used to exit investment will be determined based on best risk-adjusted strategy for both regional center program and alien investors. Usually the exit options are resale of investment share or the project property. The NYCMRC EB 5 regional center is set up to acquire, improve, or provide funding to the real estate in the development projects that can be profitably liquidated, sold or refinanced to other investors and developers or a real estate investment trust, or other public/private property investment vehicle. NYCMRC can have the property and share sold all over the world or into the US market through agents.
There are some but not limited to the following exit strategies available for the regional center to provide investment liquidity:
- Outright sale of the property to another public or private investor;
- Non-recourse leveraged refinancing of the property and distribution to investors of the excess proceeds as “return of capital;”
- Sale of the Fund’s interest to a third party investor, including another managed fund, or co-investor or co-developer;
- Tax-free exchange or swap;
- Exchange with an “UPREIT” (tax-free) for listed shares in a real estate investment trust or similar public property investment vehicle;
Having each exit request fulfilled, the exit term may take approximately 3-5 years. That is because the NYCMRC is incentivized to sell the properties but only after all its immigrant investors have had Conditions removed.
In short, the investors will receive the redemption of their initial investment plus the capital gain or minus the capital loss after total of approximately 5-7 years investing in NYCMRC projects.