EB5 Investors Magazine Volume 2 Issue 1 | Page 11

Evolving Escrow by Christian Triantaphyllis and Catharine Yen Navigating Delayed USCIS Processing Times A regional center’s escrow account is a key component of the EB-5 process. While an escrow account is not a legal EB-5 requirement, most investors prefer to submit their investment into an escrow account, as this assures that their funds will be released into the EB-5 project upon I-526 petition approval, or refunded upon I-526 petition denial. When sitting in the escrow account, the EB-5 capital is temporarily pooled together with other EB-5 investors’ funds, and upon fulfillment of the escrow conditions, the capital contribution released is assigned to the individual investor whose I-526 petition triggered the release of the escrowed funds. Traditionally, escrow accounts were structured such that funds would be released upon the approval of an investor’s I-526 petition; however, long USCIS processing times have pushed regional center principals to pursue other models that balance their need for funds with investor uncertainty about immigration outcomes. The evolving escrow landscape In the EB-5 world, the concept of the “full escrow”—an arrangement whereby the EB-5 investor’s funds are released from the escrow account and deposited into the project upon the investor’s I-526 petition approval by USCIS—was the norm until recently. However, due to prolonged processing times for I-526 petitions, the regional center escrow account arrangement has undergone significant modifications to allow EB-5 projects to receive essential funding in a timely manner. This prevents them from being starved for capital while petitions remain under adjudication with USCIS, which in many cases have dragged on as long as 12-18 months. As a result, gone are the days of full escrow arrangements as the primary option. Instead, regional center escrow agreements now often contain an assortment of legal mechanisms that permit a quicker release of EB-5 funds into the regional center’s project. The evolving landscape of the release of escrowed funds—in particular the migration away from escrow arrangements conditioning the release of funds only upon I-526 petition approval and toward escrow arrangements containing more complex, aggressive release of funds mechanisms—is a reflection of the attempt to keep up with real-world business demands. However, the increased number of triggers for escrow fund release underscores the tension between EB-5 investors’ preference for conservative escrow arrangements that provide more certainty, and the project developer’s desire to access capital as soon as possible under terms that allow for more aggressive or pragmatic release of funds in order to move the project forward. w w w. E B 5 I n v e s to r s . c o m Continued on page 10 9