Starting A Private (or Public) REIT
I have recently partnered with two individuals with extensive experience in developing and managing high-end multi-family housing projects. (Over 20 years each) I have been asked to look into raising capital and thought a private REIT might be a good idea. We are looking to raise $50-$70 million. Their historic returns have been in the 18%-24% range. They are very conservative in their projects and their track record and is excellent. Any ideas on ways to go about raising the capital?
very interesting tax structure.
it's going to be a private placement memo or a (reg d?) SEC filing and appropriate bluesky law.
There are several topics discussing this concept in general, you're the 1st to pitch the REIT structure.
Would your REIT have debt or would these be 100% equity transactions? You're going to have to do a reg D filing or sell to only Qualified Investors. In the market you're talking about that means pension funds and they are a hard pitch. So a reg D is a requirement. That means a law firm that specializes in securities law. Last time I checked a Reg D filing was about $50K and that was about 10 years ago. I'm sure they are at least twice that now.
That said the law firms that do this sort of thing also have connections to brokerage houses, etc. to help raise the money.
sort of related.
has there every been any discussion on forming a reit or other structure that had a private placemnt memo, sec paperwork, etc. as a group to share the upfront costs??
To the original person who posted the question...
Why an REIT vs. just a private placement/partnership? Are you trying to accomplish something specific by being an REIT vs. other structures?
Lets assume your partners have a solid track record and have done all this before. Why not follow what has worked for them in the past? If they have done large deals before I would expect they already have the law firm relationships and know investors who buy into specific structures.
John
[addsig]
If you want to form a REIT just for the glory of having a REIT here are the basics. Alternatively as stated by others, you can put together a RED D 504 Private Placement Offering (Very inexpensive)
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A REIT must be formed in one of the 50 states or District of Columbia as an entity taxable for federal purposes as a corporation.
It must be governed by directors or trustees, and its shares must be transferable.
Beginning with its second taxable year, a REIT must meet two ownership tests:
1. it must have at least 100 different shareholders (the "100 Shareholder Test"
2. 5 or fewer individuals cannot own more than 50% of the value of the REIT's stock during the last half of its taxable year (the "5/50 Test"
I know this a 4 year old post, I want to do a private REIT model. Can it be done under an LLC, and does it just take PPM, are the subscriptions and operating agreements different.
What forms do I need to give to the investors.
Thanks
What I meant was the end buyer ( the investment co.) is trying to get a 75% hard money lending, they just have 10% to come to the table and I will attached a second mortgage on the property for the 15%. This is the scary part, the 15%. I assume when someone get a hard money lender they will put a lien( first) in the property, correct. ?,,right now this end buyer needs 90%. Please help me with your input.
Thanks a lot,