How best to use Regulation A+ to raise capital for Real Estate developments.
We are seeing more signs that Real Estate offerings are taking the early lead in Regulation A+. The facts that consumers already understand and identify with real estate as an investment are helping, as has already been shown in the Title II/Reg D field. Regulation A+ is broadening the appeal of real estate to nonaccredited investors worldwide. Another major factor is the payment of attractive rates of interest on invested capital. Consumers find that appealing and are more likely to invest as a result.
For real estate companies that lend themselves to segmenting their market by geographic regions, it is possible to make multiple offerings for one parent entity by establishing one subsidiary for each region. For example, let's say a company is planning to lend its capital across the USA. A company can establish say six regional subsidiaries that are responsible for a clearly defined geography of the US and raise capital for each region's entity using a dedicated Reg A+ for each. In this example, the maximum per year would be 6x50 = $300 million per year.
The novel e-REIT has shown the best segment performance in Reg A+ to date, with over $100 mill raised by Fundrise and GroundFloor, with RealtyMogul recently joining the fray. Real Estate has been one of the most successful categories in equity crowdfunding since it went live in September 2013, and is now building a strong base with Reg A+, in part through the innovation of the e-REIT. It appears that the primary advantage to the investor of the e-REIT is more convenient availability than conventional REITs without the need to pay stockbroker fees. Fundrise is also offering short-term fee deferrals and a temporary guarantee of return.
RealtyMogul has followed Fundrise's lead and launched their first Regulation A+ offering, called MogulREIT. This investment allows non-accredited investors access to commercial real estate investments - and may raise up to $50 million. RealtyMogul claims to be democratizing real estate investing. Previously the company only accepted accredited investors.
MogulREIT has a minimum $2500 per investor, which the firm intends will provide access to a diversified portfolio of real estate. Property assets will include retail, office, and condominiums. According to the firm, traditional non-traded REITs charge front loaded sales commissions of 7 percent, and total expenses as high as 15%. The company intends to offer investors direct online access with zero sales commission and offering expenses of 3 percent.