REITs on The Street: Going Public While Staying Private
NEW YORK (TheStreet) -- Thanks to the Jumpstart Our Business Startups Act, better known as the "JOBS Act," certain private investment offerings will soon look more public than private.
Under current laws, the Regulation D offering allows private companies to offer and sell their securities without having to register with the Securities and Exchange Commission, providing access to capital for small companies that can't justify the costs of normal SEC registration.
The JOBS Act, which was signed into law in April 2012, immediately increased the maximum number of investors permitted to invest in private offerings from 500 to 2,000. It also required the SEC to remove the general solicitation restriction on Reg D offerings, as Congress sought to make it easier for companies to find investors and thereby raise capital.
On July 10, 2013, the SEC finally issued regulations allowing public advertising and solicitation of Regulation D offers to accredited investors. According to Section 201(a)(1) of the JOBS Act, the SEC has now removed "the prohibition on general solicitation or general advertising for securities offerings relying on Rule 506, provided that sales are limited to accredited investors and an issuer takes reasonable steps to verify that all purchasers of the securities are accredited investors."A person qualifies as an accredited investor if he or she has either: (1) an individual net worth or joint net worth with a spouse that exceeds $1 million at the time of the purchase, excluding the value (and any related indebtedness) of a primary residence or (2) an individual annual income that exceeded $200,000 in each of the two most recent years or a joint annual income with a spouse exceeding $300,000 for those years, and a reasonable expectation of the same income level in the current year. Now, for the first time, private Reg D offerings can now be publicly advertised, thereby allowing greater transparency for private investments. One company that has already benefitted from the JOBS Act and stands to benefit further is Broadstone Real Estate. Broadstone's Expansion According to Amy Tait, chairman, CEO and co-founder of Broadstone Real Estate, the Rochester, N.Y., company is an example of one that "is growing rapidly thanks to several business-friendly provisions contained in the JOBS Act." Broadstone is the sponsor and manager of private REITs. As Tait explains, "On the surface, you would think that attracting lots of new investors would be good news; however, prior to the JOBS Act, our success in attracting investors for Broadstone Net Lease caused challenges. Under previous laws, we would have been deemed public once we reached 500 shareholders. We didn't want to cross that threshold without first also gaining enough critical mass to justify the costs of running a public company. With 400 shareholders, BNL was in the awkward position of getting too big to stay private, yet it was still too small to effectively be public. We were stuck in the middle."
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV