Schedule A Offering On Real Estate

[Mikael Winkler]

Hello BP!

I am hoping for a bit more in-depth info on what a Real Estate schedule A offering is? I assume it’s an opportunity put forth to invest in a fund that will then locate and acquire cashflowing apartments. However, what are the more intricate details and workings of schedule A beyond those basics?

I’m really just looking for information, at this point. I appreciate any insight or material someone could point me to!

[Brock Freeman]

Reg A+ was created by the Jumpstart Our Business (JOBS) Act in 2012. It aims to encourage small business growth and development by streamlining the process of going public and easing limitations on the number of non-accredited shareholders an eligible offering can have. The JOBS Act went into effect in 2015.

Under Reg A+, a company can:

1. Raise up $50 million in capital in a 12-month period
2. Publicly solicit investors and advertise, as long as you include certain disclaimers
3. Avoid the cost and complications of SEC and state securities registrations
4. Receive an expedited, streamlined review of its offering memorandum
5. Confidentially submit its offering memorandum to the SEC
   
6. Issue unrestricted securities to investors, potentially creating a secondary market

Now, all those sound great for a syndication offering, right? Here's the challenge... timing and cost. It can take 1-6 months (for a new issuer look at the longer end of that) to navigate through the SEC process for the offering. Cost can run $25k to $100k+. That's problematic when you have a 60-90 day closing window on a property, and really means you need to have a property worth $5+ million to make it worthwhile. 

Reg A+ could work for a Real Estate fund but that is a whole other level of difficulty.

This is why real estate syndications continue to be Reg D 506 b or c as they can be launched in a very short period of time.