What is better in your opinion, 506(c) or 506(b) offering?

[Shane Thomas]

Happy 4th of July (if you are reading this today)!

I wanted to start a discussion on multifamily syndication offerings and maybe shed a little more light on the subject for other multifamily investors.

The initial intention of Reg D was to allow smaller companies, which likely could not afford the standard SEC registration, a chance to access the capital markets. The primary difference in the 2 offerings lies in how the Sponsor can advertise the deal AND what verification/documentation is required.

If I had to answer the question “what is the most common filing status among commercial real estate sponsors?” (which I have, many times), I would answer 506(b). There is much larger audience of potential investors that are non-accredited, but you are limited to the number of non-accredited investors you can bring to your offering so..

If you are a passive investor -- Do you care about if the offering is one or the other?

If you are an active operator -- Do you like to offer one or the other? Do you have plans to offer 506(c) deals in the future?

What are your thoughts?