SEC Investor Education & Advocacy Office Issues Bulletin on REITs

The SEC Office of Investor Education and Advocacy has issued a bulletin regarding Real Estate Investment Trust’s or REITs. The SEC has created a comparison chart differentiating between publicly traded REITs and Non-Traded REITs. As one would expect, non-traded REITs are not listed on any public exchange like the NYSE or NASDAQ. Non-traded REITs must still file with the SEC and must comply with certain ongoing reporting requirements.  There are also Private REITs but these are typically limited to accredited investors.

Recently several real estate crowdfunding platforms have moved into the non-traded REIT sector. Fundrise has launched several “eREITs”, as they have labeled them. Using Reg A+, Fundrise is raising capital to invest in a portfolio of real estate properties that allows for rapid diversification at a lower cost point.  While the Fundrise REIT does not trade on an exchange, Fundrise has facilitated a certain amount of liquidity. RealtyMogul.com has come out with their MogulREIT that is similar in structure using Reg A+. RealtyMogul.com announced their version earlier this month.  Under Reg A+ these real estate platforms may raise up to $50 million.  The REITs from Fundrise and RealtyMogul.com accept both accredited and non-accredited investors so anyone may participate.

The Description Grid published by the SEC (and sourced from the National Association of Real Estate Investment Trusts – NAREIT) is below.

Chart comparing REIT types

	Publicly traded REITs	Non-traded REITs
Overview	REITs that file with the SEC and whose shares trade on national stock exchanges.	REITs that file with the SEC but whose shares do not trade on national stock exchanges.
Liquidity	Shares are listed and traded, like any publicly traded stock, on major stock exchanges. Most are NYSE listed.	Shares are not traded on public stock exchanges. Redemption programs for shares vary by company and are limited. Generally a minimum holding period for investment exists. Investor exit strategy generally linked to a required liquidation after some period of time (often 10 years) or, instead, the listing of the stock on a national stock exchange at such time.
Transaction costs	Brokerage costs the same as for buying or selling any other publicly traded stock.	Typically, fees of 10-15 percent of the investment are charged for broker-dealer commissions and other up-front costs. Ongoing management fees and expenses also are typical. Back-end fees may be charged.
Management	Typically self-advised and self-managed.	Typically externally advised and managed.
Minimum investment amount	One share.	Typically $1,000 – $2,500.
Performance measurement	Numerous independent performance benchmarks available for tracking listed REIT industry. Wide range of analyst reports available to the public.	No independent source of performance data available.