Can someone explain to me the difference between these two?
According to NAREIT, a Private REIT:
"Private REITs, sometimes called private placement REITs, are offerings that are exempt from SEC registration under Regulation D of the Securities Act of 1933 and whose shares intentionally do not trade on a national securities exchange. Private REITs generally can be sold only to institutional investors, such as large pension funds, and/or to “Accredited Investors” generally defined as individuals with a net worth of at least $1 million (excluding primary residence) or with income exceeding $200,000 over two prior two years ($300,000 with a spouse)."
"Brokerage costs vary by company, but may include formation fees, annual management fees and a percentage of profits in the form of a “promoted interest.”"
If a Private REIT is a closed end fund that has annual management fees, sometimes "2 and 20" (promoted interest), with a GP/LP structure then how is this different from an REPE fund?
Any color on this would be appreciated.
Thanks
I think it’s all in the tax structure. The REIT must pay out a minimum percentage (and have 99+ investors) to earn REIT status. All taxes are done at the investor level so nothing to the REIT. Private funds do not have this tax advantage, but I can’t expound on this further. I’m sure someone can.
From my understanding that is basically it. There are also more rules with a PREIT such as good and bad income, paying out 95% of rent collected (FFO) being open-ended to name a few.
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