Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/504576
Commercial Investment Real Estate Crowdfunding Conundrum C CIM C O NNECTI O N S Sometimes new ideas aren't so new af er all. Take crowdfunding, for example, says Gene Trowbridge, CCIM, a senior partner of Trowbridge & Taylor LLP and a CCIM Institute senior instructor. When France gave the U.S. the Statue of Liberty in 1885, publisher Joseph Pulitzer used crowdfunding to raise the money for its pricey pedestal, with more than 120,000 people contributing nickels and dimes to the cause. "If this happened now, the Securities and Exchange Commission would have no conf ict because there was no prof t motive on the part of the donors, so it would not be considered the sale of a security," says Trowbridge, who covers the ins and outs of crowdfunding in his Ward Center course, Ultimate Group Sponsor Workshop. T at's the inherent conundrum of crowdfunding and investment in com- mercial real estate transactions. How do commercial real estate professionals juggle the need for capital with SEC restrictions when selling a security? T e SEC's answer in July 2013 was to adopt the new Regulation D, Rule 506(c), under the Jumpstart Our Business Start-ups or JOBS Act. "T is new regula- tion allows commercial real estate brokers to advertise to accredited investors," Trowbridge says. "T e U.S. government thinks those people are rich enough and smart enough to make investment decisions without government oversight." An accredited investor is an individual with a net worth of more than $1 million, excluding primary residence, or a person who makes more than $200,000 per year of income if single or more than $300,000 per year if married, f ling jointly, according to the SEC. However, the SEC still has not issued any f nal rules for equity crowdfunding, which, under Title III of the JOBS Act, will allow of erings up to $1 million to be made to non-accredited inves- tors. "T ere is confusion in the marketplace about the dif erence between accredited and non-accredited investors," Trowbridge explains. "It is not legal to advertise crowdfunding deals that of er a return on investment to non-accredited investors." Late last year the SEC indicated that it will f nalize the equity crowdfunding rules by October 2015, but plan on saving your nickels and dimes until January 2016, the earliest the rules could take ef ect. 120,000 people contributing nickels and " If this happened now, the Securities a b ecause t h ere was no p ro f t motive on t h t h e sa l e o f a securit y ," sa y s Trow b r i i n h is War d Center course, U l t i T at's the inherent conun d m ercia l rea l estate transacti j u ggl e t h e nee d f or capita l w T e SEC's answer in Ju ly 2 under the Jumpstart Our B t ion allows commercial real Trowbrid g e sa y s. " T e U.S. go smart enou gh to ma k e invest m A n accre d ite d inv e $1 mi ll ion, exc lu more t h an $2 0 $300,000 per ye However, t he crow df un d i ng , o f erin g s up t o tors. " T ere is c between accr e explains. " It i of e r a r etu rn Late l ast y e a crow df un d i n nic k e l s an d could take ef Gene Trowbridge, CCIM, a senior partner of Trowbridge & Taylor LLP, teaches the Ultimate Group Sponsor Workshop, May 7–8 in Chicago, July 20–21 in New York, and September 24–25 in Chicago. Learn more at ccim.com/education.