1
00:00:00,000 --> 00:00:04,800
Common question is what is a
real estate investment trust or

2
00:00:04,800 --> 00:00:09,510
a REIT? And how does it differ
exactly from a real estate fund

3
00:00:09,510 --> 00:00:12,450
or a real estate syndication?
Let's talk about those

4
00:00:12,450 --> 00:00:13,110
differences.

5
00:00:23,820 --> 00:00:28,383
Let's start talking about REITs.
Real estate investment trusts.

6
00:00:28,456 --> 00:00:32,802
So what exactly are they? And
how do they work? Well, a real

7
00:00:32,874 --> 00:00:37,148
estate investment trust is a
fund of sorts, it is a kind of

8
00:00:37,221 --> 00:00:41,784
real estate fund, what it is as
it accumulates real estate, and

9
00:00:41,857 --> 00:00:46,130
it pays out based on the income
of that real estate. So all

10
00:00:46,203 --> 00:00:50,332
REITs are required to pay out
90% of their income, that's

11
00:00:50,404 --> 00:00:54,968
derived from rents as dividends
to their investors. Now, a REIT

12
00:00:55,040 --> 00:00:58,807
really is it's a sub
classification of the tax code.

13
00:00:58,879 --> 00:01:03,153
It's not a different kind of
security, as far as the SEC is

14
00:01:03,226 --> 00:01:07,137
concerned, what that means is
there are REITs that are

15
00:01:07,210 --> 00:01:11,411
structured as Regulation D
offerings, there are REITs that

16
00:01:11,484 --> 00:01:15,975
are structured as Regulation A
offerings, and there are REITs,

17
00:01:16,047 --> 00:01:20,321
that are public that have,
they've gone public. And they do

18
00:01:20,394 --> 00:01:24,667
that they meet the minimum
requirements, which primarily is

19
00:01:24,740 --> 00:01:29,231
a certain amount of ownership
needs to be in people other than

20
00:01:29,303 --> 00:01:33,287
those managing, and that they
pay out that 90% of their

21
00:01:33,360 --> 00:01:37,996
income. And that 75% or more of
their holdings is in real estate

22
00:01:38,068 --> 00:01:42,415
specifically, not necessarily
not not bonds or anything like

23
00:01:42,487 --> 00:01:46,833
that, but in the real estate
itself, and that they also have

24
00:01:46,906 --> 00:01:51,542
more than 100 investors that are
not part of the management team

25
00:01:51,614 --> 00:01:55,164
itself. That's the basic
structure of a REIT. The

26
00:01:55,236 --> 00:01:59,727
benefits of a read are that they
are very liquid, especially a

27
00:01:59,800 --> 00:02:04,218
public REIT, public REITs, you
can trade on the stock market,

28
00:02:04,291 --> 00:02:08,637
you can log into your brokerage
account and make a trade and

29
00:02:08,710 --> 00:02:13,201
then sell it the very next hour.
So they're very, very liquid.

30
00:02:13,273 --> 00:02:17,982
Whereas with a real estate fund,
the private fund, it may be less

31
00:02:18,054 --> 00:02:22,400
liquid. Now, private REITs are
also going to be less liquid,

32
00:02:22,473 --> 00:02:26,602
but they're going to have
specific mechanisms in place in

33
00:02:26,674 --> 00:02:30,369
order to get people make it
easier to liquefy their

34
00:02:30,441 --> 00:02:34,715
positions, so they can sell it
at regular intervals. When a

35
00:02:34,787 --> 00:02:39,061
REIT is put together, what is
oftentimes needs to happen is

36
00:02:39,134 --> 00:02:43,480
that figuring out the greatest
challenge of net asset value.

37
00:02:43,552 --> 00:02:47,681
Now net asset value only comes
into play as it relates to

38
00:02:47,754 --> 00:02:52,100
private REITs. So private REITs
have to figure out net asset

39
00:02:52,172 --> 00:02:56,736
value on a regular basis. Most
of the ones that I know and have

40
00:02:56,808 --> 00:03:01,010
talked to and follow and have
consulted with those breeds,

41
00:03:01,082 --> 00:03:05,211
they that are private, they do
it on a monthly basis. Now

42
00:03:05,284 --> 00:03:09,847
monthly is a lot of time, it's a
lot of work in order to adjust

43
00:03:09,920 --> 00:03:14,483
your net asset value. But that's
their regular schedule. Public

44
00:03:14,556 --> 00:03:19,119
REITs. However, doesn't matter.
The net asset value is computed

45
00:03:19,192 --> 00:03:23,538
by itself just naturally by
being on the public market. It's

46
00:03:23,610 --> 00:03:28,174
how the public perceives the net
asset value and how it changes

47
00:03:28,246 --> 00:03:32,738
stock price. So there you might
get valuations of you know, 30

48
00:03:32,810 --> 00:03:37,301
$30 based on income or something
like that, but basically, the

49
00:03:37,374 --> 00:03:41,792
bottom line is that that net
asset value is very critical for

50
00:03:41,865 --> 00:03:45,849
private REITs and for public
REITs not a factor at all,

51
00:03:45,921 --> 00:03:50,340
necessarily not a factor as it
relates at least as it relates

52
00:03:50,412 --> 00:03:54,686
to share price because the share
price is determined by the

53
00:03:54,759 --> 00:03:58,888
market itself. So let's go
through the main takeaways and

54
00:03:58,960 --> 00:04:03,234
key points of REITs and real
estate funds. Number one REITs

55
00:04:03,306 --> 00:04:07,290
are companies that buy and
manage property and generate

56
00:04:07,363 --> 00:04:11,637
income from rents primarily,
they're not in the business of

57
00:04:11,709 --> 00:04:15,766
selling bit properties for their
own sake or counting on

58
00:04:15,838 --> 00:04:19,677
appreciation. They distribute
90% of their profits as

59
00:04:19,750 --> 00:04:23,806
dividends to shareholders and
their main benefit is this

60
00:04:23,879 --> 00:04:28,297
massive amount of liquidity.
Number two real estate funds and

61
00:04:28,370 --> 00:04:32,571
syndications they gather funds
from multiple investors for

62
00:04:32,644 --> 00:04:36,845
buying, managing, developing
selling properties. Generally

63
00:04:36,918 --> 00:04:41,336
they have less liquidity, larger
minimum investment, but they

64
00:04:41,409 --> 00:04:45,610
offer a much wider range of
options of things that you can

65
00:04:45,683 --> 00:04:50,101
do. This is where the mat the
majority of our clients are. We

66
00:04:50,174 --> 00:04:54,375
have a very small number of
REITs that we help and then we

67
00:04:54,448 --> 00:04:58,794
generally Help you're all the
way from your very, very large

68
00:04:58,866 --> 00:05:02,705
private equity funds, all the
way down to first time,

69
00:05:02,778 --> 00:05:06,979
syndicators. Number three
investment in real estate funds.

70
00:05:07,052 --> 00:05:10,819
It offers those benefits of
diversification and true

71
00:05:10,891 --> 00:05:14,947
professional management but it's
subject to that market.

72
00:05:15,020 --> 00:05:19,511
volatility. Generally these are
smaller, so they have a little

73
00:05:19,584 --> 00:05:23,930
bit less holdings than a REIT,
which can oftentimes be quite

74
00:05:24,002 --> 00:05:27,697
large. As property values
decline high fees lock in

75
00:05:27,769 --> 00:05:31,608
periods, they also track
slightly different than then

76
00:05:31,681 --> 00:05:36,027
reads on value. Number four
REITs. In real estate funds have

77
00:05:36,099 --> 00:05:40,301
different tax implications.
REITs dividends are subject to

78
00:05:40,373 --> 00:05:44,502
income tax, whereas real estate
funds and syndications in

79
00:05:44,575 --> 00:05:49,138
general are much more likely to
target going being taxed at the

80
00:05:49,211 --> 00:05:53,484
capital gains rate. Number five,
as a syndicator, or a real

81
00:05:53,557 --> 00:05:57,903
estate fund manager yourself,
your job is to really consider

82
00:05:57,976 --> 00:06:02,467
what's in it for your investors.
And what are you putting this

83
00:06:02,539 --> 00:06:06,741
together for? What is your
founders investment theory, use

84
00:06:06,813 --> 00:06:11,014
that in determining whether
going down the road and to the

85
00:06:11,087 --> 00:06:15,433
expense and complication of
putting together a huge business

86
00:06:15,506 --> 00:06:19,924
like a read, make sense? A lot
of my players very, very, very

87
00:06:19,997 --> 00:06:24,560
large investors who have assets
under management of well over a

88
00:06:24,633 --> 00:06:28,979
billion dollars are not REITs
and will never be REITs and do

89
00:06:29,051 --> 00:06:33,615
not want to play that game. They
don't even put together funds.

90
00:06:33,688 --> 00:06:38,324
They put together just straight
syndications. So your success is

91
00:06:38,396 --> 00:06:42,960
not tied to well whether you are
a publicly traded REIT or not.

92
00:06:43,032 --> 00:06:47,523
It's put to your success is tied
with doing the kinds of deals

93
00:06:47,596 --> 00:06:52,159
and the kinds of funds that you
want to do and working with the

94
00:06:52,232 --> 00:06:56,216
investors that you want to work
with. My name is Tilden

95
00:06:56,288 --> 00:07:00,562
Moschetti. I am a real estate
syndication attorney with the

96
00:07:00,634 --> 00:07:05,343
Moschetti Syndication Law Group.
I hope this video helped explain

97
00:07:05,415 --> 00:07:09,617
that difference between REITs
and private equity funds and

98
00:07:09,689 --> 00:07:14,398
syndications. If we can help you
on your journey, whether it's to

99
00:07:14,470 --> 00:07:18,382
become a read or a private
equity fund or a syndicator

100
00:07:18,454 --> 00:07:22,873
yourself, give us a call. We can
help you stay compliant with

101
00:07:22,945 --> 00:07:27,147
Regulation D Rule 506b and 506c
and also offering the exit

102
00:07:27,219 --> 00:07:31,421
expert guidance to make sure
that you get on the path that

103
00:07:31,493 --> 00:07:35,550
you're going and get to the goal
that you want to get to