Regulation A+ funding is perfect for urban real estate investing! What is Regulation A+? Regulation A+, or Title IV of the Jobs Act, makes it possible for everyday people, like you and me, to invest in a growing company X. More specifically, growing companies are able to raise up to $50 million from unaccredited investors, in a manner similar to an initial public offering, as opposed to venture capital or other institutional capital X. It’s not a free for all, as there are certain requirements—such as company eligibility, bad actor disqualification provisions, and disclosure X—but it is an accessible vehicle for both investors and small businesses.
Regulation A+, or Reg A+ for short, is distinct from other capital raising options.
Firstly, it differs from its predecessor, Regulation A, which was laden with a costly and time-consuming state review that has since been removed X. Most relevant though, is how Reg A+ compares to Regulation D and Regulation CF. A major benefit of using Reg D over Reg A+ is the ability to raise capital without a maximum limitation. However, Reg D has stringent restrictions on or outright exclusions of non-accredited investors X. Regulation CF also enables growing businesses to raise capital investments from non accredited investors, but has a maximum limit of roughly $1 million while the Reg A+ allows raising funds ranging from $2 million to $50 million X.
Raising funds from non-accredited investors can be particularly beneficial in urban real estate. The most obvious reasons are that a) non-accredited investors make up the bulk of investors in the world and b) accredited investors are not the only ones with money X. Some not so obvious benefits are that non-accredited investors may support your project through the approval process; provide valuable information about the kind of project you should build; patronize the commercial establishments in your project; and provide a built-in support system, allowing you to command higher rents X.
How does one participate in the auspicious Reg A+?
The natural first step would be to gather a team of professionals including legal counsel, auditors and accountants, underwriters, a transfer agent, and other advisors and service providers for certain aspects of an IPO process X. Then, the company must file an offering statement and the offering circular with the SEC, which the SEC must approve before any sales can be made X. Lastly, raise an amount of money that falls with the Reg A+ range and take whatever remaining actions stipulated by the SEC. There are many examples of how Reg A+ has been successfully used in real estate.
In July of 2018, an Atlanta-based real estate investor announced that the Tulsa Real Estate Fund, which is claimed to be the first African-American owned Regulation A+ crowdfund designed to revitalize urban communities, raised more than $10 million in one month X. Within 20 months of the Reg A+ launch, 32 companies had Reg A+ transactions that raised a total of $396 million X. Given what’s been shared about Reg A+ funding in this article, urban real estate investors and companies alike should be exploring how they may get a slice of this Reg A+ pie.