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Private Placement Securities Offering

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Nov 3, 2005 7:50 pm

What is the opinion on these?  I currently have a new REIT available to offer that is a private placement securites offering.  This is limited to high net worth clients and subject to limitations so I am only contacting those types of clients and prospects.

Anybody else particpated in these types of offerings?  Issues with these?

Nov 3, 2005 8:45 pm

The two biggest issues I would wonder about is liquidity and the timing of getting into a REIT now…

Nov 4, 2005 1:12 am

Two good points, Indyone.

I'm no REIT analyst, but I would think that the most attractive REITs now would be those consisting primarily of apartments. If mortgage rates continue their upward climb, a large number of potential homeowners may be priced out of the market. Plus, a lot of apartment complexes have since converted into condos; therefore, reducing the supply of available rentals.

Most other types of reits may be dependent upon low interest rates to maintain good cash flow.

Nov 4, 2005 3:52 am

The prospectus states that the shares can be tendered on a sliding scale and after 4 years can be tendered at the buy in price or better.  Since the target market for this is high net worth clients  and the amount they can purchase vs net worth is limited, I'm not too concerned about liquidity.

The REIT consists of retail, commercial and apartment complexes in a wide geographic and international area.  I am some what concerned about REITs in general in a rising interest rate environment. However, I think the fear of a real estate bubble is overblown. Areas like the West Coast, where I am, are already experiencing a deflation in R/E selling prices, but I don't believe that is a nation wide trend.  I agree with Doberman the apartment vs home owning issue.

Another thing I like about this (and the clients I have positioned so far) is that the income is partially tax deferred at at least 50% the first year and less in succeeding years.  If/when sold the deferred amounts are taxed as cap gains and not ordinary income.

Coming from a wirehouse environment (sort of ....Jones) I have never participated in a private securities placement issue. That is why I was interested to see if other INDY people have participated in these and what is the consensus or past experience.    It looks good to me so far   Am I missing something??