Why We Launched a Real Estate Investment Trust (“REIT”)
All About REITs
This week marks the beginning of a new chapter for RealtyMogul.com and its investors as we announced the launch of our first online commercial real estate fund structured as a real estate investment trust “REIT”, MogulREIT I. With this new fund, we opened our online marketplace to non-accredited investors for the first time.
About a year ago, we held our first annual senior management offsite in Palm Springs. In one of the most important (and intense) sessions of the 2-day meeting, we were asked to define our “core purpose”. A core purpose should help answer the questions: why do you exist, why would someone be interested in joining your company, why should employees give you their all? After a long discussion and some soul searching, we landed on something pretty short and simple: “Access Through Innovation”.
We realized that this purpose succinctly summarizes what we’re here for: to give more people on both sides of the marketplace (real estate companies and real estate investors) better access to real estate investing through innovation (in technology, products, regulations, or any other way).
For us, this purpose answered the question about what excites us and gets us going every single day?
The next obvious question was how we could fulfill this purpose?
Until now, RealtyMogul.com was only open to accredited investors. To date, over 80,000 people have expressed interest in what we do by joining our investor network, but only the 25,000 accredited investors within that group could invest through our platform. We felt that if our core purpose hinged upon providing access, we needed to create a way to provide more people with greater access to real estate investing through our platform.
So we did just that – starting this week, investing on RealtyMogul.com is finally available to non-accredited investors*.
Thanks to recent changes under The JOBS Act (more specifically, Title IV of the JOBS Act known as Regulation A+) we are now able to offer non-accredited investors the opportunity to invest in a diversified pool of commercial real estate investments through a single investment, MogulREIT I, a real estate investment trust (or “REIT”).
A “REIT” is a company that owns or finances real estate. REITs give their investors the opportunity to participate in large-scale real estate transactions by purchasing shares of the company that owns or finances them. REITs typically do not pay tax at the company level, and so they avoid the double-taxation problems that many corporations face.
Our first REIT, MogulREIT I, is a public non-traded REIT. That means that it is registered with the Securities and Exchange Commission, but is not traded on a stock exchange.
MogulREIT I investors can enjoy regular income, potential capital appreciation, and diversification across geographies, property types, and investment types.
So we covered the access component of our purpose. What about innovation?
We designed MogulREIT I to be accessible through our online platform, RealtyMogul.com. By offering it directly to investors instead of through other third-party distribution channels, we are able to eliminate the high expense loads that result from traditional, commission-based sales.
Investors in MogulREIT I will not be charged any sales commissions and the organization and offering expenses are anticipated to be approximately 3% of the target total raise of amount. Traditional non-traded REITs typically charge an average sales commission of 7% and organization and offering expenses of up to 15%**. That’s 400% more than what we charge.
MogulREIT I helps to expand our core business and offer greater access to more investors but, to be clear, we will continue to offer our accredited investors the same carefully vetted individual transactions as we have in the past.
So if you are one of the 25,000 accredited members of RealtyMogul.com, worry not. You will still have the options you’ve had before, plus one additional new investment option. We hope that by providing you with more investment options, we will be able to better meet your investment needs and help you reach your investment goals.
RealtyMogul.com started in 2013 with one mission: simplify real estate investing by connecting real estate entrepreneurs and investors through cutting-edge technology. Today’s announcement is another step towards achieving this mission.
To the accredited investors who have been with us since day one – thank you for your early vote of confidence and trust. This is just the beginning of our relationship and we’re excited that we have expanded the investment opportunities available for you.
To those who can now join our family – welcome.
For more information, please review the Offering Circular prior to investing.