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REAL ESTATE FUND FORMATION

Summary
Real Estate Fund Formation
Service Type
Real Estate Fund Formation
Provider Name
Dilendorf Law Firm,New York,New York-10004,
Telephone No.212.457.9797
Area
Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming
Description
The Dilendorf Law Firm advises clients on the establishment and operation of real estate investment funds and all aspects of fund formation, operations, and governance. Our knowledge and expertise in establishing real estate funds includes all facets of US and non-US sponsor representation, including onboarding, tax planning, and guidance after the launch.

Dilendorf Law Firm represents real estate investment managers on all aspects of fund formation and ongoing operations.  

We provide legal counsel in all relevant areas, including fund structure, securities laws, jurisdictional planning, fund strategy and other legal matters.

We have significant experience forming real estate funds and investment vehicles, including traditional closed-end and open-ended funds, tokenized funds, and joint ventures. 

We are intimately familiar with core, distressed, value-add and opportunistic investment objectives; with all asset classes, such as office, retail, residential, warehouses, industrial and mobile-parks properties.

Flat-fee real estate fund formation services include:

  • Advising on a real estate fund structure tailored to specific tax and business goals
  • Forming and registering investment advisers
  • Assisting clients with designing optimal tax structures for onshore and offshore real estate funds
  • Due diligence and representation in connection with investments in real estate properties
  • Preparing fund documentation (private placement memoranda, operating agreements, term sheets, subscription documents)
  • Preparing and processing SEC Form D and state “blue sky” filings
  • Providing ongoing regulatory, tax and compliance support

Timeline for launching a real estate fund:

The average timeline for structuring and launching a private real estate fund is 3-5 weeks. 

It could take 6-8 weeks to launch an exempt tokenized real estate fund, shares of which can be traded on regulated security token marketplaces also known as alternative trading systems operated using blockchain technologies.

ATTORNEYS' EXPERIENCE

ATTORNEYS' EXPERIENCE

Represented a client with launching a value-add real estate fund in New York

ATTORNEYS' EXPERIENCE

Represented a client in connection with tokenizing a $20M real estate lending master feeder fund (US/Cayman), including addressing potential tax implications, application of US securities and investment regulations and worldwide treatment of the fund tokens

ATTORNEYS' EXPERIENCE

Represented a client in connection with the formation of a real estate lending fund in New York

ATTORNEYS' EXPERIENCE

Represented a foreign private fund in connection with the corporate and tax structuring of their investment in commercial real estate project in NYC by utilizing beneficial tax treaty provisions, and combination of debt and equity

ATTORNEYS' EXPERIENCE

Worked with a client on setting-up a $20M tokenized real estate lending master feeder fund (US/Cayman)

ATTORNEYS' EXPERIENCE

Structured investment of Section 1231 gain, generated from the sale of real estate used in trade/business, in a two-tier qualified opportunity fund for purchasing and developing properties in NY


ATTORNEYS' EXPERIENCE

Advised a group of private investors in connection with setting up a qualified opportunity fund for purchasing a $10M development lot

ATTORNEYS' EXPERIENCE

Advised client on structuring and launching “mini-master” private investment fund: utilizing an offshore fund domiciled in the Cayman Islands that invests assets directly into a domestic master fund domiciled in DE

ATTORNEYS' EXPERIENCE

Set up of a real estate fund targeting value-add multifamily assets in growth markets

ATTORNEYS' EXPERIENCE

Advised a client regarding the process of tokenizing a $40M commercial property in the Midwest, addressed applicable securities regulations and token transfer restrictions for US and non-US investors, selected a legal structure for tokenization (LP, SPV, Trustee), guided through the process of underwriting the property interest on a smart contract and issuing legally compliant ERC-20 tokens, and advised regarding the process for verifying the accreditation status of US and non-US investors, KYC/AML checks as well as onshore/offshore banking

ATTORNEYS' EXPERIENCE

Represented client with launching a joint venture for a regenerative farmland. Advised client how to pivot from the JV model and scale the business model using a tokenized real estate fund.

ATTORNEYS' EXPERIENCE

Advised a private REIT on tokenizing a portion of its real estate porfolio

Our clients are advisers to real estate funds, and we regularly counsel clients with respect to the formation and offering of interests in traditional and tokenized real estate funds they advise.

Whether certain real estate fund activities require registration of the offering of securities, broker-dealer registration, investment company registration, or investment adviser registration is a fact-specific analysis that must be conducted on a case-by-case basis.

Are interests in private real estate funds “Securities”?

All offers, sales, and issuance of securities are governed by federal securities rules and regulations.

Under federal and state laws, securities are defined broadly to include shares of limited partnership interests and membership interests in an LLC, LLP and investment contracts.

Interests in a private real estate fund offered and sold to investors will typically constitute securities within the meaning of federal and state laws.

As a result, private real estate funds must comply with all applicable regulations of the Securities and Exchange Commission (“SEC”) and the securities regulators in the states where a real estate fund operates.  This includes being aware of, and complying with, applicable provisions such as the registration and anti-fraud provisions of federal and state securities laws.

Are real estate fund offerings required to be registered with the SEC Commission and the states or are exemptions from registration available?

Under the federal Securities Act of 1933 (Securities Act), all offers and sales of securities must be either (1) registered with the SEC or (2) conducted in compliance with an exemption from registration. State securities laws also require registration or an exemption from registration before securities may be offered or sold in the state.

Securities regulators interpret broadly the meaning of the term “offer.” For example, advertising a business opportunity could be considered an offer; therefore, it is prudent to assume that efforts to attract investors to a real estate fund are offers of a security and subject to federal and state securities laws.

Offerings of private real estate fund interests may not need to be registered with the SEC or state securities regulators if an exemption from registration is available.

Federal and state securities laws contain several exemptions from registration that fund managers could rely on when launching a real estate fund.

For example, some frequently used exemptions from registration that may be available to real estate fund operators include Rule 506(c) of Regulation D.  This rules provides an exemption from registration for an offering that may be conducted publicly so long as the real estate fund takes reasonable steps to verify the accredited investor status of each purchaser.

Is the real estate fund required to register an “Investment Company”?

Real estate funds can also implicate the registration provisions of the Investment Company Act of 1940 (Investment Company Act) and, potentially, the Investment Advisers Act of 1940 (Advisers Act) or related provisions of state securities laws.

Depending on the facts and circumstances, real estate funds may have to register as investment companies under the Investment Company Act.

Under Section 3(c)(5)(C), a real estate fund, will not be considered an investment company if it is primarily engaged in purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.

However, with some exceptions, the Commission has taken the position that an issuer that is primarily engaged in the business of holding interests in a pooled investment vehicle that invests in real estate generally may not rely on Section 3(c)(5)(C)

Is the adviser to a venture capital fund subject to Advisers Act or comparable regulation under the State Securities Laws?

In summary, Advisers Act Rule 203(m)-1 provides that an investment adviser that serves as an adviser solely to private funds and has assets under management of less than $150 million is exempt from registering as such with the SEC.

However, an investment adviser relying on this exemption must still comply with certain SEC reporting requirements.

Tokenized Real Estate Funds

Dilendorf Law Firm advises on all aspects of the formation, governance, and operation of tokenized real estate funds.  Tokenized real estate funds offer a number of potential benefits as compared to traditional funds.

Benefits include:

  • Access to a global pool of capital;
  • Increased liquidity on regulated US and global security token marketplaces aka Alternative Trading Systems;
  • Simplified digital management of a significant number of investors via smart contracts;
  • Automated and transparent governance, voting and compliance using smart contracts on the blockchain;

Tokenized fund interests are subject to limitations on resale, number of investors, investor solicitation and acceptance, tradebility on security token marketplaces in the US and foreign jurisdictions, etc.

When designing a tokenized real estate fund structure, fund managers must take into an account account various pitfalls presented by securities regulations, AML/KYC requirements and current investment and governance restrictions. Heightened global liquidity may present additional operational complications, for example, with secondary market re-sales and maintaining capitalization tables.

We help our clients efficiently navigate the web of challenges arising throughout the formation, governance, and operation of tokenized real estate funds.

Resources:

Summary
Real Estate Fund Formation
Service Type
Real Estate Fund Formation
Provider Name
Dilendorf Law Firm,New York,New York-10004,
Telephone No.212.457.9797
Area
Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming
Description
The Dilendorf Law Firm advises clients on the establishment and operation of real estate investment funds and all aspects of fund formation, operations, and governance. Our knowledge and expertise in establishing real estate funds includes all facets of US and non-US sponsor representation, including onboarding, tax planning, and guidance after the launch.

For more information about our Real Estate Fund Formation services,

please contact Dilendorf Law Firm by sending an email or calling us at 212.457.9797

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