PNLR Market Undergoing Transformation, Lawyer Says

Rosemarie Thurston, a partner at Alston & Bird LLP, joined REIT.com for a video interview at REITWise 2016: NAREIT’s Law, Accounting and Finance Conference at the Marriott Marquis in Washington, D.C.

Thurston leads Alston & Bird’s REITs and real estate funds practice. She moderated a REITWise panel on the public non-listed REIT (PNLR) market.

Thurston explained that the PNLR industry is undergoing a transformation, largely driven by the regulatory environment.  Financial Industry Regulatory Association (FINRA) rules that become effective April 11, “are really going to change the whole paradigm on customer account statements,” and will create more transparency in the industry as to the valuations of those securities, she said.

Another factor behind the industry’s transformation is the absence of AR Capital, which had been the largest fundraiser in the industry. The company raised almost $19 billion of capital in the last four years, according to Thurston.

Thurston observed that the new FINRA rules will require that customer account statements use a net investment amount, rather than the $10 per share price that is currently used as long as the PNLR is raising money, and for 18 months thereafter.

A valuation based on an appraisal of the assets will also be available much earlier in the cycle, Thurston stressed.

She added that the new rules are prompting product innovation in the industry.  “Ultimately, we think the old $10 A shares with the full load up front will disappear and we’ll see the new T shares become the standard security in this sector,” Thurston said.