4 Quick Questions with Rosemarie Thurston

Rosemarie Thurston, Partner, Alston & Bird LLP

3/28/2014 | By Sarah Borchersen-Keto

Published in the March/April 2014 issue of REIT magazine.

What are your expectations for public, non-listed REITs and their ability to raiseequity in 2014?

It will defi nitely be challenging to reach the levels seen in 2013, but it’s within the realm of possibility. It actually could occur if we see a high volume of successful liquidity events in 2014.
History has shown that as much as one-third to one-half of the capital that goes back to these retail investors through a liquidity event is then reinvested into another public, non-listed REIT. We understand that there’s about $45 billion worth of mature public, non-listed REIT programs that are expected to complete liquidity events in the next year or two, so if the market conditions are favorable, then we can expect to see more of that recycled capital drive growth of the industry yet again.

How do you see FINRA’s efforts to enhance public, non-listed REITs’ transparency affecting the companies and their investors?

FINRA believes that something needs to go on customer account statements to mitigate investor confusion about the underlying value of the illiquid securities purchased in a fi xed price off ering. FINRA is also concerned that investors don’t
understand that in many cases the distributions which make these products so attractive are in excess of the REIT’s earnings.
Th e new rules, as we understand where they’re going, will no longer permit the customer account statement to show the value at the gross off ering price, but at some net off ering price that refl ects a reduction for the upfront sales load, organization and off ering costs, and in cases in which distributions exceed earnings, the per-share, over-distribution amount. The customer account statement rules are a way that FINRA can enhance transparency of these value impairments.
The impact on the industry is largely uncertain, but we do think that, if the information is presented in a way that investors can understand it, the enhanced transparency will be helpful to the overall growth and longevity of the industry.

From your discussions with public, non-listed REIT CEOs, what are the main issues on their mind at the moment?

I would say regulatory uncertainty is the number one thing that these CEOs are concerned about. We’ve seen the pace of new entrants and new products slow dramatically because of the uncertainty at this time about FINRA’s customer account
statement rules. In addition, the North American Securities Administrators Association (NASAA) has proposed new regulations that would change the industry as well, making it more diffi cult for sponsors to be profitable with these products.
It’s also becoming increasingly important for sponsors to have their REITs complete successful liquidity events in order to raise money for subsequent REITs. Lastly, being able to put the money that’s being raised at this rapid clip to work quickly and wisely is always a concern in a robust capital raising environment.

What impact could a new fi duciary standard for brokers have on public, non-listed REITs?

It appears to us that this issue is probably going to be kicked into 2015, and then may actually go away as the election approaches. If a uniform fi duciary standard for all fi nancial advisors was to be passed, it could have a huge impact.


Rosemarie Thurston is a partner at Alston & Bird LLP and leads the fi rm’s REITs and Real Estate Funds practice. She represents numerous REITs, real estate funds and real estate operating companies in their fund formation, public securities offerings, private placements, mergers and acquisitions, joint ventures, roll-ups, and ongoing securities law compliance. Thurston also counsels broker-dealers on compliance with applicable regulations of the Financial Industry Regulatory Authority (FINRA) in connection with the distribution of securities.

Other Features

Sunder Raman
4 Quick Questions With Sunder Raman
What has been the biggest challenge in terms of launching REITs in India? The main challenge in establishing a framework for the new product is to...
Cliff Majersik
4 Quick Questions With Cliff Majersik
True or false: Many of the practices considered to have the best “bang for the buck” when it comes to promoting energy-efficient buildings are...
Kenneth Campbell
Four Quick Questions With CBRE Clarion Securities Co-founder Kenneth Campbell
Kenneth Campbell had a front-row seat shortly after the birth of the REIT industry, founding the first REIT-dedicated publication, Realty Trust...
Ken Kies
Four Quick Questions With Federal Policy Group's Ken Kies
Ken Kies is the managing director of the Federal Policy Group, LLC, which advises clients on tax policy matters before Congress, the Treasury...
Sean Ruhmann
Four Quick Questions With NEPC's Sean Ruhmann
Sean Ruhmann is a partner at investment consulting firm NEPC, LLC and heads the firm’s real estate and real assets research group. Prior to joining...
Four Quick Questions With Jim Fetgatter, Chief Executive, AFIRE
Jim Fetgatter has served as chief executive of the Association of Foreign Investors in Real Estate (AFIRE) for more than 20 years. AFIRE represents...
David Kiron of MIT Sloan Management Review’s Big Ideas Initiative
Where does sustainability stand today in terms of being a strategic corporate priority? In our surveys , about 65 percent of companies report that...
Mark Decker Jr.
Four Quick Questions With Mark Decker Jr. of BMO Capital Markets
Mark Decker Jr. is a managing director with BMO Capital Markets and head of the firm’s U.S. Real Estate, Lodging & Leisure Group. Since the...
Scott Schaevitz
Scott Schaevitz, Co-Head of Americas Real Estate Investment Banking, Barclays
Scott Schaevitz is co-head of Americas real estate investment banking with Barclays. Prior to joining Barclays in 2008, he served as a Managing...
Jeremy Banoff
Jeremy I. Banoff, Senior Managing Director, FPL Associates L.P.
In general, what were the key findings of the 2014 NAREIT Compensation Survey in terms of hiring practices? This year’s survey findings included...