MVP’s No-Load REIT Declared Effective by SEC

The US Securities and Exchange Commission has declared MVP REIT II Inc., a non-traded real estate investment trust that intends to invest primarily in parking lots, parking garages and other parking structures, effective. The REIT, which charges no securities load on investors, seeks to raise up to $550 million at $25 per share.

As previously reported by The DI Wire, perhaps the most intriguing aspect of MVP REIT II is that it will have no upfront securities load for its investors. Instead, the REIT’s sponsor will pay a 6.5 percent commission to financial advisors. The sponsor will also pay organizational and offering expenses. There is no dealer-manager fee.

One of the sharpest criticisms of non-traded REITs has traditionally been the significant securities load, typically totaling in the neighborhood of 10 percent or more.

Of course, sponsors have begun introducing new share classes into their new and existing offerings for some time in response to FINRA 15-02, which will require the inclusion of per share estimated values for non-traded REITs and related offerings on investor account statements beginning in April 2016. Historically, these non-traded investments have been listed on account statements at their full sale price, rather than reflecting the immediate loss of value as a result of the sales load. Typically, sponsors have introduced “T shares,” that provide for a smaller up-front commission and then an annual “trail” commission during the life of the offering. The MVP REIT II offering is the first to eliminate the impact of all sales commissions to the REIT and its investors.