NextSeed, previously a debt-focused Reg CF platform, has recently listed its first real estate offering for a property being redeveloped in downtown Albuquerque, New Mexico. Securities are being issued under Reg D 506c – so accredited investors only.
According to NextSeed, ARRIVE Albuquerque “offers a rare opportunity to invest in a marquee property in the redeveloping downtown area of Albuquerque.” The property is a hotel that is said to core to the city’s downtown. “ARRIVE Albuquerque represents a unique and timely investment well-positioned to capitalize on downtown’s accelerating growth,” claims NextSeed.
The offering is part of a Qualified Opportunity Zone -a new tax exemption that can significantly improve net returns to investors. The investment will be held in a Special Purpose Vehicle or SPV.
A minimum hurdle of $100,000 has been set with a $20,000 minimum investment. Investors will be receiving “LLC Membership Interests.” A distribution waterfall is highlighted on the offering page. The first 100% of distributions will go to investors until they receive the complete return of their initial investment plus a 9% preferred return. Investors continue to receive more in the 3rd and 4th distribution segments.
On a different subject, NextSeed hopes that the Securities and Exchange Commission (SEC) will update Reg CF rules that currently bar SPVs and sets caps on the amounts that accredited investors may dedicate to Reg CF offerings. To quote NextSeed:
“Due to a prohibition in Regulation Crowdfunding [Reg CF] on investment fund vehicles, this offering is only available to Accredited Investors pursuant to Regulation 506(c). We hope that the SEC and Congress will someday modify Regulation Crowdfunding to allow non-accredited investors to participate in investment funds, but it is unfortunately not possible today.”
Some industry participants believe that Reg CF is doomed as a stand-alone offering. Today, most platforms pair Reg CF with a side-by-side Reg D offering to work around the clumsy and myopic rules enacted by the Commission. The SEC is currently in the midst of a review of the securities exemption ecosystem – a review that provides a unique opportunity to fix what is broken. Reg CF is high on the list of broken rules. Some industry advocates hope the SEC will raise the exemption to a $20 million cap thus making it more viable and attractive to quality issuers.
NextSeed previously operated solely as a FINRA regulated funding portal but to become a sustainable platform NextSeed became a broker-dealer.
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