The environment for the burgeoning alternative investment industry is constantly evolving. New regulations and private placement standard changes affect the industry, which is why trade organizations that educate alternative investment managers like REISA are so important.
Equities caught up with Thomas Voekler, the Vice President and a board member of REISA, whose annual conference, which will be taking place this year October 6-8 in Las Vegas at Caesar’s Palace.
We talked with Voekler – a lawyer with extensive experience with REITs, public and private financing, and corporate finance – about the private placement industry, the legal challenges facing managers involved in the alternative investment space, and what attendees can expect out of this year’s conference.
EQ: I was wondering if you could start off by telling us about your involvement with REISA and a little bit about its history.
Voekler: Sure. I am the Vice President of REISA, and my day job other than that is I’m managing partner at a law firm Kaplan, Voekler, Cunningham & Frank. And our involvement (with REISA) goes back. Whether it was with this law firm or other law firms, we’ve been with REISA’s predecessor TICA since back in the day, which originally split off from the investment program association, IPA.
The reason for the formation of TICA was, at that point, there was a fundamental need for an industry group to represent the sponsors, the broker/dealers, the lawyers and the like who were doing 1031 Tenant-in-Common real estate deals. Those grew to a three, four billion dollar a year industry up until 2007 or 2008, when the lenders stopped lending to the 1031 common structure, where basically you have many investors on title and the lenders just weren’t comfortable doing that and that market basically went away and all the sponsors and broker/dealers looked for other products.
TICA really started looking at private funda and REITs and the renewed focus on the non-traded REITs. There was also another 1031, a Delaware statutory trust, which grew out of there, and obviously TICA was not an appropriate nomenclature for the industry group anymore. It had grown past that offering/products.
So the decision was made to change it to REISA, which was dealing with real estate. The industry has even grown beyond that. REISA now represents a lot of oil and gas sponsors and some other alternative life annuity sponsors.
Mostly what this annual conference is about is education of the broker/dealers who offer the product. Education of the sponsors as to where the industry is and how the industry is doing. And then, an opportunity for the affiliates like myself – the law firms, the accountants – to give the industry kind of a flavor of where the regulatory environment is, where the tax environment is, kind of any accounting issues and the like.
And so REISA is a phenomenal opportunity for anyone who’s looking at alternative investments other than the kind of the Wall Street firms are offering. These are investments that could be offered to Main Street investors if they’re accredited and really allows the diversification play, and they offer a great opportunity to allow all the players to get together and see the state of the industry and get educated.
EQ: Great. Could you tell us a little bit about how the landscape has changed in the last ten years or so since you first started doing this?
Tom: That is interesting. We’ve seen a change the last ten yearswith Sarbanes-Oxley and other regulatory changes that there was kind of a push out of doing IPOs. I think a lot of the products that we see now on the alternative space – the real estate funds, the non trade REITs – a lot people would have considered doing prior to the initial public offering but the cost, the regulatory cost involved, kind of pushed those to put off the capital raising cycle to be more private for a while until they grew to a certain asset base where it would make sense to take on the regulatory burden.
And so we saw kind of the hey-day of the private placement for a while. And then more recently the regulators have started focusing on this industry. And while Dodd-Frank and the Jobs Act have provided some good things for the industry, there’s also been a renewed focus on tightening down on the advisors of funds and looking at the accredited investor standard. Where that standard is currently you have eight million investors in the United States that would be eligible. But we’re starting to hear rumblings of an inflation adjustment that would reduce the amount of investors for our industry.
We’re seeing some renewed focus on bad actor provisions coming into the private placement world which is something that has never been there before so certain people would not be allowed to offer these securities. So we’ve seen kind of a renewed focus from the regulatory environment and it kind of ebbs and flows as it does in every industry group. Right now I think this year’s going to be pretty active at the conference, talking about some of the new provisions that are coming into play on private placements and now allowing general solicitation.
However, the rule-making is very early on in the process and I think as an industry group there’s going to be a lot of sessions on, “how do you approach this the right way? Are you just taking out the blanket ads or are you targeting advertising and how do you deal with the ramifications therewith?” And I think this conference is coming at a really important time for us to ascertain where as an industry we’re going to focus everyone’s attention.
EQ: It sounds like there’s going to be a lot of kind of interesting things going on at this conference. Is there anything you’d like to highlight for our readers to kind of let them know anything in specifically you would like to point out to them?
Tom: I think one of the great things about the conference – we have two big conferences a year, this is kind of the big annual conference – not only are we going to educate managers on the regulatory environment which is obviously really, really important, but there’s a lot of education sessions for broker/dealers you know how to increase their sales on how to deal with the SEC and FNRA and how to deal with arbitration. Just really a lot of in-depth, targeted panels for any person who’s interested in the alternative space.
It’s a pretty robust schedule. There’s, at some point, there’s four panels going on at the same time. A common complaint is that people don’t have enough bodies to attend more than one session and they would like to!
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