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Regulation A (often called Reg A+ since the 2015 updates) is a U.S. securities law exemption that allows companies to raise capital from the public in a “mini-public offering” with streamlined requirements. Under Reg A, there are two tiers: Tier 1 allows raises up to $20 million in a 12-month period, and Tier 2 allows raises up to $75 million in 12 months. Companies using Reg A must file an offering statement with the SEC and provide an offering circular (similar to a prospectus) to investors, but the process is less onerous than a full IPO – especially under Tier 2, which preempts state blue sky laws and requires ongoing reporting (including audited financials) rather than full SEC registration. Importantly, Regulation A offerings can be open to non-accredited investors, making it a way for sponsors to broadly market real estate investments to the general public (subject to investment limits for non- accredited individuals in Tier 2 offerings). For high-net-worth investors, a Reg A offering might not be significantly different from a Reg D 506(c) private placement in terms of the investment itself – but the existence of Reg A indicates a sponsor’s desire to cast a wider net for capital (including the “mass affluent” market). Lightstone as a firm has historically sponsored non-traded REITs and could potentially use Reg A+ as a mechanism to raise funds from a broad investor base in the future (for instance, a diversified fund that accepts smaller investments). For now, Lightstone’s current platform focuses on accredited investors via Reg D. However, Reg A is reflective of the trend to democratize real estate investing.
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