Because Fortitude’s real estate offerings are private placements regulated by the federal government under the 1933 Securities Act, the sponsor retains a law firm to write a Private Placement Memorandum (PPM).
The PPM contains a detailed description of the property, the sponsor, the financial details of the investment, the projected return on the investment and the specifics of the DST or TIC structure. It also contains third-party due diligence reports, all pertinent leases, agreements, contracts and a legal opinion – as well as a detailed discussion of general and specific risks associated with the investment. You may not get these benefits when purchasing non-securitized real estate on your own unless you pay for them yourself.
The law firm must also perform due diligence on disclosures made in the PPM to ensure they are complete, accurate and not misleading. A law firm is also retained to issue a legal opinion published within the PPM on whether the offering as structured will meet the provisions for Revenue Ruling 2004-86 or Revenue Procedure 2002-22 and qualify for 1031 Exchange treatment.
Fortitude and the Alternative & Direct Investment Securities Association, formerly known as the Real Estate Investment Securities Association, require a “should” level opinion for an offering to be acceptable. Regulation D of the 1933 Securities Act requires that each accredited investor must be provided with the PPM in advance of making a decision to invest in a specific offering.