The private placement memorandum (PPM) is a crucial document provided to investors in syndicated DSTs. It is prepared by the sponsor of the offering and serves as a comprehensive disclosure document, providing all the necessary information for investors to make informed investment decisions.
The PPM includes details about the offering structure, SEC disclosures, property information, trust manager and master tenant information, investment risks, financing details, use of proceeds, conflicts of interest, and investor suitability data. It also includes the purchase questionnaire and agreement, which is the sales contract for the offering.
The PPM is prepared in accordance with Regulation D of the Securities Act, which provides exemptions for sponsors to raise equity through private or limited offerings without registering with the SEC. By utilizing a PPM, DST sponsors can meet the requirements of the Securities Act in a manageable and cost-effective manner while still providing investors with necessary disclosures and protections.
While the PPM may seem overwhelming due to its length and detail, it is important for investors to thoroughly review it. The PPM is the sponsor’s opportunity to disclose all the risks, conflicts, opportunities, and potential rewards associated with the offering. It allows investors to objectively evaluate the investment and make an informed decision.
The PPM includes standard SEC disclosures and copies of important documents such as the trust agreement, master lease agreement, loan agreement, management agreement, and subscription documents. These documents govern the operation of the property and are critical for reviewing the investment.
Investors have the right to request the PPM for any DST offering at no cost. The sponsor will typically send a complete PPM package to the investor via overnight delivery or electronically. It is advisable for investors to order a PPM well in advance of an exchange to familiarize themselves with the document and set expectations.
A well-designed PPM is a valuable resource for investors and a benefit of investing in real estate through a DST private placement offering. It allows for efficient comparison and contrast of multiple DST investments and should be kept for reference throughout the investment’s hold period and beyond.