Because the real estate offerings through Cornerstone are private placement offerings regulated by the federal government under the 1933 Securities Act, a law firm is retained by the sponsor to write a Private Placement Memorandum (PPM). This 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 each particular investment. These are benefits that may not be available to an investor seeking to purchase a non-securitized piece of real estate on their own unless they paid for them themselves.
The law firm must also perform limited due diligence on disclosures made in the PPM to ensure that they are complete, accurate and not misleading to the reader. 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. Both our brokerage and the Real Estate Investment Securities Association require a "should" level opinion for an offering to be acceptable. Per Regulation D of the 1933 Securities Act, each accredited investor must be provided with the PPM in advance of making a decision to invest in the offering.