MVP REIT II: A “No-Load” Non-Traded REIT?

An S-11 for MVP REIT II Inc., the planned follow-up to MVP REIT Inc., a non-traded real estate investment trust that invests primarily in parking lots, parking garages and other parking structures, has been registered with the Securities & Exchange Commission. Seeking to raise up to $550 million at $25 per share, perhaps the most intriguing aspect of the filing is that MVP REIT II will apparently have no upfront securities load for its investors. Instead, according to the filing, the 6.5 percent selling commission will be paid directly by the “sponsor or its affiliates” (excluding the REIT itself). Organizational and offering expenses will also be paid by the sponsor and the offering will pay no dealer manager fee.

One of the sharpest criticisms of non-traded REITs has traditionally been the significant securities load, typically totaling in the neighborhood of 10 percent or more. Assuming the MVP REIT II offering makes its way to the marketplace, it will apparently be the first essentially “no-load” non-traded REIT – a potentially revolutionary change to the industry.

Of course, sponsors have begun introducing new share classes into their new and existing offerings for some time in response to FINRA 15-02, which will require the inclusion of per share estimated values for non-traded REITs and related offerings on investor account statements. Historically, these non-traded investments have been listed on account statements at their full sale price, rather than reflecting the immediate loss of value as a result of the heavy sales load. Typically, sponsors have introduced “T shares,” that provide for a smaller up-front commission and then an annual “trail” commission during the life of the offering. The MVP REIT II offering is the first to eliminate the impact of all sales commissions to the REIT and its investors.

It’s not clear when MVP REIT II will become effective, but the current MVP REIT is scheduled to close its offering on September 25. While MVP executives would not comment for this story, citing securities laws, we assume the MVP REIT II offering will become effective shortly thereafter.