We are a newly organized Delaware limited liability company which will invest in and manage a diversified portfolio of commercial real estate assets. The use of the terms “Property Income Trust”, the “Company”, “we”, “us” or “our” in this Offering Circular refer to Property Income Trust LLC unless the context indicates otherwise.
We are externally managed by our Manager, PIT Manager LLC. Our Manager will make all of our investment decisions unilaterally (see the “Management” section starting on page for details).
Mascia Development LLC, a New York Limited Liability Company, is our “Sponsor” and an affiliate of our Manager (see the “Overview Of Our Sponsor” starting on page for details).
Subject to the Company’s performance and having sufficient cash flow, the Manager intends to pay distributions to all Investors on a monthly basis in arrears commencing in the first full month after the month in which we make our first real estate-related investment.
Our goal is to provide a professionally managed, diversified portfolio of high-quality commercial real estate assets to investors who generally have had limited access to such investments in the past. Allocating some portion of your portfolio to a direct investment in high-quality commercial real estate assets may provide you with:
On top of the aforementioned reasons to invest in commercial real estate there are also some strong benefits to investing specifically in medical office properties. Some of the benefits are described now. Thanks to the aging baby boomers, there is a long-term demographic trend toward an aging population and higher medical spending per capita, all favoring the healthcare industry growth. The Affordable Care Act is further expected to increase medical spending among consumers nationwide not just the aging population. Medical professionals as office users are historically less likely to change locations than other office users, because of the substantial capital investments required in facilities and equipment, which makes them stable attractive long-term tenants. Higher predictability of returns due to long-term nature of leases and tenant responsibility for most operating costs and opportunity for growth in cash flow and valuation due to contractual rent increases.
Again, retail properties benefit from all of the commercial real estate investment benefits described above, but retail properties specifically have some additional benefits described here. We believe the fear among other real estate investors that internet retailers such as Amazon.com and the like, will “kill brick-and-mortar retailers” is overblown/oversold.
Our investment strategy is based on a “contrarian” or “value” investment thesis, meaning we typically invest counter to the common market sentiment to achieve maximum value. Similar to Warren Buffett’s “Be fearful when others are greedy and greedy when others are fearful” and Sir John Templeton’s “Invest at the point of maximum pessimism” quotes, we focus on finding those real estate properties that are “out of favor” and therefore have high relative current returns with strong long term growth possibilities.
This is not meant to be an exhaustive list of differences between a REIT and our Series A Investor Shares, but merely a highlight of the main differences. For further details, please consult your investment and tax advisor.
Investors in a real estate LLC usually hope that the pass-through entity will have sufficient depreciation, interest expense, and other deductions to shelter the cash flow from the property and keep a majority of the distribution tax deferred until sale. These shelters might permit the Investors to receive a return similar to a tax-exempt bond – except that real estate returns have historically been substantially higher compared to tax-exempt bonds because of the additional risk associated with real estate. REITS are not fully able to take advantage of these benefits to the extent that LLCs are. There can be no guarantee this will continue or that we will be able to take full advantage of this but it is true as of the date of this Offering Circular and we plan to attempt to continue achieving similar results.
A further difference between our Series A Investor Shares and a public REIT is the daily liquidity available with a publicly listed REIT. Although we have adopted a redemption policy (see the “Redemption Policy” section starting on page for further detail) that attempts to allow investors to redeem Series A Investor Shares on an annual basis, we do not have nearly the same liquidity as a fully public company. We also hope to have our Series A Investor Shares listed on the OTCQX market after the Company has issued $50,000,000 of Series A Investor Shares (see the “Transfers” section starting on page ), but there is no guarantee we will be successful in doing so. Therefore, for investors with a short-term investment horizon, a listed REIT is likely a better alternative than investing in our illiquid Series A Investor Shares. Valuations of a listed REIT are also more transparent and established than the valuation of our Series A Investor Shares. However, we believe our Series A Investor Shares will have lower correlation to the general stock market than listed REITs.
As of the date of this Offering Circular, the overall listed-REIT sector has recently been trading near all-time highs, with the Investor Series A Investor Shares version of the Vanguard REIT Index Fund (ticker: VGSIX, a mutual fund comprised of 153 public REIT stocks and requiring a $3,000 minimum investment) is yielding generally less than 3.0% after expenses, over the last few years. We believe such pricing suggests that a substantial portion of the price of listed REITs is attributable to a built-in liquidity premium, as recent unlevered capitalization rates on real estate transactions in the private sector have averaged 5.35% – 7.15%, according to a recent “Real Estate Investor Survey” report published by PWC from Q4 2015. Additionally, public REITs are subject to more demanding public disclosure and corporate governance requirements than we will be subject to. While we are subject to the scaled reporting requirements of Regulation A, such periodic reports are substantially less than what would be required for a public REIT.
The primary difference is that we neither charge nor do we intend to pay any broker-dealer distribution fees, which represents a savings to Investors of approximately 70% to 90% in upfront expenses as compared to a traditional non-exchange traded REIT.
We are one of only a few real estate investment companies available to both accredited and non-accredited investors offered directly over the internet. Currently, online investment platforms typically offer individual property investments as private placements to accredited investors only.
Yes. Our Manager and/or its affiliates shall make a combined equity investment in an expected amount of 20% of the total Series A Investor Shares outstanding, up to a maximum of $10,000,000 at the initial $25 per Share price. The money will be invested over time to match the 20% of total Series A Investor Shares outstanding until a maximum $10,000,000 has been invested. This investment will represent a significant portion of the net worth of the CEO and COO of our Sponsor, helping to ensure alignment of interests between management and Investors.
An investment in our Series A Investor Shares may be beneficial for you if you seek to diversify your investment portfolio with some commercial real estate, seek to receive current income, seek to preserve capital and are able to hold your investment for a long term time period consistent with our liquidity strategy. On the other hand, we caution persons who require immediate liquidity or guaranteed income, or who seek a short-term investment, to consider that an investment in our Series A Investor Shares will not meet those needs.
Yes. You must initially purchase at least 40 Series A Investor Shares in this Offering, or $1,000 based on the current per Share price. There is no minimum investment requirement on additional purchases after you have purchased a minimum of 40 Series A Investor Shares.
Generally, you may purchase Series A Investor Shares if you are a “qualified purchaser” (as defined in Regulation A under the Securities Act).
Net worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles. We reserve the right to reject any investor’s investment in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a “qualified purchaser” for purposes of Regulation A. For more information, see the “Securities Being Offered” starting on page and the “How To Invest” section starting on page .
You may purchase our Series A Investor Shares in this Offering by creating a new account, or logging into your existing account, at www.MasciaDev.com or www.PropertyIncomeTrust.net the “Site”. You will need to fill out an Investment Agreement like the one attached to this Offering Circular as Exhibit 1A-6E for a certain investment amount and pay for the Series A Investor Shares at the time you subscribe.
Our Manager will utilize the personnel and resources of our Sponsor to select our investments and manage our day-to-day operations.
Yes, we will provide you with periodic updates on the performance of your investment in our Company
We will provide this information to you by posting such information on the SEC’s website at www.sec.gov, on the Site, via e-mail, or, upon your request, via U.S. mail.
The Company believes in adhering to these and other industry best practices as much as possible in terms of governance, oversight, transparency, and communication with Investors. While the Manager has the flexibility to modify its practices over time to meet the needs of the Company, we have endeavored to incorporate whatever best practices we can into the LLC Agreement, and in the way which the Company is managed.
The Company shall begin making its investments as soon as is practicable in the sole judgment of the Manager. The relative size of the initial Company’s asset base may be much smaller than in the future depending on the amount of capital available to the Company. However, the Company expects to raise capital on an ongoing basis and thus shall begin making investments upon receipt of sufficient capital commitments in the sole judgment of the Manager.
The Company is an open-ended “evergreen” company with no set end date. The Manager expects to acquire investments on a frequent and ongoing basis and will continue to do so indefinitely until the maximum allowed under this Offering has been reached, or until the Manager believes market conditions do not justify doing so.
The Series A Investor Shares are restricted as to sale and transfer and should be considered a long term, illiquid investment.
In the event we are not listed on OTCQX after January 1, 2019, we plan to offer an annual redemption plan; however, you should view your investment in our Series A Investor Shares as a long-term investment with limited liquidity. According to our redemption policy, an Investor will be required to hold their Series A Investor Shares for a minimum of 12 months (the “Lockup Period”) before an Investor may request that the Company redeem their Series A Investor Shares for a cash payment based on the then-current price of the Series A Investor Shares. After the Lockup Period, Investors will have the right to request a redemption of up to a maximum of 50% of their total capital account per year, at the sole discretion of the Manager (which may make exceptions if a redemption is requested due to the death, disability, mental incapacity, or other hardship of the Investor, although it will not be obligated to do so). Redemption requests may be made on the 12-month anniversary of an Investor’s investment (each, an “Anniversary Date”), provided the Investor provides the Manager with notice of any redemption request at least 60 days prior to the Anniversary Date. Redemption requests will be considered on a first come, first served basis. The Manager shall have no obligation to grant any particular Redemption request and shall retain sole discretion as to whether or not to redeem any Series A Investor Shares. Redemption of Series A Investor Shares by any one Investor may not exceed 50% of the Investor’s total capital account per year, unless the Redemption is less than $2,500, or due to the death, disability, mental incapacity, or other hardship of the Investor, at the sole discretion of the Manager. The Manager expects to accept redemption requests for no more than 10% per year (or 2.5% per quarter) of the Company’s total outstanding Series A Investor Shares. Furthermore, an Investor requesting a redemption will be responsible for any third-party costs incurred in effecting such redemption, including, but not limited to, bank transaction charges, custody fees, and/or transfer agent charges. The redemption plan may be suspended at any time without notice. There are significant restrictions on redemptions, as more fully described in the “REDEMPTION POLICY” section on page.
After the Lockup Period, Investors will have the right to request a redemption of up to a maximum of 50% of their total capital account per year, at the sole discretion of the Manager (which may make exceptions if a redemption is requested due to the death, disability, mental incapacity, or other hardship of the Investor, although it will not be obligated to do so). Redemption requests may be made on the 12-month anniversary of an Investor’s investment (each, an “Anniversary Date”), provided the Investor provides the Manager with notice of any redemption request at least 60 days prior to the Anniversary Date. Redemption requests will be considered on a first come, first served basis.
The Manager shall have no obligation to grant any particular Redemption request and shall retain sole discretion as to whether or not to redeem any Series A Investor Shares. Redemption of Series A Investor Shares by any one Investor may not exceed 50% of the Investor’s total capital account per year, unless the Redemption is less than $2,500, or due to the death, disability, mental incapacity, or other hardship of the Investor, at the sole discretion of the Manager. The Manager expects to accept redemption requests for no more than 10% per year (or 2.5% per quarter) of the Company’s total outstanding Series A Investor Shares.
Furthermore, an Investor requesting a redemption will be responsible for any third-party costs incurred in effecting such redemption, including, but not limited to, bank transaction charges, custody fees, and/or transfer agent charges. The redemption plan may be suspended at any time without notice. There are significant restrictions on redemptions, as more fully described in the “REDEMPTION POLICY” section on page.
The Manager will not charge a commission or any “load” for the purchase of the Series A Investor Shares. While the Manager does not expect to use broker/dealers with any frequency or in amounts that would significantly affect the net returns to the Investors, although the Manager may engage licensed third parties to assist the Manager with raising capital in the Manager’s sole discretion.
Our Net Asset Value (“NAV”) per Share will be calculated at the end of each fiscal quarter, beginning January 1, 2018, by our internal accountants using a process that reflects several components, including (among other things) (1) the estimated value of our properties and other assets and investments, (2) our liabilities, (3) accruals of our monthly distributions and (4) estimated accruals of our operating revenues and expenses. See “POLICY WITH RESPECT TO VALUATION OF OUR ASSETS” on page for more details about our NAV and how it will be calculated.
Our Manager set our initial Offering price at $25.00 per Share, which will be the purchase price of our Series A Investor Shares until January 1, 2018. Thereafter, the per Share purchase price will be adjusted every fiscal quarter and, as of January 1st, April 1st, July 1st, and October 1st of each year, will be equal to our NAV divided by the number of Series A Investor Shares outstanding as of the close of business on the last business day of the prior fiscal quarter.
Yes, we intend to use leverage (i.e., debt). Our targeted portfolio-wide leverage, after we have acquired a substantial portfolio, is between 50-65% of the greater of cost (before deducting depreciation or other non-cash reserves) or fair market value of our assets. During the period when we are acquiring our initial portfolio, we may employ greater leverage on individual assets (that will also result in greater leverage of the initial portfolio) in order to quickly build a diversified portfolio of assets. For more information, see the “Leverage” section starting on page.
We are offering a maximum of $50,000,000 in our Series A Investor Shares to the public on a “best efforts” basis at $25.00 per Share. In addition, our Manager and its affiliates have committed to purchase an aggregate of 20% of the Series A Investor Shares outstanding up to $10,000,000 (400,000 Series A Investor Shares at $25.00 per Share) in addition to the $50,000,000 we are seeking to raise in this Offering.
When Series A Investor Shares are offered to the public on a “best efforts” basis, we are only required to use our best efforts to sell our Series A Investor Shares. Neither our Sponsor, Manager nor any other party has a firm commitment or obligation to purchase any of our Series A Investor Shares (other than our Manager and its affiliates’ commitment to purchase an aggregate of 20% of the outstanding Series A Investor Shares up to a maximum of 400,000 Series A Investor Shares from us at $25.00 per Share up to $10,000,000).
We currently expect that this Offering will remain open for Investors until we raise the maximum amount being offered, unless terminated by us at an earlier time. Our Manager reserves the right to terminate this Offering for any reason at any time.
Our Manager or its affiliates will pay on our behalf all costs incurred in connection with our organization and the offering of our Series A Investor Shares. See the “Use Of Proceeds” section starting on page below for more information about the types of costs that may be incurred. After we commence our operations, we will start to reimburse our Manager, without interest, for these organization and offering costs incurred both before and after that date. Reimbursement payments will be made in monthly installments, but the aggregate amount reimbursed can never exceed 0.50% of the aggregate gross offering proceeds from this Offering. If the sum of the total unreimbursed amount of such organization and offering costs, plus new costs incurred since the last reimbursement payment, exceeds the reimbursement limit described above in the applicable monthly installment, the excess may be eligible for reimbursement in subsequent months (subject to the overall 0.50% limit), calculated on an accumulated basis, until our Manager has been reimbursed in full.
The Company and Manager believe that fees should be paid for the work completed on our behalf. Meaning, higher aggregate dollar amounts should be paid for more work and lower fees paid for less work. We have attempted to align Investor interests with that of the Manager and Affiliates.
The Manager will be paid 1.5% of our NAV as an annual Asset Management Fee, and will receive a 10% profit share of all distributions paid by the Company to Investors as an incentive to achieve high returns to Investors.
In addition, the Manager and/or its affiliates will receive as income the full amount of any property level fees actually collected (e.g., property acquisition fees, leasing fees, brokerage fee, refinance fee, etc.). For more information, see the “Compensation of Our Manager” section starting on page below for further detail.
Further, we will also reimburse our Manager for the organization and offering expenses that the Manager has paid or will pay on our behalf on a monthly basis, up to 0.5% of the aggregate gross offering proceeds from this Offering.
The payment by us of fees and expenses will reduce the cash available for investment and distribution and will directly impact our quarterly NAV. See the “Compensation Of Our Manager” section starting on page below for more details regarding the fees that will be paid to our Manager and its Affiliates.
The Company is a limited liability company but will be treated as a partnership for federal tax purposes. Investors considering a purchase of the Series A Investor Shares should consult their own tax advisor for advice on any personal tax consequences that may be associated with an investment in the Series A Investor Shares. Furthermore, Investors will receive a K-1 tax form with income from multiple states as a result of purchasing Series A Investor Shares which may cause additional complexity and potentially substantial additional cost when filing your personal tax returns. We will not be responsible for assisting Investors with their tax complexity or costs. Please consult your tax advisor and see the “Federal Income Tax Consequences” section starting on page .
Unless your investment is held in a qualified tax-exempt account or we designate certain distributions as capital gain dividends, distributions that you receive generally will be taxed as ordinary income to the extent they are from current or accumulated earnings and profits.
Yes, as an Investor in our Series A Investor Shares you will benefit in proportion to your percentage share of the cashflow distributions from the depreciation, interest expense and any other pass through deductions against the distributions you receive.
Yes. In making these investment decisions, you should consider, at a minimum, (1) whether the investment is in accordance with the documents and instruments governing your IRA, plan or other retirement account, (2) whether the investment would constitute a prohibited transaction under applicable law, (3) whether the investment satisfies the fiduciary requirements associated with your IRA, plan or other retirement account, (4) whether the investment will generate unrelated business taxable income to your IRA, plan or other retirement account, and (5) whether there is sufficient liquidity for such investment under your IRA, plan or other retirement account.
Your Form K-1 tax information, will be provided on or before March 15th of the year following each taxable year. Be aware there will be multiple states to file in for your K-1 so this may not be enough time for your tax preparer to file your taxes on time by April 15th and may require a tax filing extension, which while allowed by the IRS may result in penalties if not done correctly and may cause you to incur extra tax preparation costs for filing the extension.
Investing in our Series A Investor Shares involves a high degree of risk. If we are unable to effectively manage the impact of these risks, we may not meet our investment objectives, and therefore, you should purchase these securities only if you can afford a complete loss of your investment. See the “RISKS OF INVESTING” beginning on page for a description of the risks relating to this Offering and an investment in our Series A Investor Shares.
If you have more questions about the Offering, or if you would like additional copies of this Offering Circular, you should contact us by email at firstname.lastname@example.org or by mail at:
Property Income Trust LLC
2407 Columbia Pike
Arlington, VA 22204
Attn: Investor Relations
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