{"id":139682,"date":"2026-04-22T09:05:44","date_gmt":"2026-04-22T09:05:44","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=139682"},"modified":"2026-04-22T09:05:44","modified_gmt":"2026-04-22T09:05:44","slug":"united-states-real-estate-funds","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/united-states-real-estate-funds\/","title":{"rendered":"United States: Real Estate Funds"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-139682","comparative_guide","type-comparative_guide","status-publish","hentry","guides-real-estate-funds","jurisdictions-united-states"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Goodwin<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/04\/Goodwin-PNG-2.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Goodwin<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/04\/Goodwin-PNG-2.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Real Estate Funds laws and regulations applicable in United States<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal legal structures used for investment in real estate (e.g., limited partnerships and other fund vehicles, real estate investment companies, real estate investment trusts\/ unit trusts)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The US real estate private fund market is primarily composed of limited partnerships (\u201c<strong>LPs<\/strong>\u201d) and limited liability companies (\u201c<strong>LLCs<\/strong>\u201d), most commonly formed in Delaware. Funds are typically established as either (i) closed-ended funds, which have a fixed capital raise and a defined life that locks investors in for the duration of the fund\u2019s term or (ii) open-ended funds, which operate on a perpetual or indefinite basis, with periodic opportunities for investors to subscribe or redeem.<\/p>\n<p>Real estate investment trusts (\u201c<strong>REITs<\/strong>\u201d) are formed pursuant to a separate statutory regime established under the US Internal Revenue Code and are frequently associated with US real estate fund structures.\u00a0 Publicly listed REITs are subject to US Securities and Exchange Commission (&#8220;<strong>SEC<\/strong>&#8220;) registration and reporting requirements. Non-traded REITs, which are registered with the SEC but not listed on public exchanges, may be offered as standalone products to retail or high-net-worth investors under applicable securities laws. Private REITs are frequently used as subsidiary or blocker vehicles within fund structures to manage tax certain considerations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do all these structures provide limited liability to the investors? If so, how is this achieved?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, subject to the following distinctions. In LP structures formed under the Delaware Revised Uniform Limited Partnership Act (\u201c<strong>LP Act<\/strong>\u201d), limited partners benefit from liability protection, provided they do not participate in the control of the partnership. The LP Act provides broad safe harbors that substantially narrow the circumstances in which a limited partner&#8217;s activities will be deemed to constitute participation in control. The general partner (often itself an LLC or other limited liability entity) bears unlimited liability for the obligations of the LP.<\/p>\n<p>In LLC structures formed under the Delaware Limited Liability Company Act (\u201c<strong>LLC Act<\/strong>\u201d), all members typically benefit from limited liability. The manager (often itself an LLC or other limited liability entity) has no liability for the obligations of an LLC solely by reason of acting in its role as a manager, although a manager may incur liability for its own contractual obligations or misconduct.<\/p>\n<p>REIT shareholders similarly have limited liability as equity holders, with such protection deriving from the corporate or trust law of the REIT\u2019s state of organization. REITs are most commonly organized as Maryland corporations or Maryland statutory trusts, and shareholder liability is governed accordingly.<\/p>\n<p>Across these structures, limited liability protections may be lost under law in circumstances involving fraud, misuse of the entity form, or other circumstances supporting veil piercing (which is applied sparingly under Delaware law). Investors should also note that clawback obligations or guaranty arrangements in fund documentation may create exposure beyond an investor\u2019s capital commitment.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does structure depend on sector (residential, industrial\/logistics, office, living, retail) or investment strategy (core, value-add, opportunistic)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The choice of structure is generally not driven by real estate sector (e.g., residential, office, etc.), but rather largely by investor composition, liquidity profile, governance considerations and tax considerations.<\/p>\n<p>With respect to investment strategy, closed-ended structures are typically used for value-add and opportunistic strategies, while open-ended structures are more commonly used for core strategies focused on income generation, lower leverage and periodic liquidity. For larger single-asset or single-sector investments, joint ventures and club deal structures (in which a small number of institutional investors invest directly alongside the manager) are also common, often driven by asset size, concentration considerations, and the desire for greater investor control and governance rights.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the regulatory framework distinguish between different types of real estate funds (e.g., REITs vs. private real estate funds, development funds vs. income-generating property funds, open-ended vs closed-ended) and, if so, how?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The US does not have a standalone regulatory framework governing private real estate funds specifically.\u00a0 Private real estate funds are instead regulated under the same general securities law framework applicable to other private funds.<\/p>\n<p>The US regulatory framework distinguishes primarily between private funds, which rely on exemptions from registration under the US Investment Company Act of 1940 (the \u201c<strong>Investment Company Act<\/strong>\u201d), and registered investment companies or other publicly offered real estate investment vehicles, which are subject to SEC oversight and disclosure requirements.<\/p>\n<p>At the manager level, the regulatory framework further distinguishes based on registration status under the US Investment Advisers Act of 1940 (\u201c<strong>Advisers Act<\/strong>\u201d), as discussed in Questions 14 and 15 below.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How does the regulatory calculation of leverage apply to alternative investment funds that acquire real estate assets indirectly through non-listed companies? Are there any leverage limits that apply?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>US securities laws generally do not impose a regulatory look-through or aggregation requirement for leverage incurred at the level of property-holding subsidiaries or special purpose vehicles within a fund structure. Accordingly, there is no prescribed regulatory methodology for calculating leverage on a consolidated basis across a fund and its underlying investment vehicles.<\/p>\n<p>Leverage is instead governed primarily by contractual limitations negotiated in fund documentation (e.g., maximum loan-to-value ratios or aggregate leverage caps set forth in the fund\u2019s governing documents). Regulatory requirements applicable to lenders (including bank capital and underwriting standards) may also indirectly constrain fund leverage. In practice, lender-imposed covenants \u2014 including loan-to-value, debt service coverage, and debt yield requirements \u2014 often serve as the binding constraint on fund leverage.<\/p>\n<p>Registered investment companies are subject to leverage limitations under the Investment Company Act, but most private real estate funds rely on exemptions from registration under the Investment Company Act, and are therefore not subject to those limits. The Advisers Act does not impose prescriptive leverage limits on private funds; however, investment advisers registered under the Advisers Act that manage private funds may be required to report leverage-related information to the SEC on Form PF, subject to applicable reporting thresholds based on regulatory assets under management and fund size. Large private fund advisers (those with USD 1.5 billion or more in private fund assets under management) are subject to more detailed and frequent reporting obligations, including, in certain cases, current reporting requirements for specified qualifying triggering events.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there specific reporting requirements for property-level performance metrics (net operating income, cap rates, occupancy rates)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are generally no prescriptive regulatory requirements mandating the reporting of specific property-level performance metrics (e.g., net operating income, capitalization rates, or occupancy levels) for private real estate funds. Specific reporting obligations \u2014 including the frequency, format, and content of property-level performance data \u2014 are generally established contractually in the fund&#8217;s governing documents.\u00a0 Publicly offered or otherwise SEC-registered investment vehicles are subject to more prescriptive disclosure requirements under applicable SEC rules and regulations, including periodic reporting of financial and operational data.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are any disclosures required when properties are marked to market versus held at cost?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no single statutory mandate prescribing the use of fair value or cost for private real estate funds. However, funds are typically expected to apply consistent valuation methodologies and disclose these in offering and reporting materials. Funds preparing financial statements under US generally accepted accounting principles are generally expected to apply ASC 820 (Fair Value Measurement), which establishes a three-level hierarchy for valuation inputs and related disclosures. SEC-registered vehicles are subject to additional disclosure requirements regarding their accounting policies and valuation approaches under Regulation S-X and Regulation S-K.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Who can perform the valuation function for real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Valuations of real estate assets held by private funds may be performed internally by the fund manager or by independent third-party appraisers. There is generally no regulatory requirement mandating the use of independent valuers for private real estate funds, although institutional investors typically expect independent valuation oversight.<\/p>\n<p>Registered investment advisers are expected to adopt and implement written valuation policies and procedures as part of their compliance programs under the Advisers Act. In addition, the custody rule under Rule 206(4)-2 of the Advisers Act, which requires annual audited financial statements prepared by an independent registered public accounting firm, creates an indirect incentive for independent valuation, as auditors will review and scrutinize manager-determined valuations as part of the audit process. This provides an additional layer of independent review over the fund&#8217;s valuation practices and reported asset values.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How often must valuations be performed and how does this differ between closed-ended and open-ended real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is generally no statutory requirement prescribing valuation frequency for private real estate funds. Closed-ended funds typically value assets on a quarterly basis, consistent with quarterly reporting obligations to investors. Open-ended funds generally conduct more frequent valuations \u2014 often monthly or at each dealing date \u2014 to support net asset value (&#8220;NAV&#8221;)-based subscriptions and redemptions, with independent appraisals typically conducted annually or semi-annually.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the liquidity management tools you would typically expect a manager to deploy for an open-ended real estate fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Managers of open-ended real estate funds typically deploy a combination of liquidity management tools. These include redemption gates, which limit the aggregate volume of redemptions processed in any given period, and lock-up periods, which restrict redemptions for an initial holding period (often one to two years). Advance notice requirements (typically 45 to 90 days) and suspension rights permitting the manager to temporarily halt redemptions in adverse market conditions or where asset-level liquidity is insufficient are also standard. Additional tools may include side pockets for segregating illiquid or hard-to-value assets from the main portfolio, and in-kind distributions satisfying redemptions through the transfer of interests in underlying assets rather than cash. Managers may also maintain cash or liquid asset reserves and establish redemption queues to manage orderly processing of withdrawal requests during periods of elevated redemption activity.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any limits on the manager\u2019s ability to restrict redemptions in open ended real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are generally no prescriptive statutory or regulatory limits on a private fund manager&#8217;s ability to restrict or suspend redemptions, provided such rights are clearly set forth in the fund&#8217;s governing documents and disclosed to investors. Managers owe certain fiduciary duties (which may be modified via contract) in exercising discretionary suspension or gating powers and must apply such tools consistently and in good faith. By contrast, registered investment companies and other publicly offered vehicles are subject to more prescriptive SEC requirements governing liquidity and redemption practices.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are potential tools that a manager may use to manage illiquidity risks regarding the real estate assets of its fund (e.g., credit facilities, partial disposals, NAV financing)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Managers may employ a range of tools to manage illiquidity risk, including subscription credit facilities to bridge the timing of capital calls and fund liquidity needs, NAV-based financing facilities supported by the value of the underlying portfolio, asset-level financing, partial asset dispositions, and co-investment or recapitalization arrangements. Pacing of capital deployment and maintenance of cash reserves are also commonly used to manage liquidity across the fund lifecycle. The use of such tools is typically subject to limitations set forth in the fund&#8217;s governing documents, including aggregate leverage caps and borrowing restrictions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any other limitations on a manager\u2019s ability to manage its real estate funds (e.g., geographic diversification requirements, property type concentration limits, leverage restrictions)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are generally no prescriptive regulatory requirements imposing geographic diversification, property-type concentration limits, or leverage restrictions on private real estate funds. Such limitations are instead established contractually in the fund&#8217;s governing documents and may include investment concentration limits, leverage caps, and restrictions on investments outside the fund&#8217;s stated strategy.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are managers or advisers to real estate funds required to be licensed, authorised or regulated by a regulatory body? And the real estate fund itself?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Fund managers are required to register with the SEC as investment advisers under the Advisers Act, unless an exemption applies (such as the exempt reporting adviser exemption for managers with less than USD 150 million in US private fund assets under management). A manager whose activities are limited to the acquisition and management of real estate assets and that is not in the business of advising with respect to securities may fall outside the definition of &#8220;investment adviser&#8221; under the Advisers Act and therefore not be required to register.<\/p>\n<p>The fund itself is typically not required to register as an investment company under the Investment Company Act because most private real estate funds rely on exclusions under Section 3(c)(1) or 3(c)(7) of the Investment Company Act. Real estate funds may also rely on the exclusions available under Sections 3(c)(5)(C) and 3(c)(6) of the Investment Company Act. Section 3(c)(5)(C) is available to entities primarily engaged in the business of acquiring mortgages and other liens on and interests in real estate. In more limited circumstances, private real estate funds may seek to rely on Section 3(c)(6), which is available to companies primarily engaged in certain real estate-related activities.<\/p>\n<p>Individuals performing certain activities (e.g., real estate brokerage, mortgage lending) may be subject to separate state-level licensing requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there different tiers to regulation applicable to local fund vehicles based on the size of the fund and\/ or the size of the manager?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Regulatory obligations vary primarily based on the size of a manager\u2019s assets under management and the availability of applicable exemptions. For example, advisers with USD 1.5 billion or more in private fund assets under management are subject to enhanced reporting requirements. Advisers with less than USD 150 million in US private fund assets under management may rely on the exempt reporting adviser (&#8220;<strong>ERA<\/strong>&#8220;) exemption from full SEC registration. Additionally, the threshold for SEC versus state registration is generally USD 100 million in regulatory assets under management, with advisers below that threshold typically registering at the state level.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How does the appointment of a property and asset manager typically work for a real estate fund? Are there any regulatory requirements to be aware of?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Property managers and asset managers are appointed by the fund manager pursuant to contractual arrangements, typically through a property management agreement or asset management agreement. In practice, the asset management function is generally performed by the fund manager itself (or an affiliate thereof), which may be subject to SEC oversight as a registered investment adviser or as a relying adviser of a registered adviser.<\/p>\n<p>There is generally no separate regulatory approval process for the appointment of property managers, but property managers engaged in leasing or brokerage activities may be required to hold a real estate broker\u2019s license under applicable state law. The fund manager typically retains ultimate responsibility for oversight of delegated functions. The terms of appointment, including fees, scope of authority, and termination rights, are negotiated commercially and disclosed to investors in the fund&#8217;s offering materials.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What service providers are required by applicable law and regulation for real estate funds (e.g., property valuers, asset managers, property managers, custodians)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is generally no statutory requirement prescribing a specific set of service providers for private real estate funds. In practice, funds typically engage independent auditors, fund administrators, legal counsel, tax advisers, property managers, and valuation firms. Asset management functions are generally performed by the fund manager or its affiliates rather than by independent third parties.<\/p>\n<p>SEC-registered investment advisers are required to have fund financial statements audited annually by an independent public accounting firm registered with the Public Company Accounting Oversight Board as a condition of compliance with the custody rule under the Advisers Act.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there local residence or other local qualification or substance requirements for the real estate investment fund and\/or the fund manager and\/or the property and asset manager to the fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are generally no prescriptive local substance or residency requirements for private real estate funds, their managers, or their property-level service providers under US federal securities laws. However, fund vehicles are typically organized in Delaware. Managers operating in the United States will typically maintain a local presence, and entities may be required to register or qualify to do business in states where they conduct activities or own real estate assets. In addition, state-level requirements (such as real estate broker licensing) may apply depending on the activities conducted.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rules apply to foreign managers or advisers wishing to manage, advise, or otherwise operate funds domiciled in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Foreign managers conducting advisory activities directed at US investors or with respect to US-based assets may be required to register with the SEC as investment advisers under the Advisers Act, unless an exemption applies. The foreign private adviser exemption is available to managers that (i) have no place of business in the United States, (ii) have fewer than 15 clients and investors in the United States in private funds advised by the manager, (iii) have less than USD 25 million in aggregate assets under management attributable to such US clients and investors, and (iv) do not hold themselves out generally to the public in the United States as investment advisers.<\/p>\n<p>Foreign managers that do not qualify for the foreign private adviser exemption may be able to rely on the ERA exemption, subject to satisfying its conditions, which requires the filing of reports with the SEC on Form ADV but does not impose the full compliance obligations applicable to registered advisers. Foreign managers that register with the SEC or file as ERAs are subject to applicable recordkeeping, reporting, and, in the case of registered advisers, compliance program requirements under the Advisers Act. In practice, foreign managers frequently establish a US-based affiliate or rely on a sub-advisory arrangement with a US-registered adviser to manage US fund operations and investor relationships.<\/p>\n<p>Marketing of fund interests to US investors is subject to compliance with the private placement framework under Regulation D of the Securities Act of 1933 (<strong>&#8220;1933 Act<\/strong>\u201d), including restrictions on general solicitation and verification of investor accreditation status. State blue sky laws may impose additional notice filing requirements in connection with offerings to investors in particular states. Foreign managers should also consider whether any placement or distribution activities conducted in the United States could give rise to broker-dealer registration requirements under the Securities Exchange Act of 1934. Where a fund engages in transactions involving commodity interests or swaps, the manager may also need to consider registration obligations with the Commodity Futures Trading Commission (&#8220;<strong>CFTC<\/strong>&#8220;) as a commodity pool operator or commodity trading advisor, subject to applicable exemptions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the typical level of management fee paid for real estate funds? Does it vary by sector or investment strategy (core, value-add, opportunistic)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Management fees for private real estate funds typically range from 1.0% to 2.0% per annum, although the applicable rate and fee base vary by strategy and fund structure. Fees are commonly calculated on committed capital during the investment period and may step down and be based on invested capital or net asset value thereafter (see also 22 below).<\/p>\n<p>The rate generally varies by strategy: core and core-plus funds tend toward the lower end while value-add and then opportunistic funds are typically at the higher end. Separate account mandates and large institutional commitments may negotiate reduced fee arrangements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is a typical carried interest type in real estate funds? Is there a common approach to hurdle\/preferred return, catch-up provision, or other condition based on property-specific benchmarks? If so, please explain.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Carried interest in US private real estate funds is typically set at 20% of net profits, subject to a preferred return (hurdle rate) of 7%\u20139%, with a general partner catch-up provision (often 50\/50 or 80\/20) applied after the preferred return has been met.<\/p>\n<p>Whole-fund (European-style) waterfall structures, under which carry is calculated on aggregate fund returns rather than on a deal-by-deal basis, have become the prevailing market standard for institutional real estate funds, although deal-by-deal waterfalls may be used in certain strategies or fund structures. Clawback provisions requiring the return of excess carried interest distributions are standard and are typically supported by a general partner escrow or guaranty.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are typical management fees for real estate funds paid during and after the investment period, and how do these vary (if at all) in terms of the basis of the fee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>During the investment period of closed-ended funds, management fees are typically calculated on the basis of total committed capital. \u00a0Following the expiration or earlier termination of the investment period, management fees generally step down and are calculated on the basis of invested capital, net invested capital, or net asset value, depending on the terms negotiated. Some closed-ended funds also provide for a further fee reduction in any extension period beyond the initial fund term.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any particular requests investors in real estate funds are likely to ask for in their side letters?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Common side letter provisions in real estate funds include management fee discounts, co-investment rights, enhanced reporting, information rights and transparency obligations, excuse and exclusion rights (permitting investors to opt out of specific investments), most favored nation rights, key person provisions, environmental, social and governance (\u201c<strong>ESG<\/strong>\u201d)-related commitments, and transfer rights. Investors may also seek regulatory compliance representations, tax-related structuring accommodations, and restrictions on the use of leverage or certain investment types.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can real estate funds be marketed to non-professional (retail) investors in your jurisdiction? If so, is this a particular form of real estate fund and what are the regulatory requirements?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Private real estate funds are generally not marketed to retail investors, as they typically rely on exemptions under Regulation D that restrict offers and sales to accredited investors (and in some cases, qualified purchasers). Retail investors may access real estate through publicly listed REITs, non-traded REITs registered with the SEC under the 1933 Act, and registered closed-end funds or interval funds subject to the Investment Company Act.<\/p>\n<p>Non-traded REITs and interval funds are subject to enhanced disclosure, suitability, and liquidity requirements designed to protect retail participants. Non-traded REITs are also subject to Financial Industry Regulatory Authority rules, which require updated per-share valuations in customer account statements, and the SEC and FINRA have focused on the suitability of these products for retail investors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there additional restrictions on marketing real estate funds to government entities or similar investors (e.g. sovereign wealth funds) or pension funds or insurance company investors, given their typical allocation targets for real estate?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are generally no additional securities law restrictions specifically applicable to the marketing of private real estate funds to government entities, sovereign wealth funds, pension funds, or insurance companies. However, such investors are subject to their own regulatory and fiduciary frameworks, which may impose constraints on permissible investments and fund structuring. Key considerations include:<\/p>\n<p>ERISA plan assets \u2014 if &#8220;benefit plan investors&#8221; hold 25% or more of any class of equity interests in a fund (subject to certain exclusions), the fund&#8217;s assets may be deemed &#8220;plan assets&#8221; under the US Department of Labor&#8217;s plan asset regulations promulgated under the Employee Retirement Income Security Act of 1974 (&#8220;<strong>ERISA<\/strong>&#8220;), subjecting the manager to ERISA&#8217;s fiduciary duty and prohibited transaction requirements.<\/p>\n<p>Pay-to-play \u2014 SEC Rule 206(4)-5 under the Advisers Act restricts political contributions by registered investment advisers (and their covered associates) to officials of government entities that are investors or prospective investors in the adviser&#8217;s funds, and may impose a two-year fundraising ban following a triggering contribution.<\/p>\n<p>Public pension funds \u2014 state and local government pension plans are subject to their own statutory investment guidelines, board approval processes, and public disclosure obligations (including under state freedom of information laws), which may affect fund terms and reporting requirements.<\/p>\n<p>Insurance companies \u2014 insurance company investors are subject to state-level investment limitations, including asset class concentration limits and risk-based capital requirements, which may constrain their allocation to private real estate funds.<\/p>\n<p>Sovereign wealth funds \u2014 investments by sovereign-affiliated investors may trigger review by the Committee on Foreign Investment in the United States, particularly where the fund holds real estate in proximity to sensitive US government or military installations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What sustainability due diligence or disclosure requirements and ongoing compliance obligations apply to managers of real estate funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is currently no comprehensive federal ESG disclosure regime applicable to private real estate fund managers. The SEC has, however, increased scrutiny of ESG-related claims in fund marketing materials, and managers making sustainability-related representations must ensure such statements are accurate and substantiated.<\/p>\n<p>In practice, institutional investors increasingly require managers to adopt ESG policies, conduct sustainability due diligence, and report against recognized frameworks. Managers should also expect to negotiate ESG-related provisions in side letters, which may include commitments to specific reporting standards, exclusion of certain asset types or sectors on sustainability grounds, adoption of green building certifications (e.g., LEED or ENERGY STAR), and undertakings regarding portfolio-level decarbonization targets or net-zero alignment. The scope and enforceability of such commitments should be carefully considered in light of the manager&#8217;s duties to a fund and ability to implement them across the fund&#8217;s portfolio.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any mandatory energy efficiency reporting or carbon footprint disclosure requirements?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is generally no single federal regime mandating energy efficiency or carbon footprint disclosure for private real estate funds. However, several major jurisdictions \u2014 including New York City, Washington, D.C., and California \u2014 impose building-level energy benchmarking, emissions reporting, and, in some cases, emissions caps with associated penalties. The SEC has also pursued climate-related disclosure rulemaking, though the scope and status of such rules remain subject to ongoing legal and political developments. In practice, institutional investors increasingly expect managers to track and report portfolio-level energy consumption and carbon emissions, often aligned with certain recognized frameworks.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">4312<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/139682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=139682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}