Accredited Investor Qualifications – Who Can Buy Commercial Real Estate Private Placements?

As commercial real estate investment bankers we may sometimes have occasion to raise money in various private placements or other equity arrangements.

It is our policy to only offer such opportunities to “accredited investors” even in cases where some non-accredited investors could legally participate.

This begs the question: Who qualifies as an accredited investor?

We follow the Federal securities law definition and consider an accredited investor to be:

1. a bank, insurance company, registered investment company, business development company, or small business investment company;
2. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
3. a charitable organization, corporation, or partnership with assets exceeding $5 million;
4. a director, executive officer, or general partner of the company selling the securities;
5. a business in which all the equity owners are accredited investors;
6. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;
7. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
8. a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

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