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What is a Real Estate Investment Trust (REIT)?
For whom are REITs an appropriate investment?
What is unique about Nexregen?
What percentage of the gross proceeds from the sale of shares in Nexregen Firewheel REIT will be used for investment?
Why should I invest in a REIT that is not listed or traded on an exchange?
If I buy shares, will I receive distributions and how often?
When does an investor begin to earn distributions?
What is Nexregen Firewheel REIT’s ownership position in Firewheel Village?
Will Firewheel Village be affected by rising interest rates?
If I buy shares in this offering, will I able to sell them later?
Will the distributions I receive be taxable as ordinary income?
When will you report to me on the status of my investment and when will I receive tax return information?
What is a Prospectus?
Q: What is a Real Estate Investment Trust (REIT)?
A: A REIT is a corporation that combines capital from many investors to buy and operate income-producing real estate. It gives investors a low cost
opportunity to include commercial real estate in an investment portfolio. Also, REITs avoid the "double taxation" treatment of income that would result
from an investment in a corporation, because REITs do not pay taxes if certain standards are met, including the distribution of at least 90% of income
that would otherwise be taxable. Hence, REITs are focused on generating and distributing income to their shareholders.
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Q: For whom are REITs an appropriate investment?
A: An investor who wants to (1) generate current income as well as opportunities for longer-term value growth, and (2) diversify his or her investment
portfolio, will find REITs an attractive supplement to his or her existing investment strategy.
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Q: What is unique about Nexregen?
A: Nexregen was founded by Ray Wirta and Harold Hofer for a single purpose to make direct real estate investment easier and more affordable for the
small investor. Typically, the sponsor of a private REIT has an in-house “wholesaling” team that is responsible for marketing shares in the private
REIT to financial planners. The financial planner usually receives 5% to 7% of his clients’ investment in the REIT as a commission. Additionally,
the financial planner’s parent company (or broker-dealer) also receives a commission, in the 1% to 2% range. Finally, the wholesaler receives a
commission of 2% to 3%. When you add all of these up, the bottom line is that approximately 10% of the cost of the REIT shares is spent on commissions
in these other REITs.
Nexregen does not pay commissions. We believe that investors are sophisticated enough to be able to make a real estate investment decision without the
advice of a financial planner, who is in a conflict position because of the commissions he stands to earn. Nexregen believes that with the ease of access
to the internet and the transparency of the internet, it can deliver a real estate product to the market that has 10% more of the investment amount actually
being invested in the real estate rather than being paid to others in the form of commissions.
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Q: What percentage of the gross proceeds from the sale of shares in Nexregen Firewheel REIT will be used for investment?
A: 97% of the gross proceeds from the sale of shares will be used for investment. We will use the remaining 3% of the gross proceeds to reimburse
organization and offering costs.
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Q: Why should I invest in a REIT that is not listed or traded on an exchange?
A: History has shown that public REIT valuations (represented by share price) are variable, with such share prices sometimes being higher or lower
than “Net Asset Value” (the calculation of (1) the current market value of a REIT’s properties and other assets, minus (2) its debt and other liabilities).
Investors can experience uncertainty when there is a lack of correlation between public REIT share price and NAV. Private REITs such as Nexregen Firewheel
REIT do not have this issue.
Additionally, Nexregen Firewheel REIT owns an interest in a specific property, Firewheel Village, and investors can base their investment decision upon their
perception of this property. Public REITs on the other hand own large portfolios of properties often over large geographic areas, and they buy and sell
properties continually. As a result, it is more difficult for an investor to judge the investment opportunity represented by a public REIT.
Finally, annual dividends for public REITs average below 5%.
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Q: If I buy shares, will I receive distributions and how often?
A: Distributions are scheduled on a quarterly basis. The amount of each distribution is determined by our board of directors and will depend upon cash
availability as well as current and projected cash requirements. Remember though, in order to remain qualified as a REIT, we must make distributions of at
least 90% of our annual REIT taxable income. Our current expectation is that dividends for Nexregen Firewheel REIT will be around 7% per year.
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Q: When does an investor begin to earn distributions?
A: We will calculate our quarterly distributions based upon the week an investor purchases shares in Nexregen Firewheel REIT. Therefore, investors will
receive a pro-rated distribution at the end of the first partial quarter during which they bought shares.
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Q: What is Nexregen Firewheel REIT’s ownership position in Firewheel Village?
A: Firewheel Village is owned by Nexregen Firewheel L.P. (the “Partnership”). Nexregen Firewheel REIT is one of three partners in the Partnership, the other
two being affiliates of our advisor; and our advisor is also the general partner of the Partnership. As shares of Nexregen Firewheel REIT are sold to the
public, Nexregen Firewheel REIT’s percentage interest in the L.P. will grow, up to a maximum of 90% if all shares are sold.
The investment was structured in this way to allow for the purchase of Firewheel Village, and the certainty of its ownership, before shares in Nexregen
Firewheel REIT were offered to the public.
There is no “mark up” in Firewheel Village’s purchase price. Nexregen Firewheel REIT will pay the same price for its proportionate share.
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Q: Will Firewheel Village be affected by rising interest rates?
A: No. Firewheel Village already has a mortgage, with a fixed interest rate of 5.70% for 10 years.
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Q: If I buy shares in this offering, will I able to sell them later?
A: The purchase of shares in Nexregen Firewheel REIT comes with a one-year money-back guarantee. We intend to own Firewheel Village for 3 to 7 years; although
there is no guarantee as to when the property will be sold. When Firewheel Village is sold, you will receive your final payment check.
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Q: Will the distributions I receive be taxable as ordinary income?
A: Generally, distributions that you receive will be taxed as ordinary income. We expect that some portion of your distributions may not be subject to tax
in the year received due to the fact that depreciation expenses reduce taxable income. This defers a portion of your tax until your investment is sold or
liquidated, at which time you will be taxed at capital gains rates.
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Q: When will you report to me on the status of my investment and when will I receive tax return information?
A: We will provide you with quarterly updates on the performance of Nexregen Firewheel REIT. Additionally, your Form 1099 tax information will be mailed by
January 31 of each year. We will furnish this information to you by electronic delivery (i.e., via e-mail).
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Q: What is a Prospectus?
A: A Prospectus is a legal document that discusses the investment program for which money is solicited. A Prospectus typically includes sections that describe how the solicited money is to be invested, the investment's business plan, risks associated with the investment, the background and track record of the sponsors, the legal rights and responsibilities of the investors, and more. Nexregen Firewheel Real Estate Investment Trust's Prospectus has been registered with the Texas State Securities Board.
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