Section 14(h)(4) of the Exchange Act defines a limited partnership roll-up transaction as a transaction involving the combination or reorganization of one or more limited partnerships, directly or indirectly, in which, among other things, investors in any of the limited partnerships involved in the transaction are subject to a significant adverse change with respect to voting rights, the term of existence of the entity, management compensation, or investment objectives; and any of such investors are not provided with an option to receive or retain a security under substantially the same terms and conditions as the original issue. For more information regarding transactions that are not “limited partnership roll-up transactions,” please see our publication “Frequently Asked Questions about Real Estate Investment Trusts.” If the transaction is a limited partnership roll-up not entitled to an exemption from registration, in addition to the requirements of Form S-11 and SEC Industry Guide 5, Section 14(h) of the Exchange Act, and Items 902 through 915 of Regulation S-K will require significant additional disclosures on an overall and per partnership basis, addressing changes in the business plan, voting rights, form of ownership interest, the compensation of the general partner or another entity from the original limited partnership, additional risk factors, conflicts of interest of the general partner, and statements as to the fairness of the proposed roll-up transaction to the investors, including whether there are fairness opinions, explanations of the allocation of the roll-up consideration (on a general and per partnership basis), federal income tax consequences, and pro forma financial information. There have been few public roll-up transactions in recent years, and most roll-up transactions are currently conducted as private placements, particularly following the SEC’s 2007 interpretive guidance (Release No. 33 8828), as modified by its subsequent 2020 interpretive guidance (Release Nos. 33-10884 and 34 90300) on public/private integration issues. The rules promulgated under the JOBS Act that allow general solicitation and advertising in certain private securities offerings under Rule 506 and Rule 144A, so long as the securities are sold to accredited investors, or QIBs also lessen the securities law integration risk. Any roll-up transaction, whether or not it meets the SEC and FINRA definitions, will have complex accounting and structuring issues that must be addressed with the accountants and counsel early in the IPO planning process, including relating to the identification of the REIT’s “predecessor” and “accounting acquirer” and the presentation of historical and pro forma financial statements. In addition, the organizational documents and debt and other agreements of each participating entity must be reviewed. For more information, please see our FAQs About UpREITs and OP Unit Transactions publication. 2024 Guide to REIT IPOs and Listing Transactions | 22
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