POS AM 1 urt-posam_011515.htm POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT

 

As filed with the Securities and Exchange Commission on January 16, 2015

Registration No. 333-178651

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

________________________

PRE-EFFECTIVE AMENDMENT NO. 1 TO

POST-EFFECTIVE AMENDMENT NO. 6 TO

 

FORM S-11

 

FOR REGISTRATION
UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES 

________________________

 

United Realty Trust Incorporated

(Exact name of registrant as specified in its charter)

Maryland 6798 453770595
     
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. employer
identification number)

United Realty Trust Incorporated
60 Broad Street
34th Floor
New York, New York 10004
(212) 388-6800

(Address, including zip code, and telephone number,
including area code, of the registrant’s principal executive offices)

________________________

 

 
 

 

 

 

Jacob Frydman
c/o United Realty Trust Incorporated
60 Broad Street
34th Floor
New York, New York 10004
(212) 388-6800

(Name, address, including zip code, and telephone number,
including area code, of agent for service) 

________________________

Copies to:

Peter M. Fass, Esq.
Proskauer Rose LLP
Eleven Times Square
New York, New York 10036
(212) 969-3000

________________________

Approximate date of commencement of proposed sale to public: As soon as practicable after the effectiveness of the registration statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):

Large accelerated filer Accelerated filer
   
Non-accelerated filer Smaller Reporting Company
   

(Do not check if smaller reporting company)

 
 

 

 

________________________

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

This Post-Effective Amendment No. 6 consists of the following:

  · Supplement No. 1 to Registrant’s Prospectus, dated October 2, 2014, which supplements Registrant’s Prospectus, dated April 30, 2014;

  · Supplement No. 2 to Registrant’s Prospectus, dated December 31, 2014, which supplements Registrant’s Prospectus, dated April 30, 2014;

  · Registrant’s Prospectus, dated April 30, 2014;

  · Part II to this Post-Effective Amendment No. 6, included herewith; and

  · Signatures, included herewith.

 

 
 

 

 

 

UNITED REALTY TRUST INCORPORATED

SUPPLEMENT NO. 3, DATED JANUARY 16, 2015,

TO THE PROSPECTUS, DATED APRIL 30, 2014

 This prospectus supplement, or this Supplement No. 3, is part of the prospectus of United Realty Trust Incorporated, which we may refer to as the “Company,” “we,” “our” or “us,” dated April 30, 2014, or the Prospectus, as supplemented by Supplement No. 1, dated October 2, 2014, Supplement No. 1, and Supplement No. 2, dated December 31, 2014, or Supplement No. 2. This Supplement No. 3 supplements, modifies or supersedes certain information contained in the Prospectus, Supplement No. 1 and Supplement No. 2 and should be read in conjunction with the Prospectus, Supplement No. 1 and Supplement No. 2. This Supplement No. 3 will be delivered with the Prospectus, Supplement No. 1 and Supplement No. 2.

The purposes of this Supplement No. 3 are to:

  · provide information regarding our board of directors’ determination of an estimated net asset value, or NAV, per share of the Company’s common stock, par value $0.01 per share, or Common Share;

  · revise prior disclosure regarding the status of the offering;

  · update disclosure on the cover page of the Prospectus;

  · update disclosure relating to risk factors;

  · update disclosure relating to distributions;

  · update disclosure relating to the offering price of our Common Shares;

  · update disclosure relating to the minimum investment;

  · update disclosure relating to our valuation policies;

  · update disclosure relating to our distribution policy;

  · update disclosure relating to our distribution reinvestment program;

  · update disclosure relating to our share repurchase program;

  · update disclosure relating to the plan of distribution;

  · update disclosure relating to the advisor;

  · update disclosure relating to taxes;

  · update the list of documents incorporated by reference; and

  · include as Annex A an updated form of Subscription Agreement.

 

S-1
 

 

 

 

OPERATING INFORMATION

NAV per Common Share

As set forth in the Prospectus, beginning on January 15, 2015, the offering price per Common Share in the primary offering will be equal to our NAV per Common Share plus applicable selling commissions and dealer manager fees, the price per Common Share for Common Shares purchased under our distribution reinvestment program, or DRIP, will be equal to our NAV per Common Share, and (subject to certain limitations) the price per Common Share for Common Shares repurchased pursuant to our share repurchase program will be equal to 95% of our NAV per Common Share. Our board of directors has approved an estimated NAV per Common Share equal to $12.51, calculated by our advisor in accordance with our valuation guidelines, to be used in connection with the foregoing transactions.

 Our board of directors has adopted valuation guidelines to be used in connection with determining NAV per Common Share. Our valuation guidelines provide that our advisor will calculate NAV, taking into consideration the appraisals of each of our properties performed by an independent valuer and in accordance with the valuation guidelines established by our board of directors. Our advisor reviews valuations established by the independent valuer for consistency with our valuation guidelines and the reasonableness of the independent valuer’s conclusions. Our board of directors oversees our advisor’s NAV calculations and reviews and approves valuations. Our board of directors relies on our advisor’s valuation and the independent valuer’s determination of the value of the real property assets. However, our board of directors may, in its discretion and as appropriate, consider other factors.

The valuation guidelines provide that in performing valuations of our properties, the independent valuer will generally use the income approach, in which value is estimated based on market expectations of the cash flows each property is excepted to generate over its remaining useful life, discounted to present value using a rate of return appropriate for the risk of achieving the projected cash flows, plus the residual value of the property at the end of the projection period. Alternatively, the independent valuer may, as it deems appropriate, value properties using either the sales comparison approach, in which each property is compared with comparable properties for which pricing information is available, or the replacement cost approach, which assesses the cost of replacing the property.

The independent valuer assessed our properties using both the income approach and the sales comparison approach, and concluded that the income approach is more appropriate. As such, all property valuations were estimated using the income approach.

KTR Real Estate Appraisals

 

In determining the most recent estimated value of our Common Shares, our board of directors considered information and analysis, including valuation materials that were provided by KTR Real Estate Advisors, LLC, or KTR, an independent advisory firm that specializes in providing real estate valuation services, and information provided by our advisor.

 

Based on these considerations, our board of directors established an estimated value of our Common Shares, as of January 15, 2015, of $12.51 per Common Share. If our board of directors had used one or more different valuation methods, it might have made a different determination regarding the estimated value of our Common Shares. Our board of directors is solely responsible for the establishment of the per share estimated value.

Methodology

In preparing its valuation materials, KTR, among other things:

  reviewed financial and operating information requested from, or provided by, us;

  researched the market by means of publications and other resources to measure current market conditions, supply and demand factors and growth patterns and their effect on the subject properties;

  reviewed and discussed with senior management the historical and anticipated future financial performance of the properties, including the review of forecasts and budgets prepared by us;

 

S-2
 

 

 

 

  performed such other analyses and studies, and considered such other factors, as KTR considered appropriate; and

  inspected each of the properties.

In applying the income approach, KTR used the expected net income after vacancy and collection loss, and operating expenses, for each property. Net income was then capitalized at an appropriate risk-adjusted discount rate to derive an estimate of value.

KTR used discount rates derived from fourth quarter 2014 industry published reports and other market participant data. For its analysis, KTR assumed that current in-place leases will be paid through their original terms.

This methodology produced an estimate for the aggregate value for our real estate portfolio (excluding liabilities) of $34.55 per share.

Estimates and Calculations by the Advisor

To estimate our per-share NAV, the advisor analyzed the reports provided by KTR and utilized a method which is based on the fair value of the properties and current assets, less the fair value of our total liabilities. The resulting value was then adjusted for non-controlling interests and divided by the number of shares outstanding on a fully-diluted basis as of January 14, 2015.

Our advisor reviewed the appraisals provided by KTR and agreed with the valuations. Our advisor valued current assets and liabilities at book value. Our advisor concluded that the book value of our debt as of January 15, 2015 properly reflected the fair value, as the debt was recently incurred and the terms are generally similar to the terms currently available to borrowers similar to us which are seeking borrowing terms similar to ours.

The following table, prepared by our advisor, summarizes the individual components presented to our board of directors to estimate per share value:

    Per Share
Properties   $ 34.55  
Current assets net of current liabilities     2.69  
Mortgages, notes payable and non-controlling interests     (24.73 )
Estimated per share value   $ 12.51  

Limitations of the Asset Appraisals

We believe that the NAV method used to estimate our NAV per Common Share is the methodology most commonly used by non-listed REITs to estimate per share NAV. We believe that the assumptions described herein to estimate the value of the properties are a reasonable approximation of the assumptions used by market participants buying and selling similar properties. The estimated property values may not, however, represent current market value or book value. The estimated value of the properties reflected above does not necessarily represent the value we would receive or accept if the assets were marketed for sale. The market for commercial real estate can and does fluctuate and values are expected to change in the future. Further, the estimated NAV per Common Share does not reflect a liquidity discount for the fact that the Common Shares are not currently traded on a national securities exchange, a discount for the non-assumability or prepayment obligations associated with certain of our loans and other costs that may be incurred, including any costs of sale of our assets.

As with any methodology used to estimate value, the methodologies employed to value the properties by KTR, and the recommendations made by our advisor, were based upon a number of estimates and assumptions that may not be accurate or complete, including estimates and assumptions such as comparable sales, rental and operating expense data, capitalization rates, and projections of future rent and expenses. Further, different parties using different assumptions and estimates could derive a different estimated value per Common Share, which could be significantly different from this estimated value per Common Share.

 Limitations of the Estimated NAV per Common Share

The estimated NAV per Common Share does not represent the: (i) the amount at which our Common Shares would trade at a national securities exchange, (ii) the amount a stockholder would obtain if he or she tried to sell his or her Common Shares or (iii) the amount stockholders would receive if we liquidated our assets and distributed the proceeds after paying all of our expenses and liabilities. Accordingly, with respect to the estimated NAV per Common Share, we can give no assurance that:

S-3
 

 

 

 

  a stockholder would be able to resell his or her Common Shares at this estimated value;

  a stockholder would ultimately realize distributions per Common Share equal to this estimated value per Common Share upon liquidation of our assets and settlement of our liabilities or a sale of our company;

  our Common Shares would trade at a price equal to or greater than the estimated value per Common Share if the Common Shares were listed on a national securities exchange; or

  the methodology used to estimate NAV per Common Share would be acceptable to the Financial Industry Regulatory Authority, Inc. for use on customer account statements, or that the estimated per-share NAV will satisfy the applicable annual valuation requirements under the Employee Retirememt Income Security Act of 1974, as amended, or ERISA, and the Internal Revenue Code of 1986, as amended, or the Code, with respect to employee benefit plans subject to ERISA and other retirement plans or accounts subject to Section 4975 of the Code.

Conclusion

Based on our advisor’s review of the reports provided by KTR and on our advisor’s own analysis, estimates and calculations (as described above), our advisor recommended to our board of directors an estimate of NAV per Common Share as of January 15, 2015 of $12.51.

The estimated NAV per Common Share was unanimously adopted by our board of directors on January 15, 2015. Our board of directors is ultimately and solely responsible for the determination of the estimated NAV per Common Share. The estimate was determined at a moment in time and will likely change over time as a result of changes to the value of individual assets as well as changes and developments in the real estate and capital markets, including changes in interest rates. We currently expect to update our estimated NAV per Common Share on a daily basis, subject to quarterly review and revision by our board of directors. Nevertheless, stockholders should not rely on the estimated NAV per Common Share in making a decision to buy or sell Common Shares.

New Purchase Price under Distribution Reinvestment Program

The purchase price per Common Share under the DRIP will be equal to the NAV per Common Share. Accordingly, under the DRIP, beginning with reinvestments of distributions accruing on January 15, 2015, and until we announce a new estimated NAV per Common Share, distributions may be reinvested at a price equal to $12.51 per Common Share.

New Purchase Price under Share Repurchase Plan

Pursuant to our share repurchase program, the repurchase price per Common Share will be equal to 95% of our NAV per Common Share. Accordingly, under the share repurchase program, subject to certain limitations, beginning with repurchases made on January 30, 2015, and until we announce a new estimate of NAV per Common Share, repurchases will be made at a price equal to $11.88 per Common Share.

Status of the Offering

On page S-1 of Supplement No. 2, the second sentence under the caption “Status of the Offering” is hereby deleted and replaced with the following:

“The IPO is being conducted by United Realty Securities, a division of our dealer manager, Cabot Lodge Securities, LLC, a Delaware limited liability company and a member of FINRA that is indirectly owned by our Sponsor.”

S-4
 

 

 

PROSPECTUS UPDATES

On page S-15 of Supplement No. 1, the first table under the caption “Management” is hereby deleted and replaced with the following:

“Name 

Age* 

Positions 

Jacob Frydman 57 Chief Executive Officer, Secretary and Chairman of the Board of Directors
Richard J. Vitale, CFA 47 President and Director
Steven Kahn 48 Chief Financial Officer and Treasurer
Dr. Daniel Z. Aronzon 67 Independent Director
Robert Levine 65 Independent Director
David B. Newman 54 Independent Director

___________

  * As of January 15, 2015.”

 

On page i of the Prospectus, the first sentence of the third paragraph under the caption “Investor Suitability Standards” is hereby deleted and replaced with the following:

 

“The minimum investment is $2,500.”

 

On the cover page of the Prospectus, the second and third paragraphs are hereby deleted and replaced with the following:

“We are offering up to 100,000,000 shares of our common stock, $0.01 par value per share, or Common Shares, in our primary offering at a price equal to our net asset value, or NAV, per Common Share, plus applicable selling commissions and dealer manager fees, on a “best efforts” basis through United Realty Securities, a division of Cabot Lodge Securities, LLC (“United Realty Securities” or “dealer manager”), our dealer manager. “Best efforts” means that our dealer manager is not obligated to purchase any specific number or dollar amount of Common Shares.

We also are offering up to 20,000,000 Common Shares pursuant to our distribution reinvestment program, or DRIP, at a price equal to our NAV per Common Share. At no time will the offering price per Common Share under our DRIP be less than 95% of the fair market value per Common Share. We reserve the right to reallocate the Common Shares we are offering between the primary offering and our DRIP.”

On the cover page of the Prospectus, the disclosure under the caption “Investing in our Common Shares involves a high degree of risk. See “Risk Factors” beginning on page 32 to read about risks you should consider before buying our Common Shares. These risks include the following:” is hereby revised to add the disclosure below as the last item in the list:

Because the dealer manager is an affiliate of our sponsor, you will not have the benefit of an independent due diligence review of us, which is customarily performed in underwritten offerings; the absence of an independent due diligence review increases the risks and uncertainty you face as a stockholder.”

On the cover page of the Prospectus, the fourth item in the list under the caption “Investing in our Common Shares involves a high degree of risk. See “Risk Factors” beginning on page 32 to read about risks you should consider before buying our Common Shares. These risks include the following:” is hereby deleted and replaced with the following:

“The purchase of Common Shares under our DRIP and the repurchase of Common Shares under our share repurchase program are based on our NAV per Common Share, which is based upon subjective judgments, and may not reflect the amount that you might receive for your Common Shares in a market transaction.”

On the cover page of the Prospectus, the table and footnotes are hereby deleted and replaced with the following:

“The table below assumes that all Common Shares are sold in the offering based on an NAV of $10.00 per Common Share, an assumption that does not give effect to any pricing structure that existed prior to January 15, 2015.

    Price to
Public
  Selling
Commissions
  Dealer
Manager Fee
  Net Proceeds
(Before Expenses)
Primary Offering                
Per Common Share   $ 11.11 *   $ 0.777 *   $ 0.333 *   $ 10.00  
Total Maximum   $ 1,111,000,000 *   $ 77,700,000 *   $ 33,300,000 *   $ 1,000,000,000  
Distribution Reinvestment Program                                
Per Common Share   $ 10.00     $     $     $ 10.00  
Total Maximum   $ 200,000,000     $     $     $ 200,000,000  

 

* Discounts on selling commissions and dealer manager fee are available for some categories of investors and for “single purchasers” (as defined below) of more than $1,000,000 in value of Common Shares.

 

S-5
 

 

 

On page 4 of the Prospectus, the first paragraph and the first sentence of the second paragraph under the caption “What is the offering price for your Common Shares?” are hereby deleted and replaced with the following:

“The offering price per Common Share in our primary offering and under our DRIP will vary and will be equal to our NAV on each business day, which we define as a day that the New York Stock Exchange is open, divided by the number of Common Shares outstanding as of the end of business on such day without giving effect to any Common Share repurchases and reinvestments of distributions effected on such day, which amount we refer to as our NAV per Common Share, plus applicable selling commissions and dealer manager fees.”

On pages 4–5 of the Prospectus, the last sentence of the second paragraph under the caption “What is the offering price for your Common Shares?” is hereby deleted.

On page 5 of the Prospectus, the ninth item in the list under the caption “Are there any risks involved in an investment in your Common Shares?” is hereby deleted and replaced with the following:

 We will make some of or all our distributions from sources other than cash flow from operations, including the proceeds of our public offering or from borrowings (including borrowings secured by our assets); our organizational documents do not limit the amount of distributions we can fund from sources other than operating cash flow. Distributions paid from sources other than our cash flows from operations, particularly from proceeds of our initial public offering, will result in us having fewer funds available for the acquisition of properties and other real estate-related investments and may dilute our stockholders' interests in us, which may adversely affect our ability to fund future distributions with cash flows from operations and may adversely affect our stockholders’ overall return. The majority of the distributions we have made to date have been distributions of offering proceeds.”

On page 5 of the Prospectus, the eleventh item in the list under the caption “Are there any risks involved in an investment in your Common Shares?” is hereby deleted and replaced with the following:

“The purchase of Common Shares under our DRIP and the repurchase of Common Shares under our share repurchase program are based on our NAV per Common Share, which is calculated based upon subjective judgments, assumptions and opinions about future events, and may not be accurate. As a result, our daily NAV per Common Share may not reflect the amount that you might receive for your Common Shares in a market transaction.”

On page 8 of the Prospectus, the first sentence of the fifth item in the list under the caption “What conflicts of interest will your sponsor face?” is hereby deleted and replaced with the following:

“Under certain circumstances, the asset management fee that we pay to our advisor or its assignees may be based on NAV (i.e., we will pay our advisor or its assignees a monthly fee equal to the greater of (a) one-twelfth ( 1/12) of 1% of the average of our daily NAV for the preceding month and (b) one-twelfth ( 1/12) of 0.75% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) then owned plus one-twelfth ( 1/12) of 0.75% of the amount advanced for each loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment) then owned).”

S-6
 

 

 

 

On pages 10–13 of the Prospectus, the disclosure under the caption “What are the fees that you will pay to the advisor, its affiliates and your directors?” is hereby revised to replace the table through and including the row captioned “Asset Management Fees” with the disclosure below:


“ 

Type of
Compensation
Determination of
Amount
Amount Paid During
Year Ended
December 31, 2013

Estimated Amount for
Maximum Offering
(100,000,000

Common Shares)*

  Organization and
Offering Stage
   
Selling Commissions The dealer manager will receive from the gross proceeds selling commissions equal to 7.0% of the maximum offering price per Common Share. No selling commissions will be paid on sales of Common Shares under our DRIP. The dealer manager will reallow all selling commissions to the participating broker-dealer or registered representative of the dealer manager who actually sold the Common Shares $292,557

$77,700,000

 

The actual amount will depend on the number of Common Shares sold.

Dealer Manager Fee The dealer manager will receive from the gross proceeds a dealer manager fee equal to 3.0% of the maximum offering price per Common Share. The dealer manager may reallow from the dealer manager fee up to 1.5% of the maximum offering price per Common Share to any participating broker-dealer for marketing support. No dealer manager fee will be paid with respect to sales under our DRIP. $150,549

$33,300,000

 

The actual amount will depend on the number of Common Shares sold.

 

 

S-7
 

 

 

 

Type of

Compensation

Determination of
Amount
Amount Paid During
Year Ended
December 31, 2013

Estimated Amount for
Maximum Offering
(100,000,000

Common Shares)*

       

Organization and

Offering Expenses

We will reimburse our advisor up to 2% of the total offering price paid by investors (which includes proceeds to us from the sale of Common Shares, plus applicable selling commissions and dealer manager fee) for organization and offering expenses, which may include reimbursements to be paid to the dealer manager, registered investment advisors and participating broker-dealers for due diligence fees set forth in detailed and itemized invoices.

 

Operational Stage

$86,620

$22,220,000

 

The actual amount will depend on the number of Common Shares sold.

Acquisition Fees

We will pay to our advisor or its assignees 1% of the contract purchase price of each property acquired (including our pro rata share (direct or indirect) of debt attributable to such property) or 1% of the amount advanced for a loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment), as applicable. For purposes of this prospectus, “contract purchase price” or the “amount advanced for a loan or other investment” means the amount actually paid or allocated in respect of the purchase, development, construction or improvement of a property or the amount actually paid or allocated in respect of the purchase of loans or other real estate-related assets, in each case inclusive of any indebtedness assumed or incurred in respect of such investment but exclusive of acquisition fees and acquisition expenses.

$294,000 $9,777,800 (or $27,936,571 assuming we incur our expected leverage of 65% set forth in our investment guidelines).
Acquisition Expenses

We will reimburse our advisor for expenses actually incurred related to selecting, evaluating and acquiring assets on our behalf, regardless of whether we actually acquire the related assets. In

 

$992,907 $5,866,680 (or $16,761,943 assuming we incur our expected leverage of 65% set forth in our investment guidelines).

 

S-8
 

 

 

 

Type of

Compensation

Determination of
Amount
Amount Paid During
Year Ended
December 31, 2013

Estimated Amount for
Maximum Offering
(100,000,000

Common Shares)*

       
  addition, we will pay third parties, or reimburse the advisor or its affiliates, for any investment-related expenses due to third parties, including, but not limited to, legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, third-party brokerage or finder’s fees, title insurance expenses, survey expenses, property inspection expenses and other closing costs, regardless of whether we acquire the related assets. We estimate that total acquisition expenses (including those paid to third parties, as described above) will be approximately 0.6% of the purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) and 0.6% of the amount advanced for a loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment). In no event will the total of all acquisition fees and acquisition expenses (including those paid to third parties, as described above) payable with respect to a particular investment exceed 6% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) or 6% of the amount advanced for a loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment), as applicable.    

 

S-9
 

 

 

 

Type of

Compensation

Determination of
Amount
Amount Paid During
Year Ended
December 31, 2013

Estimated Amount for
Maximum Offering
(100,000,000

Common Shares)*

       
Construction and Development Management Fee We expect to engage our property manager to provide construction and development management services for some of our properties. Other than with respect to tenant improvements, as described below, we will pay a construction and development management fee in an amount of 2% of the cost of any construction or development that our property manager undertakes. When our property manager provides construction management services with respect to tenant improvements, the construction and development management fee may be up to, but will not exceed, 5% of the cost of the tenant improvements. None Not determinable at this time.

Asset Management

Fees

We will pay our advisor or its assignees a monthly fee equal to the greater of (a) one-twelfth (1/12) of 0.75% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) then owned plus one-twelfth (1/12) of 0.75% of the amount advanced for each loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment) then owned, and (b) one-twelfth (1/12) of 1% of the average of our daily NAV for the preceding month, payable on the first business day of each month. $140,479

Not determinable at this time. Because the fee is based on a fixed percentage of NAV or contract purchase price or the amount advanced for a loan or other investment with respect to all our assets then owned during the months for which such fee is payable, there is no maximum dollar amount of this fee.”

 

 

 

On page 21 of the Prospectus, the first paragraph under the caption “If I buy Common Shares, will I receive distributions and how often?” is hereby deleted and replaced with the following:

“On January 15, 2015, our board of directors authorized the payment of distributions on our Common Shares at an annualized rate of 7.78% of NAV (a daily rate of 0.021315% of our NAV as of each respective payment date). Distributions will begin to accrue as of daily record dates beginning on February 1, 2015 and will be aggregated and paid monthly, on payment dates determined by us, to stockholders who hold Common Shares as of such daily record dates. We expect to continue paying distributions monthly unless our results of operations, our general financial condition, general economic conditions or other factors make it imprudent to do so. The timing and amount of distributions will be determined by our board and will be influenced in part by its intention to comply with REIT requirements of the Code.”

S-10
 

 

 

On page 21 of the Prospectus, the following disclosure is hereby added to the third paragraph under the caption “If I buy Common Shares, will I receive distributions and how often?”:

“Distributions paid from sources other than our cash flows from operations, particularly from proceeds of our initial public offering, will result in us having fewer funds available for the acquisition of properties and other real estate-related investments and may dilute our stockholders' interests in us, which may adversely affect our ability to fund future distributions with cash flows from operations and may adversely affect our stockholders’ overall return. On a cumulative basis since our inception, the majority of the distributions we have made have been funded with proceeds from our IPO.”

On page 22 of the Prospectus, the fourth sentence under the caption “May I reinvest my distributions in Common Shares of United Realty Trust Incorporated?” is hereby deleted and replaced with the following:

“The offering price per Common Share under our DRIP will be equal to the NAV per Common Share.”

On page 22 of the Prospectus, the first sentence under the caption “How will your advisor calculate NAV per Common Share?” is hereby deleted and replaced with the following:

“Our advisor is responsible for calculating our daily NAV at the end of each business day.”

On page 23 of the Prospectus, the third sentence in the first paragraph under the caption “How will you use the proceeds raised in this offering?” is hereby deleted and replaced with the following:

 

“The scenario assumes (a) that we sell the maximum of 100,000,000 Common Shares in this offering at a price based on an NAV per Common Share of $10.00, an assumption that does not give effect to any pricing structure that existed prior to January 15, 2015, and (b) that no Common Shares under our DRIP are sold.”

 

On pages 23–24 of the Prospectus, the table and footnote (1) under the caption “How will you use the proceeds raised in this offering?” are hereby deleted and replaced with the following:

 

 

   

Maximum Offering

(Not Including DRIP)

    Amount   Percent
Total offering price paid by investors   $ 1,111,000,000       100.00 %

Less offering expenses:

Selling commissions and dealer manager fee(1)

  $ 111,000,000       10.00 %
Organization and offering expenses(2)   $ 22,220,000       2.00 %
Amount available for investment or distribution   $ 977,780,000       88.01 %
Acquisition:                
Acquisition fees   $ 9,777,800       0.88 %
Acquisition expenses   $ 5,866,680       0.53 %
Amount invested in assets(3)   $ 962,135,520       86.60 %

(1) The table assumes that the amounts of the selling commissions and dealer manager fee were and will be, for the life of this offering, as disclosed herein, and does not give effect to any compensation structure that existed prior to January 15, 2015.

 

On page 24 of the Prospectus, the paragraph under the caption “What kind of offering is this?” is hereby deleted and replaced with the following:

 

“We are offering up to 100,000,000 Common Shares on a “best efforts” basis at our NAV per Common Share plus applicable selling commissions and dealer manager fees. Volume discounts and discounts for certain categories of purchaser also are available, as described under “Plan of Distribution.” We also are offering up to 20,000,000 Common Shares pursuant to our DRIP. The offering price per Common Share under our DRIP is equal to the NAV per Common Share. No selling commissions or dealer manager fee will be payable on Common Shares sold under our DRIP. At no time will the offering price per Common Share under our DRIP be less than 95% of the fair market value per Common Share. We reserve the right to reallocate the Common Shares we are offering between the primary offering and our DRIP.”

 

S-11
 

 

 

 

On page 24 of the Prospectus, the first sentence under the caption “Who is the dealer manager?” is hereby deleted and replaced with the following:

 

“United Realty Securities, our dealer manager, is a division of Cabot Lodge Securities, LLC, a Delaware limited liability company and a member of the Financial Industry Regulatory Authority, Inc., or FINRA, that is directly or indirectly owned by our sponsor.

 

On page 25 of the Prospectus, the second sentence under the caption “Is there any minimum investment required?” is hereby deleted and replaced with the following:

 

“We require a minimum investment of $2,500.”

 

On page 25 of the Prospectus, the paragraph under the caption “Can I be certain that I will be able to liquidate my investment immediately at the time of my choosing?” is hereby deleted and replaced with the following:

 

“No. Our Common Shares are not listed on a national securities exchange and we will not seek to list our Common Shares until the time, if such time ever occurs, that our independent directors believe that the listing of our Common Shares would be in the best interest of our stockholders. Stockholders who have held their Common Shares for at least one year may make daily requests that we repurchase all or a portion (but generally at least 25%) of their Common Shares pursuant to our share repurchase program, but we may not be able to fulfill all repurchase requests. The repurchase price per Common Share on any business day will be 95% of our NAV per Common Share for that day, calculated after the close of business on the repurchase request day, without giving effect to any share purchases or repurchases to be effected on such day; provided, however, that while the primary offering is ongoing, in no event will the repurchase price exceed the then-current offering price under the primary offering. We will limit the Common Shares repurchased during any calendar quarter to 1.25% of the weighted average number of Common Shares outstanding during the previous calendar quarter, or approximately 5% of the weighted average number of Common Shares outstanding in any 12-month period. We will limit Common Shares repurchased during any calendar quarter to 5% of our NAV as of the last day of the previous calendar quarter (or, during the quarter ending March 31, 2015, our NAV as of January 15, 2015), or approximately 20% of our NAV in any 12-month period. Our advisor will evaluate our capital needs and the amount of available cash and other liquid assets each quarter and may elect to increase the amount available for repurchase during such quarter. In addition, you will only be able to repurchase your Common Shares to the extent that we have sufficient liquid assets. Most of our assets will consist of properties which cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition. We may not always have sufficient liquid resources to satisfy all repurchase requests. In order to provide liquidity for repurchases, we intend to maintain the following percentage of the overall value of our portfolio in cash, cash equivalents and other short-term investments and certain types of real estate related assets that can be liquidated more readily than properties (collectively, “liquid assets”): (A) 15% of our NAV up to $333 million; (B) 10% of our NAV between $333 million and $667 million; and (C) 5% of our NAV in excess of $667 million. In addition, our board of directors may decide, but is not obligated, to maintain borrowing capacity under a line of credit. Our board of directors in its discretion may modify, suspend or terminate our share repurchase program for any reason. See ‘Share Repurchase Program.’” 

 

On page 28 of the Prospectus, the fifth item in the list under the caption “What types of reports on my investment will I receive?” is hereby deleted and replaced with the following:

•   our current NAV per Common Share via our toll-free, automated line, (855) REIT-NAV, or on our website at www.unitedrealtytrust.com.”
   

On page 29 of the Prospectus, the second and third sentences under the caption “There is no public trading market for our Common Shares, and there may never be one; therefore, it will be difficult for you to sell your Common Shares except pursuant to our share repurchase program. If you sell your Common Shares to us under our share repurchase program, you may receive less than the total price you paid for the Common Shares.” are hereby deleted and replaced with the following:

 

S-12
 

 

 

“Common Shares may be repurchased at a price equal to 95% of the NAV per Common Share as of the repurchase date (although while the primary offering is ongoing, in no event will the repurchase price date exceed the then-current offering price under the primary offering), not the original total offering price.”

 

On pages 29–30 of the Prospectus, the paragraph under the caption “You are limited in your ability to sell your Common Shares pursuant to our share repurchase program and may have to hold your Common Shares for an indefinite period of time.” is hereby deleted and replaced with the following:

 

“Our board of directors may amend the terms of our share repurchase program without stockholder approval. Our board of directors also is free to suspend or terminate the program or to reject any request for repurchase. In addition, our share repurchase program includes numerous restrictions that would limit your ability to sell your Common Shares. Our ability to fulfill repurchase requests is subject to a number of limitations. Most importantly, most of our assets consist of real estate properties which cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition. In addition, we will limit Common Shares repurchased during a calendar quarter to 5% of our NAV as of the last day of the previous calendar quarter, or approximately 20% of our NAV in any 12-month period. Furthermore, our board of directors may limit, modify or suspend our share repurchase program, and our advisor may limit the amount of repurchases on a quarterly basis. Repurchase of Common Shares through our share repurchase program may be the only way to dispose of your Common Shares, but there are a number of limitations placed on such repurchases. Common Shares may be repurchased at a price equal to 95% of the NAV per Common Share as of the repurchase date; provided, however, that while the primary offering is ongoing, in no event will the repurchase price exceed the then-current offering price under the primary offering. See ‘Share Repurchase Program.’”

 

On page 32 of the Prospectus, the caption “Investors who invest in us before the NAV pricing start date may be diluted if the NAV pricing start date occurs before the end of our primary offering and our NAV per Common Share falls below the price such investors paid. If, during our primary offering, our daily NAV falls significantly below our offering price, investors may be deterred from purchasing Common Shares.” and the two sentences immediately following the caption are hereby deleted and replaced with the following:

 

“Investors may be diluted if our NAV per Common Share falls below the price such investors paid. If, during our primary offering, our daily NAV falls significantly below our offering price, investors may be deterred from purchasing Common Shares.

 

The offering price per Common Share in our primary offering and under the DRIP and the share repurchase program will vary from day to day based on our NAV per Common Share on each business day. Investors may be diluted if our NAV per Common Share falls below the price such investors paid, because other stockholders may purchase shares in our primary offering and under our DRIP at prices based on the lower NAV per Common Share.”

 

On page 36 of the Prospectus, the caption “Commencing on the NAV pricing start date, your purchase and the repurchase of our Common Shares under our share repurchase program will be at a price equal to our NAV per Common Share, which will be calculated based upon subjective judgments, assumptions and opinions about future events, and may not be accurate. As a result, our daily NAV per Common Share may not reflect the amount that you might receive for your Common Shares in a market transaction, and you will not know the NAV per Common Share at the time of purchase.” and the paragraph immediately following the caption are hereby deleted and replaced with the following:

 

Your purchase and the repurchase of our Common Shares under our share repurchase program will be at prices based on our NAV per Common Share, which will be calculated based upon subjective judgments, assumptions and opinions about future events, and may not be accurate. As a result, our daily NAV per Common Share may not reflect the amount that you might receive for your Common Shares in a market transaction, and you will not know the NAV per Common Share at the time of purchase.

 

We will base the purchase price of Common Shares and the repurchase price for Common Shares under our share repurchase program on our NAV per Common Share. NAV will be calculated by estimating the market value of our assets and liabilities, many of which may be illiquid. An independent valuer will perform valuations of our real estate portfolio and provide the board with the metrics to be used in calculating our daily NAV, all of which the board of directors will approve. The valuation may not be precise because the valuation methodologies used to value a real estate portfolio involve subjective judgments, assumptions and opinions about future events. Any resulting disparity may benefit the stockholders whose shares are or are not being repurchased under our share repurchase program, those purchasing or not purchasing Common Shares or those participating or not participating in our DRIP. Investors will not know the NAV per Common Share underlying the purchase price at the time they submit a purchase order. See “Valuation Policies” for more details about how our NAV will be calculated.”

 

S-13
 

 

 

 

On page 36 of the Prospectus, the caption “It may be difficult to accurately reflect material events that may impact our daily NAV between valuations and, accordingly, commencing on the NAV pricing start date, we may be selling Common Shares and repurchasing Common Shares under our share repurchase program at too high or too low a price.” and the sentence immediately following the caption are hereby deleted and replaced with the following:

 

“It may be difficult to accurately reflect material events that may impact our daily NAV between valuations and, accordingly, we may be selling Common Shares and repurchasing Common Shares under our share repurchase program at too high or too low a price.

 

Our independent valuer will estimate at least annually the market value of our principal assets and liabilities, and also provide the metrics to be used in the subsequent calculation of NAV, and we will rely on those estimates to determine the daily NAV per Common Share.”

On page 38 of the Prospectus, the second sentence under the caption “Our advisor and its affiliates face conflicts of interest relating to the incentive fee structure under our advisory agreement and pursuant to the terms of the Sponsor Preferred Shares; these conflicts of interest could result in actions that are not necessarily in the long-term best interests of our stockholders.” is hereby deleted and replaced with the following:

 

“For example, we will pay to our advisor or its assignees a monthly fee equal to the greater of (a) one-twelfth (1/12) of 1% of the average of our daily NAV for the preceding month and (b) one-twelfth (1/12) of 0.75% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) then owned plus one-twelfth (1/12) of 0.75% of the amount advanced for each loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment) then owned.”

 

On page 43 of the Prospectus, the caption “The offering price of our Common Shares in this offering was not determined on an independent basis; as a result, the offering price of the Common Shares in this offering is not related to any independent valuation” and the paragraph immediately following the caption are hereby deleted.

On page 50 of the Prospectus, the paragraph under the caption “Valuations and appraisals of our properties and valuations of our investments in real estate-related assets are estimates of fair value and may not necessarily correspond to realizable value, which could adversely affect the value of your investment.” is hereby deleted and replaced with the following:

 

“In order to calculate our daily NAV, our properties will initially be valued at cost, which we expect to represent fair value. After this initial valuation, valuations of properties will be conducted in accordance with our valuation guidelines and will be based partially on appraisals performed by our independent valuer. Similarly, our real estate-related asset investments will initially be valued at cost, and thereafter will be valued at least annually, or in the case of liquid securities, daily, as applicable, at fair value as determined by our advisor. See “Valuation Policies.” The valuation methodologies used to value our properties will involve subjective judgments concerning factors such as comparable sales, rental and operating expense data, capitalization or discount rate, and projections of future rent and expenses. Appraisals and valuations will be only estimates, and ultimate realization depends on conditions beyond our advisor’s control. Further, valuations do not necessarily represent the price at which we would be able to sell an asset, because such prices would be negotiated. We will not retroactively adjust the valuation of such assets, the price of our Common Shares in our primary offering or under our DRIP, the price we paid to repurchase Common Shares or NAV-based fees we paid to our advisor. Because the price of Common Shares in our primary offering or under our DRIP and the price at which your Common Shares may be repurchased by us pursuant to our share repurchase plan are based on our estimated NAV per Common Share, you may pay more than realizable value or receive less than realizable value for your investment.”

 

S-14
 

 

 

On page 50 of the Prospectus, the caption “Commencing on the NAV pricing start date, in calculating our daily NAV, our advisor will base its calculations in part on independent appraisals of our properties, the accuracy of which our advisor will not independently verify.” is hereby deleted and replaced with the following:

 

“In calculating our daily NAV, our advisor will base its calculations in part on independent appraisals of our properties, the accuracy of which our advisor will not independently verify.”

 

On page 51 of the Prospectus, the caption “Commencing on the NAV pricing start date, our NAV per Common Share may suddenly change if the appraised values of our properties materially change or the actual operating results differ from what we originally budgeted for that month.” is hereby deleted and replaced with the following:

 

“Our NAV per Common Share may suddenly change if the appraised values of our properties materially change or the actual operating results differ from what we originally budgeted for that month.”

 

On page 51 of the Prospectus, the caption “Commencing on the NAV pricing start date, the NAV per Common Share that we publish may not necessarily reflect changes in our NAV and in the value of your Common Shares or the impact of extraordinary events that we cannot immediately quantify.” is hereby deleted and replaced with the following:

 

“The NAV per Common Share that we publish may not necessarily reflect changes in our NAV and in the value of your Common Shares or the impact of extraordinary events that we cannot immediately quantify.”

 

On page 70 of the Prospectus, the second and third sentences of the second paragraph under the caption “If the fiduciary of an employee pension benefit plan subject to ERISA (such as a profit-sharing, Section 401(k) or pension plan) or any other retirement plan or account fails to meet the fiduciary and other standards under ERISA or the Code as a result of an investment in our Common Shares, the fiduciary could be subject to criminal and civil penalties.” are hereby deleted and replaced with the following:

 

“We will provide a daily NAV per Common Share, which we will use as the per share estimated value.”

 

On page 72 of the Prospectus, the second and third sentences under the caption “Estimated Use of Proceeds” are hereby deleted and replaced with the following:

“The scenario assumes (a) that we sell the maximum of 100,000,000 Common Shares in this offering at a price based on an NAV per Common Share of $10.00, an assumption that does not give effect to any pricing structure that existed prior to January 15, 2015, and (b) that no Common Shares under our DRIP are sold. We estimate that for each Common Share sold in this offering, approximately 86.60% of the total offering price paid by the investor will be available for the purchase of real estate and real estate-related assets under the scenario set forth below.”

 

On page 72 of the Prospectus, the table under the caption “Estimated Use of Proceeds” is hereby deleted and replaced with the following:

“ 

 

   

Maximum Offering

(Not Including DRIP)

    Amount   Percent
Total offering price paid by investors   $ 1,111,000,000       100.00 %

Less offering expenses:

Selling commissions and dealer manager fee(1)

  $ 111,000,000       10.00 %
Organization and offering expenses(2)   $ 22,220,000       2.00 %
Amount available for investment or distribution   $ 977,780,000       88.01 %
Acquisition:                
Acquisition fees   $ 9,777,800       0.88 %
Acquisition expenses   $ 5,866,680       0.53 %
Amount invested in assets(3)   $ 962,135,520       86.60 %”

 

S-15
 

 

 

On page 72 of the Prospectus, footnote (2) is hereby deleted and replaced with the following:

“(2) Includes (a) selling commissions equal to 7.0% of the maximum offering price per Common Share and (b) a dealer manager fee equal to 3.0% of the maximum offering price per Common Share, both of which are payable to the dealer manager by purchasers of Common Shares. The dealer manager may reallow from the dealer manager fee up to 1.5% of the maximum offering price per Common Share to any participating broker-dealer for marketing support. No selling commissions or dealer manager fee are payable on sales of Common Shares under our DRIP. Our dealer manager will reallow all selling commissions to the participating broker-dealer or registered representative of the dealer manager who actually sold the Common Shares. The amount of selling commissions and dealer manager fee may be reduced under certain circumstances for volume discounts. See “Plan of Distribution — Volume Discounts” for a description of such provisions.”

 

On page 73 of the Prospectus, the last sentence of footnote (5) is hereby deleted and replaced with the following:

“(5) Assuming that we incur portfolio-wide leverage up to 65% loan-to-value, calculated based on the greater of the aggregate cost and the fair market value of our assets, as set forth in our investment guidelines, the maximum acquisition fees, assuming we achieve the maximum offering amount, would be $27,936,571.”

 

On page 73 of the Prospectus, the last sentence of footnote (6) is hereby deleted and replaced with the following:

“(6) Assuming that we incur leverage up to 65% of the greater of the aggregate cost and the fair market value of our assets, as set forth in our investment guidelines, the maximum acquisition expenses, assuming we achieve the maximum offering amount, would be $16,761,943.”

 

On page 82 of the Prospectus, the table under the caption “Our Advisor” is hereby deleted and replaced with the following:

S-16
 

 

 

 

“Name   Age*   Position(s)
Jacob Frydman   57   Chief Executive Officer and Chairman of the Board of Directors
Richard J. Vitale, CFA   47   President
Steven Kahn   48   Chief Financial Officer
Daniel C. Edelman   39   General Counsel and Chief Compliance Officer
Lawrence J. Longua   73   Senior Consultant
Dov Shimanowitz   44   Executive Vice President of Operations
Chad Whatley   39   Executive Vice President of Product Distribution
Alexander M. Libin   28   Assistant General Counsel and Vice President, Operations
Kevin Rice   30   Director of Marketing
  * As of January 15, 2015.”
           

 

Mr. Funt’s biography on pages 83–84 of the Prospectus is hereby deleted.

On page 87 of the Prospectus, the second, third, fourth and fifth sentences of the third paragraph under the caption “Our Sponsor” are hereby deleted and replaced with the following:

“Litigation between the parties is continuing. Neither our company nor our advisor is a party.”

S-17
 

 

 

 

On pages 90–93 of the Prospectus, the table under the caption “Compensation Table” through and including the row captioned “Asset Management Fees” is hereby deleted and replaced with the following:

“We have no paid employees. Our advisor and its affiliates manage our day-to-day affairs. The following table summarizes all the compensation and fees we pay to our advisor and its affiliates, including amounts to reimburse their costs in providing services. In the sole discretion of our advisor, our property manager or our board of directors or URP, as applicable, certain fees and commissions may be paid, in whole or in part, in cash or Common Shares. The selling commissions may vary for different categories of purchasers. See “Plan of Distribution.” This table assumes the Common Shares are sold through distribution channels associated with the highest possible selling commissions and dealer manager fee. No effect is given to any Common Shares sold through our DRIP.

 

Type of

Compensation

Determination of
Amount
Amount Paid During
Year Ended
December 31, 2013

Estimated Amount for
Maximum Offering
(100,000,000

Common Shares)*(1)

  Organization and
Offering Stage
   
Selling Commissions(2) The dealer manager will receive from the gross proceeds selling commissions equal to 7.0% of the maximum offering price per Common Share. No selling commissions will be paid on sales of Common Shares under our DRIP. The dealer manager will reallow all selling commissions to the participating broker-dealer or registered representative of the dealer manager who actually sold the Common Shares. $292,557

$77,700,000

 

The actual amount will depend on the number of Common Shares sold.

Dealer Manager Fee(2) The dealer manager will receive from the gross proceeds a dealer manager fee equal to 3.0% of the maximum offering price per Common Share. The dealer manager may reallow from the dealer manager fee up to 1.5% of the maximum offering price per Common Share to any participating broker-dealer for marketing support. No dealer manager fee will be paid with respect to sales under our DRIP. $150,549

$33,300,000

 

The actual amount will depend on the number of Common Shares sold.

 

 

S-18
 

 

 

 

Type of

Compensation

Determination of
Amount
Amount Paid During
Year Ended
December 31, 2013

Estimated Amount for
Maximum Offering
(100,000,000

Common Shares)*(1)

       

Organization and

Offering Expenses(3)

We will reimburse our advisor up to 2% of the total offering price paid by investors (which includes proceeds to us from the sale of Common Shares, plus applicable selling commissions and dealer manager fee) for organization and offering expenses, which may include reimbursements to be paid to the dealer manager, registered investment advisors and participating broker-dealers for due diligence fees set forth in detailed and itemized invoices.

 

Operational Stage

$86,620

$22,220,000

 

The actual amount will depend on the number of Common Shares sold.

Acquisition Fees(4)

We will pay to our advisor or it assignees 1% of the contract purchase price of each property acquired (including our pro rata share (direct or indirect) of debt attributable to such property) or 1% of the amount advanced for a loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment), as applicable. For purposes of this prospectus, “contract purchase price” or the “amount advanced for a loan or other investment” means the amount actually paid or allocated in respect of the purchase, development, construction or improvement of a property or the amount actually paid or allocated in respect of the purchase of loans or other real estate-related assets, in each case inclusive of any indebtedness assumed or incurred in respect of such investment but exclusive of acquisition fees and acquisition expenses.

$294,000 $9,777,800 (or $27,936,571 assuming we incur our expected leverage of 65% set forth in our investment guidelines).
Acquisition Expenses(5)

We will reimburse our advisor for expenses actually incurred related to selecting, evaluating and acquiring assets on our behalf, regardless of whether we actually acquire the related assets. In

 

$992,907 $5,866,680 (or $16,761,943 assuming we incur our expected leverage of 65% set forth in our investment guidelines).

 

 

S-19
 

 

 

 

Type of

Compensation

Determination of
Amount
Amount Paid During
Year Ended
December 31, 2013

Estimated Amount for
Maximum Offering
(100,000,000

Common Shares)*(1)

       
  addition, we will pay third parties, or reimburse the advisor or its affiliates, for any investment-related expenses due to third parties, including, but not limited to, legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, third-party brokerage or finder’s fees, title insurance expenses, survey expenses, property inspection expenses and other closing costs, regardless of whether we acquire the related assets. We estimate that total acquisition expenses (including those paid to third parties, as described above) will be approximately 0.6% of the purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) and 0.6% of the amount advanced for a loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment). In no event will the total of all acquisition fees and acquisition expenses (including those paid to third parties, as described above) payable with respect to a particular investment exceed 6% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) or 6% of the amount advanced for a loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment), as applicable.    

  

S-20
 

 

 

 

Type of

Compensation

Determination of
Amount
Amount Paid During
Year Ended
December 31, 2013

Estimated Amount for
Maximum Offering
(100,000,000

Common Shares)*(1)

       
Construction and Development Management Fee(4),(6) We expect to engage our property manager to provide construction and development management services for some of our properties. Other than with respect to tenant improvements, as described below, we will pay a construction and development management fee in an amount of 2% of the cost of any construction or development that our property manager undertakes. When our property manager provides construction management services with respect to tenant improvements, the construction and development management fee may be up to, but will not exceed, 5% of the cost of the tenant improvements. None Not determinable at this time.

Asset Management

Fees

We will pay our advisor or its assignees a monthly fee equal to the greater of (a) one-twelfth (1/12) of 0.75% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) then owned plus one-twelfth (1/12) of 0.75% of the amount advanced for each loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment) then owned, and (b) one-twelfth (1/12) of 1% of the average of our daily NAV for the preceding month, payable on the first business day of each month.(7) $140,479

Not determinable at this time. Because the fee is based on a fixed percentage of NAV or contract purchase price or the amount advanced for a loan or other investment with respect to all our assets then owned during the months for which such fee is payable, there is no maximum dollar amount of this fee.”

 

 

 

 

On pages 102–103 of the Prospectus, the footnotes under the caption “Compensation Table” are hereby deleted and replaced with the following:

  “* For purposes of calculating the estimated fee amounts set forth in the table, we (a) assumed that we will sell the maximum of 100,000,000 Common Shares in this offering based on an NAV per Common Share of $10.00, an assumption that disregards any pricing structure that existed prior to January 15, 2015, and (b) did not take into consideration the effect that the repurchase of Common Shares by our stockholders (through our share repurchase program) would have upon such fee amounts.

 

S-21
 

 

 

 

 

(1) Our dealer manager will repay to the company any excess over FINRA’s 10% cap if the offering is abruptly terminated after reaching the minimum amount, but before reaching the maximum amount, of offering proceeds.
   
(2) The amount of selling commissions and dealer manager fee may be reduced under certain circumstances for volume discounts. See “Plan of Distribution” for a description of such provisions.
   
(3) These organization and offering expenses include all costs and expenses to be paid by us in connection with our formation and an offering, including our legal, accounting, printing, mailing and filing fees, charge of our escrow agent, reimbursements to our dealer manager, registered investment advisors and participating broker-dealers for due diligence expenses set forth in detailed and itemized invoices, amounts to reimburse our advisor for its portion of the salaries of the employees of its affiliates who provide services to our advisor, and other costs in connection with administrative oversight of such offering and the marketing process, such as preparing supplemental sales materials, holding educational conferences and attending retail seminars conducted by our dealer manager or participating broker-dealers. Our advisor will advance our organization and offering expenses to the extent we do not have the funds to pay such expenses. We will reimburse our advisor up to 2% of the total offering price paid by investors (which includes proceeds to us from the sale of Common Shares, plus applicable selling commissions and dealer manager fee) for organization and offering expenses.
   
(4) In the sole discretion of our advisor, our property manager or URP, as applicable, this fee, commission or expense reimbursement may be paid, in whole or in part, in cash or Common Shares, or any combination thereof. For the purposes of the payment of this fee, each Common Share will be valued at NAV per Common Share.
   
(5) In addition, if during the period ending two years after the close of the offering, we sell an investment and then reinvest in other investments, we will pay our advisor any acquisition fees in respect of such other investments, along with reimbursement of acquisition expenses in respect of such other investments; provided, however, that in no event shall the total of all acquisition fees and acquisition expenses (including any financing coordination fees) payable in respect of such reinvestment exceed 6% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) or 6% of the amount advanced for a loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment), as applicable.
   
(6) We may make periodic progress payments or other cash advances to developers or builders of our properties prior to completion of development or construction only upon receipt of an architect’s certification as to the percentage of the project then completed and as to the dollar amount of the development or construction then completed. We intend to use such additional controls on disbursements to builders and developers as we deem necessary and prudent. We will not undertake improvements that would cause any of our income from the applicable property to be treated as other than rents from real property for purposes of the applicable REIT requirements described under the section titled “Material U.S. Federal Income Tax Considerations” in this prospectus.
   
(7) The asset management fee may be paid, in whole or in part, at the discretion of our board of directors, in cash or Common Shares, or any combination thereof. For the purposes of the payment of the asset management fee in Common Shares, each Common Share will be valued at NAV per Common Share.
   
(8) Leasing fees will be payable at the time of execution of a lease or renewal lease. If the tenant subsequently defaults under its lease obligations, in accordance with industry practice, our property manager will not be obligated to remit the leasing fees to us. Therefore, our property manager may have an incentive to lease to a less creditworthy tenant (a) in order to expedite the collection of a leasing fee, and (b) because if the tenant breaks the lease, our property manager may have a second opportunity to earn a leasing fee.
   
(9) Operating expenses will include reimbursement of our advisor for personnel costs, including certain salaries and benefits payable to our officers who are also executive officers, key personnel or members of our advisor. See “Management.” The anticipated amount of reimbursement for compensation, including base salary, bonuses and related benefits, on an annual basis for our executive officers is approximately $600,000.
   
(10) Our sponsor will receive no compensation directly from us, except that, as described in various places throughout this prospectus, the issuance to our sponsor of its Sponsor Preferred Shares will result in us recognizing compensation expense for accounting purposes if certain events occur. Consistent with the accounting treatment, the Sponsor Preferred Shares will constitute an economic benefit to our sponsor measured by the difference between the purchase price for the Sponsor Preferred Shares and the value of Common Shares into which they are converted. Our sponsor’s ownership position as a result of the conversion of the Sponsor Preferred Shares will remain relatively constant at between 2.6% and 5.2% of the outstanding Common Shares at any given time (assuming (a) the maximum selling commissions and dealer manager fee, and (b) no reinvestments of distributions). If the maximum offering is achieved, for the consideration of $50,000, the potential value of our sponsor’s holdings at $10.45 per Common Share would be $52.25 million upon conversion, assuming no investors participate in our DRIP. Following our liquidation, dissolution or winding up, our sponsor will receive 15% of the amount of any excess of the proceeds over the amount of Invested Capital, as defined above and under “Description of Shares — Sponsor Preferred Shares,” plus a cumulative non-compounded pre-tax annual return to holders of Common Shares of 7% on Invested Capital.”

 

S-22
 

 

 

On page 108 of the Prospectus, the first sentence under the caption “Valuation Conflicts” is hereby deleted and replaced with the following:

“The asset management fee paid to our advisor may be based on NAV, which the advisor is responsible for calculating.”

On page 131 of the Prospectus, the first paragraph under the caption “Valuation Guidelines; Calculation of NAV” is hereby deleted and replaced with the following:

“Our board of directors has adopted valuation guidelines to be used in connection with valuing our properties and other real estate-related assets and liabilities and calculating NAV. Valuations and calculations of NAV began on January 15, 2015. Our advisor will administer our valuation guidelines. Commencing on that date, our advisor began calculating NAV based in part on the appraisals of our properties performed by the independent valuer and in accordance with the valuation guidelines established by our board of directors. Each of our properties will be appraised at least annually, and appraisals will be scheduled over the course of a year so that approximately 25% of all properties are appraised each quarter. These appraisals will be used internally solely to calculate our NAV and will not be disclosed to our stockholders or to the public. Our board will monitor on an ongoing basis our advisor’s compliance with our valuation guidelines. The calculation of our NAV is intended to be a calculation of fair value of our assets less our outstanding liabilities and may differ from our financial statements. As a public company, we are required to issue financial statements based on historical cost in accordance with GAAP. To calculate our NAV, we have adopted a model, as explained below, which attempts to adjust the value of our assets from historical cost to fair value in accordance with the GAAP principles set forth in FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, or Topic 820. We have engaged KTR Valuation & Consulting Services, LLC, or KTR, a leading firm in the business of providing valuation advisory services and performing valuation analyses with respect to real estate assets and liabilities, to perform valuations of our portfolio and provide the metrics to be used in the calculation of NAV in the subsequent valuation, and such independent valuer (including any independent valuer selected by our board in substitution of a prior independent valuer) will not be affiliated with us or with our advisor or any of its or our affiliates. Along with any information available to the independent valuer based on its own contacts and experience, the independent valuer will have access to all information about our investment portfolio that the independent valuer deems relevant. Our advisor will use the valuations provided by the independent valuer as a basis for calculating NAV per Common Share and will, in its discretion and as appropriate, consider other factors in calculating NAV, including, without limitation, the metrics provided by the independent valuer for the calculation of NAV. Our advisor will calculate the fair value of our assets based on appraisals performed by our independent valuer and in accordance with these principles. Because these fair value calculations will involve significant professional judgment in the application of both observable and unobservable attributes, the calculated fair value of our assets may differ from their actual realizable value or future fair value. Furthermore, no rule or regulation requires that we calculate NAV in a certain way. While we believe our NAV calculation methodologies are consistent with standard industry principles, there is no established practice among non-traded REITs for calculating NAV in order to establish a purchase and repurchase price. As a result, other non-traded REITs may use different methodologies or assumptions to determine NAV.”

On page 132 of the Prospectus, the first paragraph under the caption “Calculation of NAV and NAV Per Common Share” is hereby deleted and replaced with the following:

“Commencing on January 15, 2015, in accordance with the valuation guidelines, our advisor began to, and our advisor will continue to, calculate our NAV after the end of each business day that the New York Stock Exchange is open for unrestricted trading. Changes in our daily NAV will reflect factors including, but not limited to, our portfolio income, interest expense and unrealized/realized gains (losses) on assets, and accruals for the asset management fee. The portfolio income will be calculated and accrued on the basis of data extracted from (a) the annual budget for each property and at the company level, including organization and offering expenses incurred following the offering commencement date and certain operating expenses, (b) material, unbudgeted non-recurring income and expense events such as capital expenditures, prepayment penalties, assumption fees, tenant buyouts, lease termination fees and tenant turnover with respect to our properties when our advisor becomes aware of such events and the relevant information is available and (c) material property acquisitions and dispositions occurring during the month. For the first month following January 15, 2015, we will calculate and accrue portfolio income with respect to our properties based on their performance prior to January 15, 2015, and using the most recent valuation of each property. Commencing on January 15, 2015, for the first month following a property acquisition, we will calculate and accrue portfolio income with respect to such property based on its performance before the acquisition and the contractual arrangements in place at the time of the acquisition, as identified and reviewed through our due diligence and underwriting process in connection with the acquisition. Thereafter, on an ongoing basis, our advisor will adjust the accruals to reflect actual operating results and to appropriately reflect the outstanding receivable, payable and other account balances resulting from the accumulation of daily accruals for which financial information is available. The daily accrual of portfolio income also will include reimbursements to our advisor and dealer manager for organization and offering expenses incurred prior to the offering commencement date and paid on our behalf. Under GAAP, we would be required to recognize organization costs and acquisition fees and expenses as an expense when incurred, and offering costs as a reduction of equity. Any NAV calculation adhering to Topic 820 will not capitalize and amortize organization and offering costs or acqusition fees, as such costs and fees hold no value for stockholders after they have been paid in cash to the various service providers. After subtracting such liabilities from the value of the operating partnership’s assets, our advisor will multiply that amount by our percentage ownership interest in the operating partnership. Following the allocation of income and expenses as described above, NAV will be adjusted for reinvestments of distributions, repurchases of Common Shares, and expense accruals to determine the current day’s NAV. At the close of business on the date that is one business day after each record date for any declared distribution, which we refer to as the distribution adjustment date, our NAV will be reduced to reflect the accrual of our liability to pay the distribution to our stockholders of record as of the record date.”

S-23
 

 

 

On page 133 of the Prospectus, the second sentence under the caption “Limits on the Calculation of Our NAV Per Common Share” is hereby deleted and replaced with the following:

“Furthermore, our NAV per Common Share may not fully reflect certain extraordinary events such as a terrorist attack or an act of nature because we may not be able to quantify the financial impact of such events on our portfolio right away.”

On page 133 of the Prospectus, the first sentence under the caption “Wholly Owned Properties” is hereby deleted and replaced with the following:

“Commencing on January 15, 2015 and at the beginning of each calendar year thereafter, our advisor will develop a valuation plan with the objective of having each of our wholly owned properties appraised at least annually, with appraisals scheduled over the course of a year so that approximately 25% of all properties are appraised each quarter.”

On page 134 of the Prospectus, the first sentence of the second paragraph under the caption “Wholly Owned Properties” is hereby deleted and replaced with the following:

“Newly acquired wholly owned properties will initially be valued at cost and thereafter will join the annual appraisal cycle during the first full quarter in which we own the property.”

On page 134 of the Prospectus, the second sentence of the paragraph under the caption “Valuation of Real Estate-Related Loans and Securities” is hereby deleted and replaced with the following:

“In general, real estate-related assets will be valued according to the procedures specified below upon acquisition or issuance and then annually, or in the case of liquid securities, daily, as applicable, thereafter.”

On page 135 of the Prospectus, the first sentence under the caption “Private Real Estate-Related Assets” is hereby deleted and replaced with the following:

“Investments in privately placed debt instruments and securities of real estate-related operating businesses (other than joint ventures), such as real estate development or management companies, will be valued by our advisor at cost (purchase price plus all related acquisition costs and expenses, such as legal fees and closing costs) and will be revalued annually at fair value.”

S-24
 

 

 

On page 145 of the Prospectus, the second and third paragraphs under the caption “REIT Qualification Tests” are hereby deleted and replaced with the following:

“We believe that our holdings of real estate assets and other securities comply with the foregoing REIT asset requirements, and we intend to monitor compliance on an ongoing basis. We may make real estate related debt investments; provided, that the underlying real estate meets our criteria for direct investment. A real estate mortgage loan that we own generally will be treated as a real estate asset for purposes of the 75% Asset Test if, on the date that we acquire or originate the mortgage loan, the value of the real property securing the loan is equal to or greater than the principal amount of the loan. Certain mezzanine loans we make or acquire may qualify for the safe harbor in Revenue Procedure 2003-65, 2003-2 C.B. 336, pursuant to which certain loans secured by a first priority security interest in ownership interests in a partnership or limited liability company will be treated as qualifying assets for purposes of the 75% Asset Test and the 10% vote or value test. We may hold some mezzanine loans that do not qualify for that safe harbor. Furthermore, we may acquire distressed debt investments that require subsequent modification by agreement with the borrower. If the outstanding principal balance of a mortgage loan exceeds the fair market value of the real property securing the loan at the time we commit to acquire the loan, or agree to modify the loan in a manner that is treated as an acquisition of a new loan for U.S. federal income tax purposes, then a portion of such loan may not be a qualifying real estate asset. Under current law it is not clear how to determine what portion of such a loan will be treated as a qualifying real estate asset. Pursuant to IRS guidance, the IRS has stated that it will not challenge a REIT’s treatment of a loan as being in part a real estate asset if the REIT treats the loan as being a real estate asset in an amount that is equal to the lesser of the fair market value of the real property securing the loan, as of the date we committed to acquire or modify the loan, and the fair market value of the loan. However, uncertainties exist regarding the application of this guidance, and no assurance can be given that the IRS would not challenge our treatment of such assets. While we intend to make such investments in such a manner as not to fail the asset tests described above, no assurance can be given that any such investments would not disqualify us as a REIT.”

On page 156 of the Prospectus, the paragraph under the caption “Material U.S. Federal Income Tax Considerations — Foreign Accounts” is hereby deleted and replaced with the following:

“Withholding taxes may apply to certain types of payments made to “foreign financial institutions” (as specially defined in the Code) and certain other non-U.S. entities. A withholding tax of 30% generally will be imposed on dividends on, and gross proceeds from the sale or other disposition of, our common stock paid to (a) a foreign financial institution (as the beneficial owner or as an intermediary for the beneficial owners) unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders and meets certain other specified requirements or (b) a non-financial foreign entity (as the beneficial owner or, in certain cases, as an intermediary for the beneficial owners) unless such entity certifies that it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner and such entity meets certain other specified requirements. These rules generally apply to payments of dividends on our common stock made after June 30, 2014 and generally will apply to payments of gross proceeds from a sale or other disposition of our common stock after December 31, 2016. We will not pay any additional amounts in respect of any amounts withheld. U.S. Stockholders and Non-U.S. Stockholders are encouraged to consult their tax advisors regarding the particular consequences to them of this legislation and guidance.”

On page 159 of the Prospectus, the second-to-last sentence of the second paragraph under the caption “Annual or More Frequent Valuation Requirement” is hereby deleted.

 

On page 167 of the Prospectus, the first paragraph under the caption “Description of Shares—Distributions” is hereby deleted and replaced with the following:

“On January 15, 2015, our board of directors authorized the payment of distributions on our Common Shares at an annualized rate of 7.78% of NAV (a daily rate of 0.021315% of our NAV as of each respective payment date). Distributions will begin to accrue as of daily record dates beginning on February 1, 2015 and will be aggregated and paid monthly, on payment dates determined by us, to stockholders who hold Common Shares as of such daily record dates. We expect to continue paying distributions monthly unless our results of operations, our general financial condition, general economic conditions or other factors make it imprudent to do so. The timing and amount of distributions will be determined by our board and will be influenced in part by its intention to comply with REIT requirements of the Code.”

S-25
 

 

 

On page 167 of the Prospectus, the following language is added to the third paragraph under the caption “Description of Shares—Distributions”

“Distributions paid from sources other than our cash flows from operations, particularly from proceeds of our initial public offering, will result in us having fewer funds available for the acquisition of properties and other real estate-related investments and may dilute our stockholders’ interests in us, which may adversely affect our ability to fund future distributions with cash flows from operations and may adversely affect our stockholders’ overall return. On a cumulative basis since our inception, the majority of the distributions we have made have been funded with proceeds from our IPO.”

On page 171 of the Prospectus, the disclosure under the caption “Purchases of Common Shares” is revised to delete the second paragraph and replace it with the following disclosure:

The offering price per Common Share under our DRIP will be equal to the NAV per Common Share.

On page 172 of the Prospectus, the disclosure under the caption “U.S. Federal Income Tax Consequences of Participation” is revised to delete the first three sentences of the second paragraph and replace them with the following disclosure:

 

“The offering price per Common Share under our DRIP will be equal to the NAV per Common Share, which is intended to equal the fair market value of a Common Share.”

 

On page 175 of the Prospectus, the first three paragraphs under the caption “SHARE REPURCHASE PROGRAM” are hereby deleted and replaced with the following disclosure:

“Under our share repurchase program, stockholders who have held their Common Shares for at least one year may request that we repurchase all or any portion, subject to certain minimum amounts described below, of their Common Shares on any business day. Generally, we will pay repurchase proceeds, less any applicable tax or other withholding required by law, by the third business day following the repurchase request day. The repurchase price per Common Share on any business day will be 95% of our NAV per Common Share for that day, calculated after the close of business on the repurchase request day, without giving effect to any share purchases or repurchases to be effected on such day; provided, however, that while the primary offering is ongoing, in no event will the repurchase price exceed the then-current offering price under the primary offering.

 

If a stockholder’s repurchase request is received before 4:00 p.m. Eastern time such Common Shares will be repurchased at a price equal to 95% of our NAV per Common Share (subject to the limitation that if the primary offering is still ongoing, in no event will the repurchase price commencing on the NAV pricing start date exceed the then-current offering price under the primary offering) calculated after the close of business on that day. If a stockholder’s request is received after 4:00 p.m. on any business day, or received on a day other than a business day, such Common Shares will be repurchased at 95% of our NAV per Common Share (subject to the limitation that if the primary offering is still ongoing, in no event will the repurchase price exceed the then-current offering price under the primary offering) calculated after the close of business on the next business day. We refer to the day on which a repurchase request is received pursuant to our repurchase program as the “repurchase request day.” Although a stockholder will not know at the time he or she requests the repurchase of Common Shares the exact price at which such repurchase request will be processed, the stockholder may cancel the repurchase request before it has been processed by notifying a customer service representative available on our toll-free, automated telephone line, (855) REIT-NAV. The line will be open on each business day between the hours of 9:00 a.m. and 7:00 p.m. Eastern time. Repurchase requests submitted before 4:00 p.m. on a business day must be cancelled before 4:00 p.m. on the same day. Repurchase requests received after 4:00 p.m. on a business day, or at any time on a day that is not a business day, must be cancelled before 4:00 p.m. on the next business day. If we file a pricing supplement disclosing a change in the NAV per Common Share by more than 5% from the NAV per Common Share disclosed in the last filed prospectus or pricing supplement, all investors whose repurchase requests have not been processed will have the right to rescind the repurchase transaction within ten days of such filing. If the repurchase request is not cancelled before the applicable time described above, the stockholder will be contractually bound to the repurchase of the Common Shares and will not be permitted to cancel the request prior to the payment of repurchase proceeds. Because our NAV per Common Share will be calculated at the close of each business day, the repurchase price may fluctuate between the repurchase request day and the date on which the company pays repurchase proceeds. If the repurchase request day is after the record date for a distribution payment but prior to the payment date for such distribution, the stockholder will be entitled to receive such distribution with respect to the repurchased Common Shares because the stockholder held them on the record date. At the close of business on the date that is one business day after each record date for any declared distribution, which we refer to as the distribution adjustment date, our NAV will be reduced to reflect the accrual of our liability to pay the distribution to our stockholders of record as of the record date.

 

S-26
 

 

 

 

We will limit the Common Shares repurchased during the three months ending March 31, 2015 to 5% of our NAV as of January 15, 2015. Subsequently we will limit the Common Shares repurchased during any calendar quarter to 5% of our NAV as of the last day of the previous calendar quarter, or approximately 20% of our NAV in any 12-month period. Furthermore, we may not have sufficient liquidity to honor all repurchase requests. We intend to maintain the following percentage of the overall value of our portfolio in liquid assets that can be liquidated more readily than properties: (a) 15% of our NAV up to $333 million; (b) 10% of our NAV between $333 million and $667 million; and (c) 5% of our NAV in excess of $667 million. However, our stockholders should not expect that we will maintain liquid assets at or above these levels. To the extent that we maintain borrowing capacity under a line of credit, such available amount will be included in calculating our liquid assets. Our advisor will consider various factors in determining the amount of liquid assets we should maintain, including but not limited to our receipt of proceeds from sales of additional Common Shares, our cash flow from operations, available borrowing capacity under a line of credit, if any, our receipt of proceeds from any asset sale, and the use of cash to fund repurchases. The board will review the amount and sources of liquid assets on a quarterly basis.”

 

On page 176 of the Prospectus, the third paragraph under the caption “SHARE REPURCHASE PROGRAM” is hereby deleted and replaced with the following:

“Our advisor will continuously monitor our capital needs and the amount of available liquid assets relative to our current business, as well as the volume of repurchase requests relative to the sales of new Common Shares. If our board of directors believes, in its business judgment, that repurchases may unnecessarily burden our short-term or long-term liquidity, adversely affect our operations or have a material adverse impact on non-repurchasing stockholders, then prior to the beginning of any quarter, our board of directors may set a limit on the number of Common Shares that may be repurchased in such quarter; provided , that we will limit the Common Shares repurchased during such quarter to 5% of our NAV as of the last day of the previous calendar quarter, or approximately 20% of our NAV in any 12-month period. Stockholders may make multiple requests for repurchase during the quarter but may not exceed the maximum limits of repurchase established by our advisor.”

 

On page 176 of the Prospectus, the second sentence of the fifth paragraph under the caption “SHARE REPURCHASE PROGRAM” is hereby deleted.

On page 183 of the Prospectus, the disclosure under the caption “PLAN OF DISTRIBUTION” is hereby deleted and replaced with the following:

PLAN OF DISTRIBUTION

 

The Offering

 

We are offering a maximum of 100,000,000 Common Shares through United Realty Securities, our dealer manager, which is a division of Cabot Lodge, a broker-dealer registered with FINRA, in our primary offering at our NAV per Common Share, plus applicable selling commissions and dealer manager fees.

 

Our dealer manager also is one of the broker-dealers that solicits subscriptions for our Common Shares. Our dealer manager has entered into soliciting dealer agreements with certain other broker-dealers who are members of FINRA to authorize them to sell our Common Shares.

 

S-27
 

 

 

 

The Common Shares are being offered on a “best efforts” basis, which means generally that the dealer manager is required to use its best efforts to sell the Common Shares but has no firm commitment or obligation to purchase any of the Common Shares. We also are offering up to 20,000,000 Common Shares for sale pursuant to our DRIP. We reserve the right to reallocate the Common Shares we are offering between the primary offering and our DRIP. The offering price per Common Share under our DRIP is equal to the NAV per Common Share. At no time will the offering price per Common Share under our DRIP be less than 95% of the fair market value per Common Share. We may amend, suspend or terminate our DRIP for any reason at any time upon 10 days’ notice to the participants. We may provide notice by including such information in a separate mailing to the participants. There will be no fees, commissions or expenses paid with respect to these Common Shares. The offering of our Common Shares will terminate on or before August 15, 2015, which is three years after the initial effective date of this offering. This offering must be registered in every state in which we offer or sell Common Shares. Generally, such registrations are for a period of one year. Thus, we may have to stop selling Common Shares in any state in which our registration is not renewed or otherwise extended annually. At the discretion of our board of directors, we may elect to extend the termination date of our offering of Common Shares reserved for issuance pursuant to our DRIP until we have sold all Common Shares allocated to such program through the reinvestment of distributions, in which case participants in our DRIP will be notified. We reserve the right to terminate this offering at any time prior to the stated termination date.

 

Dealer Manager and Compensation We Will Pay for the Sale of Our Common Shares

 

Our dealer manager was organized in October 2011 for the purpose of participating in and facilitating the distribution of securities of real estate programs sponsored by United Realty and its affiliates. For additional information about our dealer manager, including information relating to our dealer manager’s affiliation with us, please refer to the section of this prospectus captioned “Management—United Realty Securities.”

 

The total of the selling commissions and dealer manager fees paid per Common Share in our primary offering will equal 10.0% of the maximum offering price per Common Share in our primary offering. Our dealer manager will receive from the gross proceeds selling commissions equal to 7.0% of the maximum offering price per Common Share. Our dealer manager will reallow all selling commissions to the participating broker-dealer or registered representative of the dealer manager who actually sold the Common Shares. The dealer manager also will receive from the gross proceeds a dealer manager fee equal to 3.0% of the maximum offering price per Common Share as compensation for acting as the dealer manager. The dealer manager may reallow from the dealer manager fee up to 1.5% of the maximum offering price per Common Share to any participating broker-dealer for marketing support. We will not pay selling commissions or a dealer manager fee for Common Shares sold pursuant to our DRIP. We will not pay referral or similar fees to any accountants, attorneys or other persons in connection with the distribution of the Common Shares. After the close of business on each business day, we will post the NAV per Common Share on our website at www.unitedrealtytrust.com. You may also obtain the daily determination of our NAV per Common Share by calling our toll-free, automated telephone line at (855) REIT-NAV. Any purchase orders that we receive prior to 4:00 p.m. Eastern time on a given business day will be executed at a price based on our NAV per Common Share for that business day. Subscriptions that we receive after 4:00 p.m. Eastern time on a given business day or thereafter will be executed at a price based on our NAV per Common Share as calculated by our advisor after the close of business on the next business day.

 

We will reimburse the dealer manager and any registered investment advisor or participating broker-dealer for reasonable bona fide due diligence expenses incurred by the dealer manager or such registered investment advisor or participating broker-dealer which are supported by a detailed itemized invoice. These due diligence reimbursements are not considered a part of the 10% underwriting compensation under FINRA Rule 2310(b)(4)(B)(vii) so long as they are included in a detailed and itemized invoice, although they are considered an organization and offering expense, and organization and offering expenses cannot exceed 15% of the offering proceeds.

 

The dealer manager does not intend to be a market maker and so will not execute trades for selling stockholders. Set forth below is a table indicating the estimated dealer manager compensation and expenses that will be paid in connection with the offering of Common Shares, assuming all Common Shares are sold in the offering based on an NAV of $10.00 per Common Share, an assumption that does not give effect to any compensation structure that existed prior to January 15, 2015.

 

S-28
 

 

 

 

    Per Share   Total Maximum(1)
Primary offering:        
Price to public   $ 11.11     $ 1,111,000,000  
Dealer manager fee   $ 0.333     $ 33,300,000  
Selling commissions   $ 0.777     $ 77,700,000  
Net proceeds to United Realty Trust Incorporated (before expenses)   $ 10.00     $ 1,000,000,000  
Distribution reinvestment program(2):                
Price to public   $ 10.00     $ 200,000,000  
Selling commissions     —         —    
Dealer manager fee     —         —    
Proceeds to United Realty Trust Incorporated   $ 10.00     $ 200,000,000  

 

(1) In addition to the amounts disclosed in this table, we agreed to award to certain other officers and associated persons of United Realty Securities, at no cost, the fully vested restricted shares and, subject to vesting restrictions, and further subject to the provisions of our stock incentive plan, the retention-based restricted shares and incentive restricted shares, that are disclosed under “Compensation Table—Awards Under Our Stock Incentive Plan.” Such restricted shares may not be sold, transferred, assigned or hypothecated until 180 days after the termination of our primary offering.
   
  Our advisor also may provide to certain associated persons of United Realty Securities cash bonuses ranging from $1,000 to $5,000 based on the number of new soliciting dealers that any such United Realty Securities associated person recruits to join the selling group and for certain cash payments if United Realty Securities registered representatives meet certain sales levels.
   
  The awards of restricted shares and the cash bonus awards described above may be deemed to be “underwriting compensation” by FINRA. As further discussed below, all amounts deemed to be “underwriting compensation” by FINRA will be subject to FINRA’s 10% cap.
   
(2) The table assumes a price under our DRIP of $10.00 per Common Share. Common Shares will be sold under our DRIP at NAV per Common Share, which is an amount that may be higher or lower than $10.00. At no time will the offering price per Common Share under our DRIP be less than 95% of the fair market value per Common Share. No selling commissions or dealer manager fee are payable in connection with our DRIP.

 

We will not pay any selling commissions in connection with the sale of Common Shares to investors whose contracts for investment advisory and related brokerage services with their broker-dealer include a fixed or “wrap” fee feature. Investors may agree with their broker-dealer to reduce the amount of selling commissions payable with respect to the sale of their Common Shares down to zero if the investor (a) has engaged the services of a registered investment advisor or other financial advisor who will be paid compensation for investment advisory services or other financial or investment advice or (b) is investing through a bank trust account with respect to which the investor has delegated the decision-making authority for investments made through the account to a bank trust department. The net proceeds to us will not be affected by reducing the commissions payable in connection with such transaction. Neither our dealer manager nor its affiliates will directly or indirectly compensate any person engaged as an investment advisor or a bank trust department by a potential investor as an inducement for such investment advisor or bank trust department to advise favorably for an investment in our Common Shares.

 

We or our affiliates also may provide permissible forms of non-cash compensation to registered representatives of our dealer manager and the participating broker-dealers, such as golf shirts, fruit baskets, cakes, chocolates, a bottle of wine, or tickets to a sporting event. In no event shall such items exceed an aggregate value of $100 per annum per participating salesperson, or be pre-conditioned on achievement of a sales target. The value of such items will be paid from the dealer manager fee and considered underwriting compensation subject to FINRA’s 10% cap pursuant to Rule 2310 in connection with this offering.

 

S-29
 

 

 

 

We have agreed to indemnify our dealer manager, and intend to indemnify participating broker-dealers and selected registered investment advisors, against certain liabilities arising under the Securities Act. However, the SEC takes the position that indemnification against liabilities arising under the Securities Act is against public policy and is unenforceable.

 

The compensation described above includes certain costs associated with the sale and distribution of our Common Shares that our sponsor may pay. We will not reimburse our sponsor for such payments. Nonetheless, such payments will be deemed to be “underwriting compensation” by FINRA. In accordance with the rules of FINRA, the table above sets forth the nature and estimated amount of all items that may be viewed as “underwriting compensation” by FINRA that are anticipated to be paid by us and our sponsor in connection with the offering. The amounts shown assume we sell all the Common Shares offered hereby and that all Common Shares are sold in our primary offering through participating broker-dealers, which is the distribution channel with the highest possible selling commissions and dealer manager fee.

 

It is illegal for us to pay or award any commissions or other compensation to any person engaged by you for investment advice as an inducement to such advisor to advise you to purchase our Common Shares; however, nothing herein will prohibit a registered broker-dealer or other properly licensed person from earning a selling commission in connection with a sale of the Common Shares.

 

To the extent necessary to comply with FINRA rules, we will provide, on an annual basis, a per share estimated value of our Common Shares, the method by which we developed such value and the date of the data we used to estimate such value.

 

In no event will the amount we pay to FINRA members exceed FINRA’s 10% cap pursuant to Rule 2310. All amounts deemed to be “underwriting compensation” by FINRA will be subject to FINRA’s 10% cap. Our dealer manager will repay to the company any excess amounts received over FINRA’s 10% cap if the offering is abruptly terminated after reaching the minimum amount, but before reaching the maximum amount, of offering proceeds.

 

If the offering is terminated, the dealer manager will be reimbursed only for its actual out-of-pocket expenses.

 

Common Shares Purchased by Affiliates, Friends, Institutional Investors and Participating Brokers

 

Our executive officers and directors, as well as officers and employees of our advisor and their family members (including spouses, parents, grandparents, children and siblings) or other affiliates, Friends and institutional investors, may purchase Common Shares. The offering price for such Common Shares will be our NAV per Common Share, reflecting the fact that selling commissions and a dealer manager fee will not be payable in connection with such sales.

 

Additionally, participating broker-dealers, including their registered representatives and their immediate families, may purchase Common Shares, in the sole discretion of our dealer manager, at a purchase price that excludes the selling commission. Our dealer manager will not be permitted to purchase Common Shares.

 

As used above and elsewhere in this prospectus, “Friends” means those individuals who have had longstanding business or personal relationships with our executive officers and directors. “Institutional investors” means institutional accredited investors as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act. The net offering proceeds we receive will not be affected by sales of Common Shares at a discount as set forth above. Our executive officers, directors and other affiliates, Friends, any institutional investors, and participating broker-dealers, including their registered representatives and their immediate families, who receive a discount will be expected to hold their Common Shares purchased as stockholders for investment and not with a view towards resale. In addition, Common Shares purchased by officers and employees of our advisor and their family members (including spouses, parents, grandparents, children and siblings) (each an “advisor affiliate”) will not be entitled to vote on any matter presented to the stockholders for a vote relating to the removal of our directors or United Realty Advisors LP as our advisor or any transaction between us and any of our directors, our advisor or any of their respective affiliates, and such Common Shares will be subject to a lock-up agreement among the purchaser, our advisor and us. Any Common Shares purchased by an advisor affiliate may not be sold by such advisor affiliate during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the Common Shares by such advisor affiliate for a period of 180 days immediately following the date of effectiveness of or commencement of sales under this offering, except as provided in FINRA Rule 5110(g)(2). With the exception of the 18,182 Common Shares initially sold to United Realty Advisor Holdings LLC in connection with our organization, the 20,000 Common Shares that Mr. Frydman purchased for his own account in December 2012, and the Common Shares that our sponsor may receive upon conversion of its Sponsor Preferred Shares, no director, officer or advisor or any affiliate has owned or may own more than 9.8% in value or number of our outstanding Common Shares.

 

S-30
 

 

 

 

Volume Discounts

 

We will offer Common Shares with reduced selling commissions and, in some cases, reduced dealer manager fee, to

“single purchasers” of Common Shares on orders exceeding $1,000,000. The reduction will not affect the amount we receive for investment.

 

The discount set forth in the table below will apply to each Common Share within each volume range set forth in the table below.

 

 

Dollar Volume of Common Shares Purchased Selling Commissions Dealer Manager Fee Selling Commission Plus Dealer Manager Fee
$2,500 to $1,000,000 7.0% of maximum offering price per Common Share 3.0% of maximum offering price per Common Share 10% of maximum offering price per Common Share
$1,000,001 to $2,000,000 6.0% of maximum offering price per Common Share 3.0% of maximum offering price per Common Share 9% of maximum offering price per Common Share
$2,000,001 to $3,000,000 5.0% of maximum offering price per Common Share 3.0% of maximum offering price per Common Share 8% of maximum offering price per Common Share
$3,000,001 to $4,000,000 4.0% of maximum offering price per Common Share 2.0% of maximum offering price per Common Share 6% of maximum offering price per Common Share
$4,000,001 to $9,999,999 3.0% of maximum offering price per Common Share 1.0% of maximum offering price per Common Share 4% of maximum offering price per Common Share
$10,000,000 and above 2.0% of maximum offering price per Common Share 1.0% of maximum offering price per Common Share 3% of maximum offering price per Common Share

 

Any reduction in the amount of the selling commissions and dealer manager fee in respect of volume discounts received will be credited to the investor in the form of additional Common Shares. Fractional Common Shares will be issued.

 

As an example, assuming an NAV per Common Share of $10.00, a single purchaser would receive 180,926.36 Common Shares for an investment of $2,000,000, the selling commission would be $130,487.97 and the dealer manager fee would be $60,248.48. The discount would be calculated as follows: the purchaser would acquire 90,009 Common Shares at a cost of $11.11 per Common Share and 90,917.36 Common Shares at a cost of $10.999 per Common Share and would pay selling commissions of $0.777 per Common Share and dealer manager fee of $0.333 per Common Share for 90,009 Common Shares and would pay selling commissions of $0.666 per Common Share and dealer manager fee of $0.333 per Common Share for 90,917.36 Common Shares. In no event will the proceeds to us be less than our NAV per Common Share.

 

For purchases of $10,000,000 or more, in our sole discretion, selling commissions and dealer manager fee may be reduced to amounts lower than those set forth in the table above, but in no event will the proceeds to us be less than our NAV per Common Share. Selling commissions and dealer manager fee paid will in all cases be the same for the same level of sales.

 

If there is a sale of $10,000,000 or more with reduced selling commissions or a reduced dealer manager fee, we will supplement this prospectus to include: (a) the aggregate amount of the sale; (b) the total price per Common Share paid by the purchaser; and (c) a statement that other investors wishing to purchase at least the amount described in clause (a) above will pay no more per Common Share than the purchaser described in clause (b) above.

 

S-31
 

 

 

 

Orders may be combined for the purpose of determining the total selling commissions and dealer manager fee payable with respect to applications made by a “single purchaser,” so long as all the combined purchases are made through the same broker-dealer. The amount of total selling commissions and dealer manager fee thus computed will be apportioned pro rata among the individual orders on the basis of the respective amounts of the orders being combined. As used in this prospectus, the term “single purchaser” will include:

 

  any person or entity, or persons or entities, acquiring shares as joint purchasers;
     
  all profit-sharing, pension and other retirement trusts maintained by a given corporation, partnership or other entity;
     
  all funds and foundations maintained by a given corporation, partnership or other entity;
     
  all profit-sharing, pension and other retirement trusts and all funds or foundations over which a designated bank or other trustee, person or entity exercises discretionary authority with respect to an investment in our company; and
     
  any person or entity, or persons or entities, acquiring shares that are clients of and are advised by a single investment adviser registered under the Investment Advisers Act of 1940.
     

If a single purchaser described in the last five categories above wishes to have its orders so combined, that purchaser will be required to request the treatment in writing, which request must set forth the basis for the discount and identify the orders to be combined. Any request will be subject to our verification that all the orders were made by a single purchaser.

 

Orders also may be combined for the purpose of determining the selling commissions and dealer manager fee payable in the case of orders by any purchaser described in any category above who, within 90 days of its initial purchase of Common Shares, orders additional Common Shares. In this event, the selling commissions and dealer manager fee payable with respect to the subsequent purchase of Common Shares will equal the selling commissions and dealer manager fee per Common Share which would have been payable in accordance with the schedule set forth above if all purchases had been made simultaneously. Purchases subsequent to this 90-day period will not qualify to be combined for a volume discount as described herein.

 

Unless investors indicate that orders are to be combined and provide all other requested information, we cannot be held responsible for failing to combine orders properly.

 

Purchases by entities not required to pay U.S. federal income tax may only be combined with purchases by other entities not required to pay U.S. federal income tax for purposes of computing amounts invested if investment decisions are made by the same person. If the investment decisions are made by an independent investment advisor, that investment advisor may not have any direct or indirect beneficial interest in any of the entities not required to pay U.S. federal income tax whose purchases are sought to be combined. You must mark the “Additional Investment” space on the subscription agreement signature page in order for purchases to be combined. We are not responsible for failing to combine purchases if you fail to mark the “Additional Investment” space.

 

If the subscription agreements for the purchases to be combined are submitted at the same time, then the additional Common Shares to be credited to you as a result of such combined purchases will be credited on a pro rata basis. If the subscription agreements for the purchases to be combined are not submitted at the same time, then any additional Common Shares to be credited as a result of the combined purchases will be credited to the last component purchase, unless we are otherwise directed in writing at the time of the submission. However, the additional Common Shares to be credited to any entities not required to pay U.S. federal income tax whose purchases are combined for purposes of the volume discount will be credited only on a pro rata basis on the amount of the investment of each entity not required to pay U.S. federal income tax on their combined purchases.

 

California residents should be aware that volume discounts will not be available in connection with the sale of Common Shares made to California residents to the extent such discounts do not comply with the provisions of Rule 260.140.51 adopted pursuant to the California Corporate Securities Law of 1968. Pursuant to this rule, volume discounts can be made available to California residents only in accordance with the following conditions:

 

S-32
 

 

 

 

  there can be no variance in the net proceeds to us from the sale of the Common Shares to different purchasers of the same offering;
     
  all purchasers of the Common Shares must be informed of the availability of quantity discounts;
     
  the same volume discounts must be allowed to all purchasers of Common Shares which are part of the offering;
     
  the minimum amount of Common Shares as to which volume discounts are allowed cannot be less than $10,000;
     
  the variance in the price of the Common Shares must result solely from a different range of commissions, and all discounts must be based on a uniform scale of commissions; and
     
  no discounts are allowed to any group of purchasers.

 

Accordingly, volume discounts for California residents will be available in accordance with the foregoing table of uniform discount levels based on dollar volume of Common Shares purchased, but no discounts are allowed to any group of purchasers, and no subscriptions may be aggregated as part of a combined order for purposes of determining the number of Common Shares purchased.

 

Manner-of-Sale Discounts

 

We will offer Common Shares with reduced selling commissions to prospective investors who offer to purchase Common Shares via the Internet in response to a communication by us, by our dealer manager or by a participating broker- dealer that (a) is shown in print, on television or on the Internet, broadcasted on the radio or distributed through digital or social media; and (b) complies with Rule 134 under the Securities Act, including, to the extent applicable, Question 110.01 of the Securities Act Rules Compliance and Disclosure Interpretations; provided, that the participating broker-dealer receiving such offer to purchase has taken reasonable steps to verify that the prospective investor made such offer to purchase in response to such communication. “Reasonable steps” will include determining that the prospective investor has accessed a website containing, or “clicked through” a hyperlink to, an electronic copy of our prospectus, as supplemented to date, where such website address or hyperlink was provided in the communication. The offering price for such Common Shares will be our NAV per Common Share, plus selling commissions equal to 2.7% of the maximum offering price per Common Share and a dealer manager fee equal to 3.0% of the maximum offering price per Common Share. The reduced offering prices will not affect the amounts we receive for investment.

 

Subscription Process

 

To purchase Common Shares in this offering, you must complete and sign a subscription agreement, like the one contained in this prospectus as Appendix B. You should exercise care to ensure that the applicable subscription agreement is filled out correctly and completely.

 

By executing the subscription agreement, you will attest, among other things, that you:

 

  have received the final prospectus;
     
  accept the terms of our charter;
     
  meet the minimum income and net worth requirements described in this prospectus;
     
  are purchasing the Common Shares for your own account;
     
  are purchasing the Common Shares for investment and not with a view towards resale (if you are among the categories of purchaser described above under “— Common Shares Purchased by Affiliates, Friends, Institutional Investors and Participating Broker-Dealers”);
     
  acknowledge that the Common Shares are not liquid; and
     
  are in compliance with the USA PATRIOT Act and are not on any governmental authority watch list.

 

We include these representations in our subscription agreement in order to prevent persons who do not meet our suitability standards or other investment qualifications from subscribing to purchase our Common Shares.

 

Subscriptions will be effective only upon our acceptance, and we reserve the right to reject any subscription in whole or in part. We may not accept a subscription for Common Shares until at least five business days after the date you receive the final prospectus. Subject to compliance with Rule 15c2-4 of the Exchange Act, our dealer manager or the participating broker-dealers will promptly submit a subscriber’s check on the business day following receipt of the subscriber’s subscription documents and check. In certain circumstances where the suitability review procedures are more lengthy than customary, a subscriber’s check will be promptly deposited in compliance with Exchange Act Rule 15c2-4. The proceeds from your subscription will be deposited in a segregated escrow account and will be held in trust for your benefit, pending our acceptance of your subscription.

 

S-33
 

 

 

 

A sale of the Common Shares may not be completed until at least five business days after the subscriber receives our final prospectus as filed with the SEC pursuant to Rule 424(b) of the Securities Act. Within ten business days of our receipt of each completed subscription agreement, we will accept or reject the subscription. If we accept the subscription, we will mail a confirmation within three days. If for any reason we reject the subscription, we will promptly return the check and the subscription agreement, without interest (unless we reject your subscription because we fail to achieve the minimum offering) or deduction, within ten business days after rejecting it.

 

Investments by IRAs and Certain Qualified Plans

 

We may appoint one or more IRA custodians for investors in our Common Shares who desire to establish an IRA, SEP or certain other tax-deferred accounts or transfer or rollover existing accounts. We will provide the name(s) of any such additional IRA custodian(s) in a prospectus supplement. Our advisor may determine to pay the fees related to the establishment of investor accounts with such IRA custodians, and it also may pay the fees related to the maintenance of any such account for the first year following its establishment. Thereafter, we expect the IRA custodian(s) to provide this service to our stockholders with annual maintenance fees charged at a discounted rate. In the future, we may make similar arrangements for our investors with other custodians. Further information as to custodial services is available through your broker or may be requested from us.

 

Suitability Standards

 

Our sponsor, those selling Common Shares on our behalf and any participating broker-dealers and registered investment advisors recommending the purchase of Common Shares in this offering have the responsibility to make every reasonable effort to determine that your purchase of Common Shares in this offering is a suitable and appropriate investment for you based on information provided by you regarding your financial situation and investment objectives. In making this determination, these persons have the responsibility to ascertain that you:

 

  meet the minimum income and net worth standards set forth under “Investor Suitability Standards” immediately following the cover page of this prospectus;
       
  can reasonably benefit from an investment in our Common Shares based on your overall investment objectives and portfolio structure;
       
  are able to bear the economic risk of the investment based on your overall financial situation;
       
  are in a financial position appropriate to enable you to realize to a significant extent the benefits described in this prospectus of an investment in our Common Shares; and
       
  have apparent understanding of:
       
    the fundamental risks of the investment;
       
    the risk that you may lose your entire investment;
       
    the lack of liquidity of our Common Shares;
       
    the restrictions on transferability of our Common Shares;
       
    the background and qualifications of our sponsor and its affiliates; and
       
    the tax consequences of your investment.

 

Relevant information for this purpose will include at least your age, investment objectives, investment experience, income, net worth, financial situation and other investments as well as any other pertinent factors. Our sponsor, those selling Common Shares on our behalf and any participating broker-dealers and registered investment advisors recommending the purchase of Common Shares in this offering must maintain, for a six-year period, records of the information used to determine that an investment in Common Shares is suitable and appropriate for you.

 

S-34
 

 

 

 

Until our Common Shares are listed on a national securities exchange, subsequent purchasers, i.e., potential purchasers of your Common Shares, also must meet the net worth or income standards.

 

Minimum Purchase Requirements

 

You must initially purchase at least $2,500 in Common Shares to be eligible to participate in this offering. In order to satisfy this minimum purchase requirement, unless otherwise prohibited by state law, a husband and wife may jointly contribute funds from their separate IRAs; provided, that each such contribution is made in increments of $100. You should note that an investment in our Common Shares will not, in itself, create a retirement plan and that, in order to create a retirement plan, you must comply with all applicable provisions of ERISA or the Code, as applicable.

 

If you have satisfied the applicable minimum purchase requirement, any additional purchase must be in amounts of at least $100. The investment minimum for subsequent purchases does not apply to Common Shares purchased pursuant to our DRIP.

 

Unless you are transferring all your Common Shares, you may not transfer your Common Shares in a manner that causes you or your transferee to own fewer than the number of Common Shares required to meet the minimum purchase requirements, except for the following transfers without consideration: transfers by gift, transfers by inheritance, intrafamily transfers, family dissolutions, transfers to affiliates and transfers by operation of law. These minimum purchase requirements are applicable until our Common Shares are listed on a national securities exchange, and these requirements may make it more difficult for you to sell your Common Shares. We cannot assure that our Common Shares will ever be listed on a national securities exchange.”

 

On page 171 of the Prospectus, the last sentence of the second paragraph under the caption “Purchase of Common Shares” is hereby deleted.

On page 175 of the Prospectus, the last sentence of the first paragraph under the caption “SHARE REPURCHASE PROGRAM” is hereby deleted and replaced with the following.

On page 190 of the Prospectus, the first sentence under the caption “Minimum Purchase Requirements” is hereby deleted and replaced with the following:

“You must initially invest $2,500 to be eligible to participate in this offering.”

On page 194 of the Prospectus, the bullet points under the caption “Incorporation of Certain Information by Reference”are hereby deleted and replaced with the following:

  · Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC on March 31, 2014;

  ·

Quarterly Reports on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014, filed with the SEC on May 1, 2014, August 14, 2014 and November 7, 2014, respectively;

  · Preliminary Proxy Statement on Schedule 14A filed with the SEC on April 18, 2014;
  · Definitive Proxy Statement on Schedule 14A filed with the SEC on April 30, 2014; and
  · Current Reports on Form 8-K and 8-K/A, as applicable, filed with the SEC on May 1, 2014, May 28, 2014, June 16, 2014, August 4, 2014, September 23, 2014, December 22, 2014, January 14, 2015 and January 15, 2015.

 

S-35
 

 

 

 

Annex A

 

 

S-36
 

 

 

 

 

 

S-37
 

 

 

 

 

S-38
 

 

 

 

 

 

 

S-39
 

 

 

 

S-40
 

 

 

 

S-41
 

 
PROSPECTUS
 
 
United Realty Trust Incorporated
Maximum Offering of 100,000,000 Common Shares
 

 
United Realty Trust Incorporated, The Dual Strategy REIT, is a Maryland corporation that intends to invest in a wide variety of commercial property types. We intend to elect to qualify and be taxed as a real estate investment trust for U.S. federal income tax purposes, or REIT, commencing with our taxable year ending December 31, 2013. We are not a mutual fund and do not intend to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act.

We are offering up to 100,000,000 shares of our common stock, $0.01 par value per share, or Common Shares, in our primary offering at a price of $10.45 per Common Share on a “best efforts” basis through United Realty Securities, a division of Cabot Lodge Securities, LLC (“United Realty Securities” or “dealer manager”) our dealer manager. “Best efforts” means that our dealer manager is not obligated to purchase any specific number or dollar amount of Common Shares.
 
We also are offering up to 20,000,000 Common Shares pursuant to our distribution reinvestment program, or DRIP. Until the NAV pricing start date, as defined below, the offering price per Common Share under our DRIP will be $10.00. Commencing on the NAV pricing start date, the offering price per Common Share in our primary offering and under our DRIP will be equal to our NAV per Common Share, as defined below under “Prospectus Summary — What is the offering price for our Common Shares?", plus applicable selling commissions and dealer manager fees. At no time will the offering price per Common Share under our DRIP be less than 95% of the fair market value per Common Share. The term “NAV pricing start date” refers to the earliest to occur of: (a) our investing in assets with an aggregate cost, including our pro rata share (direct or indirect) of debt attributable to such assets, in excess of $1 billion; (b) our raising net offering proceeds of in excess of $650 million in our primary offering; (c) our advisor's determination, subject to oversight by our board of directors and based in part on an appraisal of our properties by the independent valuer in accordance with the valuation guidelines established by our board of directors, that our NAV per Common Share is greater than $10.45; and (d) January 15, 2015. The term “NAV” stands for “net asset value”. We reserve the right to reallocate the Common Shares we are offering between the primary offering and our DRIP.
 
We are externally advised by United Realty Advisors LP, or our advisor.

Investing in our Common Shares involves a high degree of risk. See “Risk Factors” beginning on page 32 to read about risks you should consider before buying our Common Shares. These risks include the following:
 
  There is no public trading market for our Common Shares, and there may never be one.
  This is a blind pool offering, so you will not have the opportunity to evaluate our investments before we make them.
  We and our advisor have a limited operating history, we have no established financing sources, and our sponsor has limited experience operating a public REIT.
  Commencing on the NAV pricing start date, the purchase of Common Shares under our DRIP and the repurchase of Common Shares under our share repurchase program will be at a price equal to our NAV per Common Share, which will be based upon subjective judgments, and may not reflect the amount that you might receive for your Common Shares in a market transaction.
  Our advisor and its affiliates, including all our executive officers and some of our directors, will face conflicts of interest caused by their compensation arrangements with us.
  You are limited in your ability to sell your Common Shares pursuant to our share repurchase program.
  We will make some of or all our distributions from sources other than cash flow from operations, including the proceeds of our public offering or from borrowings (including borrowings secured by our assets); our organizational documents do not limit the amount of distributions we can fund from sources other than operating cash flow.
  Our failure to qualify or remain qualified as a REIT would subject us to U.S. federal income tax and potentially state and local tax, and would adversely affect our operations and the market price of our Common Shares.
  The share ownership restrictions of the Internal Revenue Code of 1986, as amended, or the Code, for REITs and the share transfer and ownership limits in our charter may inhibit market activity in our Common Shares.
 
Neither the U.S. Securities and Exchange Commission, the Attorney General of the State of New York nor any other state securities commission has approved or disapproved of our Common Shares or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This investment involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. The use of projections or forecasts in this offering is prohibited. No one is permitted to make any oral or written predictions about the cash benefits or tax consequences you will receive from your investment.

PENNSYLVANIA INVESTORS: The minimum closing amount of this offering was $2,090,000. Because the minimum closing amount was less than $104,500,000, you are cautioned to carefully evaluate the program’s ability to fully accomplish its stated objectives and inquire as to the current dollar volume of the program’s subscriptions. We will not release any Pennsylvania investor proceeds for subscriptions from escrow until we have received an aggregate of $52,250,000 in subscriptions. We will deposit subscription payments from Pennsylvania investors in an escrow account held by the escrow agent, UMB Bank, N.A., in trust for the subscribers’ benefit, pending release to us. Subscription payments held in escrow will be placed in short-term, low risk, highly liquid, interest-bearing investments prior to their investment in real estate-related assets. If a refund is made because of a failure to raise an aggregate of $52,250,000 in subscriptions, no amounts will be deducted from the escrow funds. If we do raise an aggregate of $52,250,000 in subscriptions, we will return all interest earned on proceeds in the escrow account prior to raising such amount and completing our initial issuance of Common Shares to Pennsylvania subscribers.
 
 
 

 
 
   
Price to Public(1)
 
Selling Commissions
 
Dealer Manager Fee
 
Net Proceeds
(Before Expenses)
Primary Offering
                               
Per Common Share
 
$
10.45
 
$
0.73
 
$
0.31
 
$
9.41
 
Total Maximum(2)
 
$
1,045,000,000
 
$
73,000,000
 
$
31,000,000
 
$
941,000,000
 
Distribution Reinvestment Program(3)
                               
Per Common Share
 
$
10.00
   
$
0.00
   
$
0.00
   
$
10.00
 
Total Maximum
 
$
200,000,000
   
$
0.00
   
$
0.00
   
$
200,000,000
 
 

  * Discounts on selling commissions and dealer manager fee are available for some categories of investors and for “single purchasers” (as defined below) of more than $1,000,000 in value of Common Shares.
  (1) The purchase price shown will apply until the NAV pricing start date. Commencing with the NAV pricing start date, we will offer Common Shares on our primary offering at our NAV per Common Share, plus applicable selling commissions and dealer manager fees.
  (2)
The table assumes that the amounts of the selling commissions and dealer manager fee were and will be, for the life of this offering, as disclosed herein with respect to the pre-NAV pricing start date commission structure. However, the actual aggregate amounts of the selling commissions and dealer manager fee over the life of this offering, assuming a pre-NAV pricing start date commission structure, will be lower than as set forth in this table, and the net proceeds (before expenses) higher, because prior to May 30, 2013, the amounts of the selling commissions and dealer manager fee were lower, as a percentage of the gross offering price of a Common Share, than the amounts described in this prospectus with respect to the pre-NAV pricing start date commission structure.
  (3) The table assumes a price under our DRIP of $10.00 per Common Share.
We intend to continue our primary offering until three years from the commencement date of our initial public offering, or August 15, 2015.

The date of this prospectus is April 30, 2014.
 
 

 
 

An investment in our Common Shares involves significant risk and is suitable only for persons who have adequate financial means, desire a relatively long-term investment and will not need immediate liquidity from their investment. Persons who meet these standards and seek to diversify their personal portfolios with a finite-life, real estate-based investment, which among its benefits hedges against inflation and the volatility of the stock market, seek to receive current income, seek to preserve capital, wish to obtain the benefits of potential long-term capital appreciation and who are able to hold their investment for a time period consistent with our liquidity plans are most likely to benefit from an investment in our company. On the other hand, we caution persons who require immediate liquidity or guaranteed income, or who seek a short-term investment, not to consider an investment in our Common Shares as meeting these needs. Notwithstanding these investor suitability standards, potential investors should note that investing in Common Shares involves a high degree of risk and should consider all the information contained in this prospectus, including the “Risk Factors” section contained herein, in determining whether an investment in our Common Shares is appropriate.

In order to purchase Common Shares in this offering, you must:
 
  meet the applicable financial suitability standards as described below; and
  purchase at least the minimum number of Common Shares as described below.
 
We have established suitability standards for initial stockholders and subsequent purchasers of Common Shares from our stockholders. These suitability standards require that a purchaser of Common Shares have, excluding the value of a purchaser’s home, home furnishings and automobiles, either:
 
  a minimum net worth of at least $250,000; or
  a minimum annual gross income of at least $70,000 and a minimum net worth of at least $70,000.
 
The minimum purchase is 250 Common Shares (prior to the NAV pricing start date, $2,612.50). You may not transfer fewer Common Shares than the minimum purchase requirement. In addition, you may not transfer, fractionalize or subdivide your Common Shares so as to retain fewer than the number of Common Shares required for the minimum purchase. In order to satisfy the minimum purchase requirements for individual retirement accounts, or IRAs, unless otherwise prohibited by state law, a husband and wife may jointly contribute funds from their separate IRAs if each such contribution is made in increments of $100. You should note that an investment in our Common Shares will not, in itself, create a retirement plan and that, in order to create a retirement plan, you must comply with all applicable provisions of the Code.

Several states have established suitability requirements that are more stringent than the standards that we have established and described above. Common Shares will be sold to investors in these states only if they meet the special suitability standards set forth below. In each case, these special suitability standards exclude from the calculation of net worth the value of the investor’s home, home furnishings and automobiles.

General Standards for all Investors
 
  Each investor must have either (a) a net worth of at least $250,000, or (b) an annual gross income of $70,000 and a minimum net worth of $70,000.
 
Alabama
 
  In addition to the suitability standards above, Common Shares will only be sold to Alabama residents that represent that they have a liquid net worth of at least 10 times the amount of their investment in this real estate investment program and other similar programs.
 
California and Pennsylvania
 
  In addition to the general suitability requirements described above, each California or Pennsylvania investor’s maximum investment in our Common Shares will be limited to 10% of the investor’s net worth (exclusive of home, home furnishings and automobile).
 
Iowa
  Each Iowa investor must have either (a) a minimum net worth of at least $250,000, or (b) an annual gross income of at least $70,000 and a net worth of at least $70,000. The investor’s maximum investment in the issuer and its affiliates cannot exceed 10% of the Iowa resident’s liquid net worth. “Liquid net worth” is defined as that portion of net worth (total assets minus total liabilities) that is comprised of cash, cash equivalents and readily marketable securities.
 
Kansas
 
 
It is recommended by the Office of the Securities Commissioner that Kansas investors limit their aggregate investment in the securities of the issuer and other non-traded REITs to not more than 10% of their liquid net worth.  For these purposes, liquid net worth is defined as that portion of total net worth (total assets minus liabilities) that is comprised of cash, cash equivalents and readily marketable securities, as determined in conformity with accounting principles generally accepted in the United States of America, or GAAP.
 
 
i

 
 
Kentucky
 
  Each Kentucky investor must have either (a) a net worth of at least $250,000, or (b) a gross annual income of at least $70,000 and a net worth of at least $70,000, with the amount invested in this offering not to exceed 10% of the Kentucky investor’s liquid net worth.
 
Maine
 
  Each Maine investor must represent that, in addition to the general standards described above, each Maine investor’s maximum investment in this offering and other direct participation programs will not exceed 10% of the investor’s liquid net worth. “Liquid net worth” is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.
 
Massachusetts
 
 
Each Massachusetts investor must have either (a) a minimum net worth of at least $300,000, or (b) an annual gross income of at least $100,000 and a net worth of at least $100,000. The investor’s maximum investment in the issuer and other illiquid direct participation programs cannot exceed 10% of the Massachusetts resident’s liquid net worth.
 
Missouri
 
  In addition to the general suitability requirements described above, no more than ten percent (10%) of any one Missouri investor’s liquid net worth shall be invested in the securities registered by us for this offering with the Securities Division.
 
Nebraska
 
  Nebraska investors must have either (a) a minimum net worth of $100,000 and an annual income of $70,000, or (b) a net worth of $350,000. A Nebraska investor’s maximum investment in our Common Shares and our affiliates shall not exceed 10% of that investor’s net worth.
 
New Jersey
 
  Each New Jersey investor must represent that, in addition to the general standards described above, each New Jersey investor has either (a) a liquid net worth of $100,000 and annual gross income of $85,000, or (b) a minimum liquid net worth of $350,000. Additionally, each New Jersey investor’s total investment in this offering and other non-traded real estate investment programs will not exceed 10% of the investor’s liquid net worth. “Liquid net worth” is defined as that portion of net worth (total assets exclusive of home, home furnishings and automobiles minus total liabilities) that is comprised of cash, cash equivalents and readily marketable securities.
 
New Mexico
 
  Each New Mexico investor must represent that, in addition to the general standards described above, each New Mexico investor's maximum investment in this offering and other direct participation programs will not exceed 10% of the investor's liquid net worth. “Liquid net worth'' is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.
 
North Dakota
 
  Each North Dakota investor must represent that, in addition to the general standards described above, such investor has a net worth of at least ten times their investment in our offering.
 
Oregon
 
  An Oregon investor's maximum investment in the issuer and its affiliates may not exceed 10% of that investor's liquid net worth.
 
Because the minimum closing amount of this offering was less than $104,500,000, Pennsylvania investors are cautioned to carefully evaluate our ability to fully accomplish our stated objectives and to inquire as to the current dollar volume of our subscription proceeds. We will not release any Pennsylvania investor proceeds for subscriptions from escrow until we have received an aggregate of $52,250,000 in subscriptions.
 
 
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In the case of sales to fiduciary accounts (such as an IRA, Keogh Plan or pension or profit-sharing plan), these minimum suitability standards must be satisfied by the beneficiary, by the fiduciary account, or by the donor or grantor who directly or indirectly supplies the funds to purchase our Common Shares if the donor or the grantor is the fiduciary. Prospective investors with investment discretion over the assets of an IRA, employee benefit plan or other retirement plan or arrangement that is covered by the Employee Retirement Income Security Act of 1974, as amended, or ERISA, or Code Section 4975 should carefully review the information in the section of this prospectus titled “ERISA Considerations.” Any such prospective investors are required to consult their own legal and tax advisors on these matters.

In the case of gifts to minors, the minimum suitability standards must be met by the custodian of the account or by the donor.

In order to ensure adherence to the suitability standards described above, requisite criteria must be met, as set forth in the subscription agreement in the form attached hereto as Appendix B. In addition, our sponsor, our dealer manager and the participating broker-dealers, as our agents, must make every reasonable effort to determine that the purchase of our Common Shares is a suitable and appropriate investment for an investor. In making this determination, our dealer manager or the participating broker-dealer, as applicable, will rely on relevant information provided by the investor in the investor’s subscription agreement, including information regarding the investor’s age, investment objectives, investment experience, income, net worth, financial situation, other investments and any other pertinent information, including whether (a) the participant is or will be in a financial position appropriate to enable him, her or it to realize the benefits described in the prospectus, (b) the participant has a fair market net worth sufficient to sustain the risks inherent in the investment program, and (c) the investment program is otherwise suitable for the participant. Executed subscription agreements will be maintained in our records for six years.

See “Plan of Distribution — Suitability Standards” for a detailed discussion of the determinations regarding suitability that we require.

 
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Table of Contents

   
Page
INVESTOR SUITABILITY STANDARDS
 
i
 
PROSPECTUS SUMMARY
 
1
 
RISK FACTORS
 
32
 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
83
 
ESTIMATED USE OF PROCEEDS
 
84
 
MANAGEMENT
 
87
 
COMPENSATION TABLE
 
104
 
STOCK OWNERSHIP
 
120
 
CONFLICTS OF INTEREST
 
121
 
INVESTMENT OBJECTIVES AND CRITERIA
 
130
 
DESCRIPTION OF REAL ESTATE INVESTMENTS
 
146
 
VALUATION POLICIES
 
150
 
SELECTED FINANCIAL DATA
 
156
 
PRIOR PERFORMANCE SUMMARY
 
157
 
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
 
163
 
ERISA CONSIDERATIONS
 
184
 
DESCRIPTION OF SHARES
 
190
 
SHARE REPURCHASE PROGRAM
 
203
 
SUMMARY OF OUR OPERATING PARTNERSHIP AGREEMENT
 
206
 
PLAN OF DISTRIBUTION
 
212
 
SUPPLEMENTAL SALES MATERIAL
 
221
 
LEGAL MATTERS
 
221
 
EXPERTS
 
221
 
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
 
221
 
WHERE YOU CAN FIND MORE INFORMATION
 
221
 
Appendix A Prior Performance Tables
 
A-1
 
Appendix B Form of Subscription Agreement
 
B-1
 
Appendix C Distribution Reinvestment Program
 
C-1
 
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
 
II-1
 
 
 
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As used herein and unless otherwise required by context, the term “prospectus” refers to this prospectus, as it may be amended and supplemented from time to time. This prospectus summary highlights material information contained elsewhere in this prospectus. Because it is a summary, it may not contain all the information that is important to you. To understand this offering fully, you should read the entire prospectus carefully, including the “Risk Factors” section and the financial statements, before making a decision to invest in our Common Shares. In this prospectus, references to “United Realty Trust Incorporated,” “our company,” “the company,” “we,” “us” and “our” mean United Realty Trust Incorporated, a Maryland corporation, together with United Realty Capital Operating Partnership, L.P., or our operating partnership, a Delaware limited partnership and the subsidiary through which we conduct substantially all our business except where it is clear from the context that the term only means the issuer of the Common Shares in this offering, United Realty Trust Incorporated, which we sometimes refer to as URTI. References to “United Realty” and our “sponsor” mean United Realty Advisor Holdings LLC, a Delaware limited liability company, which is controlled and indirectly owned by Jacob Frydman, who is sometimes referred to herein as the principal of our sponsor. When we refer to our “charter” in this prospectus, we are referring to our charter as it may be amended, supplemented or restated from time to time.

What is United Realty Trust Incorporated?

We are The Dual Strategy REIT. United Realty Trust Incorporated is a Maryland corporation incorporated on November 8, 2011 that intends to invest primarily in interests in real estate located in the United States, with a primary focus on the eastern United States and in markets that we believe are likely to benefit from favorable demographic changes, or that we believe are poised for strong economic growth. We may invest in interests in a wide variety of commercial property types, including office, industrial, retail and hospitality properties, single-tenant properties, multifamily properties, age-restricted residences and in other real estate-related assets. We expect to build a high-quality portfolio intended to generate current income and to provide capital preservation, capital appreciation and portfolio diversification. These properties may be existing income-producing properties, newly constructed properties or properties under development or under construction. We may acquire assets directly or through joint ventures, by making an equity investment in a project or by making a mezzanine or bridge loan with a right to acquire equity in the project. We also may buy debt secured by an asset with a view toward acquiring the asset through foreclosure. We also may originate or invest in mortgages, bridge or mezzanine loans and tenant-in-common interests, or entities that make investments similar to the foregoing. Further, we may invest in real estate-related securities, including securities issued by other real estate companies.

We expect to invest approximately 80% of our funds in direct real estate investments and other equity interests, and approximately 20% of our funds in debt interests, which may include bridge or mezzanine loans. We expect this breakdown to remain approximately the same even if we only raise an amount substantially less than our maximum offering amount.

Our sponsor is United Realty Advisor Holdings LLC, a Delaware limited liability company. Jacob Frydman controls and indirectly owns our sponsor.

We are externally advised by our advisor. Our advisor conducts our operations and manages our portfolio of real estate investments. We have no paid employees. Mr. Frydman controls our advisor and holds a majority of the economic interests in it.

We intend to conduct our operations so that the company and its subsidiaries are not required to register as an investment company under the Investment Company Act.

Our office is located at 60 Broad Street, 34th Floor, New York, NY 10004. Our telephone number is (212) 388-6800. Our fax number is (212) 388-6801, and our website address is www.unitedrealtytrust.com.
 
What is the status of the offering?

On August 15, 2012, we commenced our initial public offering on a “best efforts” basis of up to 100,000,000 Common Shares (exclusive of 20,000,000 Common Shares available pursuant to our DRIP). On December 28, 2012, we received and accepted aggregate subscriptions in excess of the minimum of 200,000 Common Shares, broke escrow (except for Pennsylvania investors) and issued Common Shares to our initial investors, who were admitted as stockholders.
 
As of March 31, 2014, there were 790,469 Common Shares outstanding, including shares issued under our DRIP. As of March 31, 2014, there were approximately 99,228,847 Common Shares available for sale, excluding shares available under our DRIP. As of March 31, 2014, we had received aggregate gross proceeds of approximately $7.7 million from the sale of approximately 739,537 Common Shares in our public offering. As of March 31, 2014, we had incurred, cumulatively to that date, approximately $779,381 in selling commissions, dealer manager fees and other organizational and offering costs for the sale of our Common Shares.

In addition, we have sold 18,182 Common Shares to our sponsor for an aggregate purchase price of $200,000, and have sold 500,000 shares of preferred stock, subsequently exchanged for 500,000 shares of Sponsor Preferred Stock, or the Sponsor Preferred Shares, to our sponsor for an aggregate purchase price of $50,000. Pursuant to Section II.A.2 of the North American Securities Administrators Association Statement of Policy regarding Real Estate Investment Trusts, or the NASAA REIT Guidelines, our sponsor may not sell its initial investment while it remains our sponsor. Our sponsor is the sole owner of all outstanding Sponsor Preferred Shares. Upon (and for 180 days following) a sale or transfer of substantially all of our assets, stock or business (other than a sale of assets in our liquidation, dissolution or winding up), a listing of our Common Shares on a national securities exchange or the termination or non-renewal of our advisory agreement with our advisor, the Sponsor Preferred Shares will be convertible into Common Shares, and if the conversion is consummated, it will result in dilution of the interests of the holders of the Common Shares in us. If we were to liquidate, dissolve or wind up, the Sponsor Preferred Shares would not be convertible.

We will not sell any Common Shares to Pennsylvania residents unless we have received an aggregate of $52,250,000 in subscriptions from all investors pursuant to this offering. Pending the satisfaction of this condition, all subscription payments from Pennsylvania residents will be placed in an account held by the escrow agent, UMB Bank, N.A., in trust for subscribers’ benefit, pending release to us. Funds in escrow will be invested in short-term investments that can be readily sold or otherwise disposed of for cash without any dissipation of the offering proceeds invested.

What is the market opportunity?

We believe that the next several years should present a buying opportunity for investment in commercial real estate. Since 2008, commercial real estate prices generally have decreased, making it possible to acquire many properties for less than what such properties would have sold for at the height of the commercial real estate market in 2006 and 2007 and often for less than replacement cost. We also are in a historically low interest rate environment, which means that we expect to be able to borrow today at historically low interest rates. Leverage is one of the components that makes real estate attractive. When owners of real estate can borrow at a rate lower than the capitalization rates at which properties are priced, the owners will have positive leverage, resulting in net cash flow on invested equity at a rate higher than the capitalization rate.
 
 
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It is our view and belief that we are approaching a “perfect storm” for property acquisitions now. Over the next few years, we believe several trends will occur which will make the acquisition of real estate assets attractive. We anticipate that in 2014 a significant number of securitized loans that were originated at the height of the commercial real estate market in 2006 and 2007 will be coming due, which, when originally made, were at debt levels that will be difficult to refinance. We also expect that if certain regulations are promulgated relating to bank capital requirements, banks will sell real estate-related assets and foreclose on troubled real estate loans which they previously may have modified or extended. This should create a further buying opportunity for real estate investment. It is our view and belief that based on the sovereign debt crisis in Europe, many governments of industrialized nations will be forced to take actions that may result in an inflationary cycle in the mid- to long-term. For all these reasons, we believe we can acquire properties at below replacement cost, finance them with low interest rate debt, improve the value of the rental stream if and as inflation starts to take hold, and then dispose of the assets at higher prices towards the end of our holding period. If our view and belief are correct, we believe that our company will be well positioned to benefit based on the timing of its formation and expected types of asset acquisitions upon completion of the offering.

What is your dual strategy?

In order to meet our investment objectives we deploy a dual strategy in building our portfolio. The first strategy focuses on acquiring existing stabilized cash-flowing assets to support stable, consistent dividend distributions to our stockholders. The second strategy focuses on acquiring opportunistic assets which we can reposition, redevelop or remarket to create value enhancement and capital appreciation. By pursuing both strategies simultaneously we believe we can most effectively achieve our desired investment objectives. In executing on our investment objectives we will consider the state of the current real estate and capital markets in the United States in conjunction with our views of likely future developments which will impact both the real estate and capital markets in the United States.

With respect to our strategy of acquiring stable, in-place cash-flowing assets, we perceive a unique opportunity to finance such assets with low interest financing as a way to effect a positive impact on cash flow, and, based on the length of term for which we are able to fix such interest rates, any assumable financing may be viewed by a potential purchaser as an attractive opportunity when we elect to exit such a transaction. Since we also believe that, on a longer term, inflation should play a significant role in the valuation of real estate assets, we will be focusing on acquiring properties which have shorter-term leases or leases which provide for periodic increases through fixed rent increases or adjustment based on increases in the consumer price index, as a way to guard against potential inflation. Therefore, we will generally not seek to acquire properties which are fully leased with fixed rents which are not adjustable if inflation occurs, except where leases are of shorter duration, or where our objectives may be achieved from other characteristics of such properties.

At the same time, we will be pursuing our second strategy of acquiring assets which we believe, because of their property-specific characteristics or their market characteristics, may benefit from unique repositioning opportunities or for development or redevelopment or that are located in markets which we believe show high growth potential or that are available from distressed sellers which present appropriate investments for us. This strategy involves more risk than real estate programs that have a targeted holding period for investments longer than ours, utilize leverage to a lesser degree or employ more conservative investment strategies, and we believe that we have a potential for a higher rate of return than comparable real estate programs.

We intend that our overall strategy will involve one or more of the following attributes:
 
  Diversified Portfolio — Once we have invested substantially all the proceeds of this offering, we expect to have acquired a well diversified portfolio based on property type, geography, investment strategy, tenant mix, lease expirations and other factors;
  Growth Markets or Growth Opportunities — We expect that our properties either will be located in established or growing markets based on trends in population growth, employment, household income, employment diversification and other key demographic factors, or will be opportunities for value enhancement based on the need for recapitalization, repositioning or redevelopment; and
   • Discount To Replacement Cost — In the current acquisition environment, we expect to acquire properties at values based on current rents and at a substantial discount to replacement cost.
 
 
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We intend to focus on maximizing stockholder value. Some of the key elements of our financial strategy include:
 
  Seasoned Management — We will acquire and manage the portfolio through our advisor and its affiliates, including our sponsor’s seasoned team of ten professional managers who, although they have limited experience operating a public REIT, have over 150 years of combined operating history and extensive knowledge and expertise in commercial real estate;
  Property Focus — We will utilize a property-specific focus that combines intensive leasing plans with cost containment measures, with the expectation that it will deliver a solid and stable income stream;
  Stable Dividend — We intend to make monthly distributions. While we will seek to make distributions from operating revenues, we have made and may continue to make distributions at least partially from sources such as the proceeds of this offering or borrowings. Distributions from such sources would reduce the funds available for investment in properties and would reduce the amount of distributions we could make in the future. For more information, see “Risk Factors —  Risks Related to an Investment in United Realty Trust Incorporated”;
  Prudent Leverage — We will target a prudent leverage strategy with an approximately 65% loan-to-value ratio on our portfolio (calculated once we have invested substantially all the offering proceeds). For purposes of calculating our 65% target leverage, we will determine the loan-to-value ratio on our portfolio based on the greater of the aggregate cost and the fair market value of our investments and other assets. Our charter allows us to incur leverage up to 300% of our total “net assets” (as defined in Section I.B of the NASAA REIT Guidelines) as of the date of any borrowing, which is generally expected to be approximately 75% of the cost of our investments. We may only exceed this 300% limit with the approval of a majority of our independent directors;
  Upside Potential — We expect our portfolio to have upside potential from a combination of lease-up, rent growth, cost containment and increased cash flow; and
  Exit Strategy — We expect to sell our assets, sell or merge our company or list our company, within six to nine years after the end of this offering, although we cannot guarantee an exit within this timeframe
 
What is a REIT?

We intend to elect to qualify and be taxed as a REIT commencing with our taxable year ending December 31, 2013.
 
In general, a REIT is an entity that:
 
  combines the capital of many investors to acquire or provide financing for real estate investments;
  allows individual investors to invest in a professionally managed, large-scale, diversified portfolio of real estate assets;
  pays annual distributions to investors of at least 90% of its annual REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain; and
  avoids the “double taxation” treatment of income that normally results from investments in a corporation because a REIT generally is not subject to U.S. federal corporate income and excise taxes on that portion of its net income distributed to its stockholders, provided that certain U.S. federal income tax requirements are satisfied.
 
 
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However, under the Code, REITs are subject to numerous organizational and operational requirements. If we fail to remain qualified for taxation as a REIT in any subsequent year after electing REIT status and do not qualify for certain statutory relief provisions, our income for that year will be taxed at regular corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify as a REIT. Even if we qualify as a REIT, we still may be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income and excise taxes on our undistributed income. See “Material U.S. Federal Income Tax Considerations.”

What are your investment objectives?

Our primary investment objectives are:
 
  to provide you with stable cash distributions;
  to preserve and protect your capital contribution;
  to provide you with portfolio diversification;
  to realize growth in the value of our assets upon the sale of such assets; and
  to provide you with the potential for future liquidity through the sale of our assets, a sale or merger of our company or a listing of our Common Shares on a national securities exchange. See “— What are your exit strategies?”
 
We expect that a limited secondary market for the Common Shares may develop in which broker-dealers may offer to purchase your Common Shares, including through “mini-tender” offers, either for their own account or the accounts of other dealers. There can be no assurances that any such secondary market will develop, and any such secondary market would be likely to be limited and likely to price your Common Shares at a significant discount to the offering price per Common Share.

 
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What is the offering price for your Common Shares?

Until the NAV pricing start date, the per share price for Common Shares in our primary offering will be $10.45 (which includes the maximum allowed to be charged for commissions and fees, subject to certain discounts as described in this prospectus).

Commencing on the NAV pricing start date, the offering price per Common Share in our primary offering and under our DRIP will vary and will be equal to our NAV on each business day, which we define as a day that the New York Stock Exchange is open, divided by the number of Common Shares outstanding as of the end of business on such day without giving effect to any Common Share repurchases and reinvestments of distributions effected on such day, which amount we refer to as our NAV per Common Share, plus applicable selling commissions and dealer manager fees. After the close of business on the last business day of each month, we will file a pricing supplement, which will identify the NAV per Common Share for such month, with the Securities and Exchange Commission, or SEC, and we also will post the pricing supplement on our website at www.unitedrealtytrust.com. In addition to the monthly pricing supplements, we will provide more frequent pricing supplements if there is a change in the NAV per Common Share by more than 5% from the NAV per Common Share disclosed in the last filed prospectus or pricing supplement. In such event, we will, after the close of business on the day on which there is such a change in the NAV per Common Share, file a pricing supplement which would show the calculation of the daily NAV per Common Share and will provide an explanation as to the reason for the change. All investors whose repurchase requests have not been processed will have the right to rescind the repurchase transaction within ten days of such notice. You also may obtain the daily determination of our NAV per Common Share by calling our toll-free, automated telephone line at (855) REIT-NAV. Commencing on the NAV pricing start date, any purchase orders that we receive prior to 4:00 p.m. Eastern time on a given business day will be executed at a price equal to our NAV per Common Share for that business day. Subscriptions that we receive after 4:00 p.m. Eastern time on a given business day or thereafter will be executed at a price equal to our NAV per Common Share as calculated by our advisor after the close of business on the next business day. Please note that the NAV pricing start date could occur as late as January 15, 2015.
 
Are there any risks involved in an investment in your Common Shares?

Investing in our Common Shares involves a high degree of risk. You should carefully review the “Risk Factors” section of this prospectus beginning on page 32, which contains a detailed discussion of the material risks that you should consider before you invest in our Common Shares. The risks include the following:
 
  There is no public trading market for our Common Shares, and there may never be one; therefore, it will be difficult for you to sell your Common Shares except pursuant to our share repurchase program. There are limits on your ability to sell Common Shares pursuant to our share repurchase program.
  This is a blind pool offering, so you will not have the opportunity to evaluate our investments before we make them.
 
The principal of our sponsor has been involved in investments that have faced adverse business developments, including bankruptcies.
  If we are unable to raise substantial funds, we will be limited in the number and type of investments we may make, and the value of your investment in us will fluctuate with the performance of the specific investments we make.
  We and our advisor have a limited operating history, we have no established financing sources, and our sponsor has limited experience operating a public REIT.
  Our advisor and its affiliates, including all our executive officers and some of our directors, will face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.
 
 
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  Our advisor and its affiliates face conflicts of interest relating to the incentive fee structure under our advisory agreement and pursuant to the terms of the Sponsor Preferred Shares; these conflicts of interest could result in actions that are not necessarily in the long-term best interests of our stockholders.
  The interests of holders of Common Shares will be diluted upon conversion of the Sponsor Preferred Shares. See “Risk Factors — There will be dilution of stockholders’ interests upon conversion of the Sponsor Preferred Shares.”
  We will make some of or all our distributions from sources other than cash flow from operations, including the proceeds of our public offering, cash advanced to us by our advisor, or from borrowings (including borrowings secured by our assets); this may reduce the amount of capital we invest and negatively impact the value of your investment. Our organizational documents do not limit the amount of distributions we can fund from sources other than operating cash flow.
  You are limited in your ability to sell your Common Shares pursuant to our share repurchase program and may have to hold your Common Shares for an indefinite period of time.
  Commencing on the NAV pricing start date, the purchase of Common Shares under our DRIP and the repurchase of Common Shares under our share repurchase program will be at a price equal to our NAV per Common Share, which will be calculated based upon subjective judgments, assumptions and opinions about future events, and may not be accurate. As a result, our daily NAV per Common Share may not reflect the amount that you might receive for your Common Shares in a market transaction.
  In calculating our daily NAV, our advisor will base its calculations in part on independent appraisals of our properties, the accuracy of which our advisor will not independently verify. Because valuation of our properties is inherently subjective, the NAV per Common Share that we publish may not necessarily reflect changes in our NAV and in the value of your Common Shares or the impact of extraordinary events that we cannot immediately quantify.
  We have broad authority to incur debt, and high debt levels could hinder our ability to make distributions and could decrease the value of your investment.
  Our failure to qualify or remain qualified as a REIT would subject us to U.S. federal income tax and potentially state and local tax, and would adversely affect our operations and the market price of our Common Shares.
  To assist us in qualifying as a REIT, among other purposes, stockholders generally are restricted from owning more than 9.8% in value of the aggregate of our outstanding shares of stock and 9.8% (in value or in number of shares, whichever is more restrictive) of our outstanding Common Shares. In addition, our charter contains various other restrictions on ownership and transfer of our Common Shares.
 
What is the role of the board of directors?

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. We have five members of our board of directors, three of whom are independent of our sponsor and its affiliates. Our charter requires that a majority of our directors be independent of our sponsor. Our independent directors are responsible for reviewing the performance of our advisor and must approve other matters set forth in our charter. Our directors are elected annually by the stockholders.

Who is your advisor and what does it do?

United Realty Advisors LP, an affiliate of our sponsor, is our advisor. Our advisor is responsible for coordinating the management of our day-to-day operations and for identifying and making investments in real estate properties on our behalf, subject to the supervision of our board of directors.

 
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Our advisor has primary responsibility for making decisions regarding the selection and negotiation of real estate investments. Our advisor makes recommendations on all investments and dispositions to our board of directors. Other major decisions to be approved by our advisor, subject to the direction of our board of directors, include decisions with respect to the retention of investment banks, marketing methods with respect to this offering, the termination or extension of this offering, the initiation of a follow-on offering, mergers and other change-of-control transactions and certain significant press releases.

Our advisor employs 30 full-time employees and two consultants. Of the 30-person staff, 8 are real estate professionals who have over 150 years of combined real estate experience. The advisor has been funded with $10 million in capital which has been called and paid in to the advisor.

What is the experience of your advisor?

Our advisor is a limited partnership that was formed in the State of Delaware on July 1, 2011. Our advisor has a limited operating history and limited experience managing a public company.

What is the experience of your sponsor?

United Realty Advisor Holdings LLC, a Delaware limited liability company, is directly or indirectly controlled by Jacob Frydman, and indirectly controls our advisor and is our sponsor. Our sponsor was formed on July 1, 2011 and has limited experience operating a public REIT. For information about the experience of Mr. Frydman, the principal of our sponsor, see “Prior Performance Summary” and the tables included in Appendix A herein, which we have filed with the SEC. Prior programs, as well as investment activities for his own account, of the principal of our sponsor had substantially different investment objectives than ours. Investors should not assume that they will experience returns, if any, comparable to those experienced by investors in such prior real estate programs or to those of Mr. Frydman investing for his own account.

Who is United Realty Partners LLC, and what does it do?

United Realty Capital, LLC, a Delaware limited liability company controlled and indirectly owned by Mr. Frydman, was formed on October 11, 2011. Its name was changed to United Realty Partners LLC, or URP, on December 14, 2011. If our independent directors approve, we may engage URP, from time to time, to provide certain services, which might include brokerage services, services in connection with the origination or refinancing of debt, or advice in connection with joint venture opportunities and equity financing opportunities for our properties. We only engage URP for such services if it can provide the same level of service as an unaffiliated third party provider and at a cost similar to that of an unaffiliated third party. As a result, on a single acquisition transaction, we may pay to our affiliates an acquisition fee, a financing coordination fee, a supplemental brokerage fee, a supplemental financing fee and a supplemental joint venture advisory fee. For a more detailed discussion of compensation, see the table included in the “Compensation Table” section of this prospectus, including the footnotes thereto.

How do you expect your portfolio to be allocated between real estate properties and real estate-related loans and securities?

We intend to acquire and manage a diverse portfolio of real estate properties and real estate-related loans and securities. We plan to diversify our portfolio by geographic region, tenant mix, investment size and investment risk with the goal of attaining a portfolio of income-producing real estate properties and real estate-related assets that provide stable returns to our investors. Our management team has experience investing in many types of properties, and as a result may acquire a wide variety of property types, including office, industrial, retail and hospitality properties, single-tenant properties, multifamily properties, age-restricted residences and in other real estate-related assets. These properties may be existing income-producing properties, newly constructed properties or properties under development or under construction. Properties may include multifamily properties purchased for conversion into condominiums or cooperatives (or blocks of sponsor units purchased for rental or resale), ground leases and properties intended to be converted from one use to another use. Some properties in which we invest may require development, redevelopment or repositioning. We also may seek out opportunities by acquiring assets from sellers who are financially distressed or face time-sensitive deadlines, or from owners or institutions who have acquired assets through foreclosure. We may acquire assets directly or through joint ventures, by making an equity investment in a project or by making a mezzanine or bridge loan with a right to acquire equity the project. We also might buy debt secured by an asset with a view toward acquiring the asset as a result of foreclosure. We also may originate or invest in mortgages, bridge, or mezzanine loans and Section 1031 tenant-in-common interests, or in entities that make investments similar to the foregoing. Further, we may invest in real estate-related securities, including securities issued by other real estate companies, either for investment or in change of control transactions completed on a negotiated basis or otherwise. Assuming we sell the maximum offering amount, we intend to allocate approximately 80% of our portfolio to real estate properties, and approximately 20% to real estate-related loans and securities, which may include the equity securities of other REITs and real estate companies.
 
 
7

 
 
How do you select potential properties for acquisition?

To find properties that best meet our criteria for investment, our advisor has developed a disciplined investment approach that combines the experience of its team of real estate professionals with a structure that emphasizes thorough market research, stringent underwriting standards and an extensive downside analysis of the risks of each investment.

What types of real estate-related debt investments do you expect to make?

Assuming that we sell the maximum offering amount, we expect that our real estate-related debt investments, when aggregated with our real estate-related securities, will not constitute more than 20% of our portfolio or represent a substantial portion of our assets at any one time. With respect to our investments in such assets, we will focus primarily on investments in first mortgages. The other real estate-related debt investments in which we may invest include second mortgage, mezzanine, bridge and other loans; debt and derivative securities related to real estate assets; collateralized debt obligations; debt securities issued by real estate companies; and credit default swaps.

What types of investments will you make in the equity securities of other companies?

We expect to make equity investments in REITs and other real estate companies. We may purchase the common or preferred stock of these entities or options to acquire their stock. We do not expect our non-controlling equity investments in other public companies to exceed 5% of the proceeds of this offering, assuming we sell the maximum offering amount, or to represent a substantial portion of our assets at any one time.

Do you use leverage?

Yes. We expect that once we have fully invested the proceeds of this offering, assuming we sell the maximum amount, our portfolio-wide loan-to-value ratio (calculated after the close of this offering) will be approximately 65%. For purposes of calculating our 65% target leverage, we will determine the loan-to-value ratio on our portfolio based on the greater of the aggregate cost and the fair market value of our investments and other assets. There is no limitation on the amount we may borrow for the purchase of any single asset. Our charter allows us to incur leverage up to 300% of our total “net assets” (as defined in Section I.B of the NASAA REIT Guidelines) as of the date of any borrowing, which is generally expected to be approximately 75% of the cost of our investments. We may only exceed this 300% limit if a majority of our independent directors approves each borrowing in excess of this limit and we disclose such borrowing to our stockholders in our next quarterly report along with a justification for the excess borrowing. In all events, we expect that our secured and unsecured borrowings will be reasonable in relation to the net value of our assets and will be reviewed by our board of directors at least quarterly.

We do not intend to exceed the leverage limit in our charter except in the early stages of our development when the costs of our investments are most likely to exceed our net offering proceeds. Careful use of debt will help us to achieve our diversification goals because we will have more funds available for investment. However, high levels of debt could cause us to incur higher interest charges and higher debt service payments, which would decrease the amount of cash available for distribution to our investors.
 
 
8

 
 
How do you structure the ownership and operation of your assets?

We own our assets and conduct our operations through United Realty Capital Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our operating partnership. Because we conduct substantially all our operations through the operating partnership, we are considered an UPREIT. UPREIT stands for “Umbrella Partnership Real Estate Investment Trust.” Using an UPREIT structure may give us an advantage in acquiring properties from persons who may not otherwise sell their properties because of certain unfavorable U.S. federal income tax consequences.

What conflicts of interest will your sponsor face?

Our sponsor and its affiliates and personnel will experience conflicts of interest in connection with the management of our business. Some of the material conflicts are as follows:
 
  Our sponsor and its affiliates will have to allocate their time between us and other real estate programs and activities in which they are involved.
  Our sponsor or its affiliates will receive fees in connection with transactions involving the purchase, origination, financing, management and sale of our assets regardless of the quality of the asset acquired or the services provided to us and in connection with any joint venture arrangements.
  Our advisor may terminate the advisory agreement without penalty upon 60 days’ written notice and, upon termination of the advisory agreement, our sponsor will be entitled to convert its Sponsor Preferred Shares into Common Shares.
  We may seek stockholder approval to internalize our management by acquiring assets and personnel from our advisor for consideration that would be negotiated at that time. The payment of such consideration could result in dilution to your interest in us and may provide incentives to our advisor or its management to pursue an internalization transaction rather than an alternative strategy, even if such alternative strategy might otherwise be in our stockholders’ best interests.
  Comencing on the NAV pricing start date, the asset management fee that we pay to our advisor or its assignees may be based on NAV (i.e., commencing on the NAV pricing start date we will pay our advisor or its assignees a monthly fee equal to the greater of (a) one-twelfth ( 1/12) of 1% of the average of our daily NAV for the preceding month and (b) one-twelfth ( 1/12) of 0.75% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) then owned plus one-twelfth ( 1/12) of 0.75% of the amount advanced for each loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment) then owned). Furthermore, our advisor will be involved in estimating certain accrued fees and expenses that are part of our NAV and performing the calculation of our daily NAV. Because the asset management fee may be based on NAV, the advisor will benefit from our Common Shares having a higher NAV and therefore it has an incentive to cause the NAV to be higher. Moreover, our advisor and its affiliates will receive fees in connection with transactions involving the purchase, financing, management and sale of our investments, and, because our advisor does not maintain a significant equity interest in us and is entitled to receive substantial minimum compensation regardless of performance, our advisor’s and its affiliates’ interests are not wholly aligned with those of our stockholders.
  We have issued 500,000 shares of preferred stock, subsequently exchanged for 500,000 Sponsor Preferred Shares, to our sponsor in exchange for $0.10 per share. Our sponsor is the sole owner of all outstanding Sponsor Preferred Shares. Upon (and for 180 days following) a sale or transfer of substantially all of our assets, stock or business (other than a sale of assets in our liquidation, dissolution or winding up), a listing of our Common Shares on a national securities exchange or the termination or non-renewal of our advisory agreement with our advisor, the Sponsor Preferred Shares will be convertible into Common Shares, and if the conversion is consummated, it will result in dilution of the interests of the holders of the Common Shares in us. If we were to liquidate, dissolve or wind up, the Sponsor Preferred Shares would not be convertible. The possibility of conversion may influence our advisor’s judgment when recommending (or not recommending) to our board a sale or transfer of substantially all of our assets, stock or business, a listing of our Common Shares on a national securities exchange, or the termination or non-renewal of our advisory agreement. As the entity with ultimate control over our advisor, our sponsor can influence the conversion of the Sponsor Preferred Shares.
 
 
9

 
 
 
Our dealer manager, United Realty Securities, is an affiliate of our advisor and will receive fees in connection with our public offering of Common Shares.
 
What fees have you paid or do you owe to your advisor and its affiliates to date?

Through December 31, 2013, we have reimbursed our advisor for $128,482 in organization and offering expenses, and $1,270,386 representing reimbursement for general and administrative costs, which consisted primarily of professional fees, allocated salaries and office rent. We paid URP a supplemental transaction-based advisory fee for deal sourcing in the amount of $234,000 and paid our advisor an acquisition fee in the amount of $294,000 and a financing coordination fee in the amount of $160,000 in connection with acquisitions closed on March 29, 2013 and August 2, 2013, and an oversight fee of $1,161. We have paid $65,096 in property management fees and $140,479 in asset management fees to our advisor as of December 31, 2013.

What is the ownership structure of the company and the entities that perform services for you?

The following chart shows the ownership structure of the various entities that perform or are likely to perform important services for us:
 
 
  (1) Jacob Frydman controls and indirectly owns United Realty Advisor Holdings LLC, our sponsor, and controls and indirectly owns Prime United Holdings, LLC.
  (2) On November 25, 2011, United Realty Advisor Holdings LLC, our sponsor, acquired 500,000 shares of preferred stock, subsequently exchanged for 500,000 Sponsor Preferred Shares, for $0.10 per share, or an aggregate of $50,000. On November 17, 2011, our sponsor acquired 18,182 Common Shares for an aggregate purchase price of $200,000.
  (3) Certain passive investors with limited voting rights who are not affiliated with our sponsor directly hold approximately 33% and 7% of the economic interests in URTI GP, LLC and United Realty Advisors LP, respectively. Jacob Frydman indirectly holds approximately 67% of the economic interests in URTI GP, LLC. Mr. Frydman indirectly holds a 100% interest in our sponsor and an approximately 55% indirect interest in our advisor.
  (4)  A division of Cabot Lodge Securities, LLC.
 
 
10

 
 
What are the fees that you will pay to the advisor, its affiliates and your directors?

Our advisor and its affiliates will receive compensation and reimbursement for services relating to this offering and the investment and management of our assets. The most significant items of compensation and reimbursement are included in the table below. In the sole discretion of our advisor, URA Property Management LLC, or our property manager, our board of directors or URP, as applicable, certain fees and expenses may be paid, in whole or in part, in cash or in Common Shares. Our advisor will advance our organization and offering expenses to the extent we do not have the funds to pay such expenses. For a more detailed discussion of compensation, see the table included in the “Compensation Table” section of this prospectus, including the footnotes thereto. The selling commissions and dealer manager fee will not be paid by purchasers who are our executive officers or directors, officers or employees of our advisor or their family members (including spouses, parents, grandparents, children and siblings) or other affiliates, Friends and institutional investors (the terms “Friends” and “institutional investors” are explained under “Plan of Distribution — Common Shares Purchased by Affiliates, Friends, Institutional Investors and Participating Broker-Dealers”), and will be reduced for “single purchasers” of more than $1,000,000 in value of Common Shares. Purchases by participating broker-dealers, including their registered representatives and their immediate families, will be less the selling commissions, in the sole discretion of our dealer manager. Our dealer manager will not be permitted to purchase Common Shares. The table below assumes the Common Shares are sold through distribution channels associated with the highest possible selling commissions and dealer manager fee. No effect is given to any Common Shares sold through our DRIP.
 
Type of Compensation
 
Determination of Amount
    Amount Paid During
Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
   Organization and Offering Stage  
 
Selling Commissions
 
Prior to the NAV pricing start date, the dealer manager will be paid $0.73 per Common Share out of the Common Shares sold in our primary offering, and selling commissions will constitute approximately 7.0% of the offering price of $10.45 for Common Shares. Commencing on the NAV pricing start date, the dealer manager will receive from the gross proceeds selling commissions equal to 7.0% of our NAV per Common Share. No selling commissions will be paid on sales of Common Shares under our DRIP. The dealer manager will reallow all selling commissions to the participating broker-dealer or registered representative of the dealer manager who actually sold the Common Shares.
   $292,557    
$73,000,000
  
The actual amount will depend on the number of Common Shares sold.
 
 
11

 
 
Type of Compensation
 
Determination of Amount
   Amount Paid During
Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
Dealer Manager Fee
 
Prior to the NAV pricing start date, the dealer manager will be paid $0.31 per Common Share out of the Common Shares sold in our primary offering, and the dealer manager fee will constitute approximately 3.0% of the offering price of $10.45 per Common Share. Commencing on the NAV pricing start date, the dealer manager will receive from the gross proceeds a dealer manager fee equal to 3.0% of our NAV per Common Share. The dealer manager may reallow from the dealer manager fee up to $0.15 per Common Share (prior to the NAV pricing start date) or 1.5% of our NAV per Common Share (commencing on the NAV pricing start date) to any participating broker-dealer for marketing support. No dealer manager fee will be paid with respect to sales under our DRIP.
    $150,549    
$31,000,000
  
The actual amount will depend on the number of Common Shares sold.
 
 
12

 
 
Type of Compensation
 
Determination of Amount
   Amount Paid During
Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
Organization and Offering Expenses
 
We will reimburse our advisor up to 2% of the total offering price paid by investors (which includes proceeds to us from the sale of Common Shares, plus applicable selling commissions and dealer manager fee) for organization and offering expenses, which may include reimbursements to be paid to the dealer manager, registered investment advisors and participating broker-dealers for due diligence fees set forth in detailed and itemized invoices.
   $86,620    
$20,900,000
  
The actual amount will depend on the number of Common Shares sold.
 
 
Operational Stage
 
 
Acquisition Fees
 
We will pay to our advisor or its assignees 1% of the contract purchase price of each property acquired (including our pro rata share (direct or indirect) of debt attributable to such property) or 1% of the amount advanced for a loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment), as applicable. For purposes of this prospectus, “contract purchase price” or the “amount advanced for a loan or other investment” means the amount actually paid or allocated in respect of the purchase, development, construction or improvement of a property or the amount actually paid or allocated in respect of the purchase of loans or other real estate-related assets, in each case inclusive of any indebtedness assumed or incurred in respect of such investment but exclusive of acquisition fees and acquisition expenses.
   $294,000    
$9,201,000 (or $26,289,000 assuming we incur our expected leverage of 65% set forth in our investment guidelines).
 
 
13

 
 
Type of Compensation
 
Determination of Amount
   Amount Paid During
Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
Acquisition Expenses
 
We will reimburse our advisor for expenses actually incurred related to selecting, evaluating and acquiring assets on our behalf, regardless of whether we actually acquire the related assets. In addition, we will pay third parties, or reimburse the advisor or its affiliates, for any investment-related expenses due to third parties, including, but not limited to, legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, third-party brokerage or finder’s fees, title insurance expenses, survey expenses, property inspection expenses and other closing costs, regardless of whether we acquire the related assets. We estimate that total acquisition expenses (including those paid to third parties, as described above) will be approximately 0.6% of the purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) and 0.6% of the amount advanced for a loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment). In no event will the total of all acquisition fees and acquisition expenses (including those paid to third parties, as described above) payable with respect to a particular investment exceed 6% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) or 6% of the amount advanced for a loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment), as applicable.
    $992,907    
$5,520,600 (or $15,773,000 assuming we incur our expected leverage of 65% set forth in our investment guidelines).
               
Construction and Development Management Fee
 
We expect to engage our property manager to provide construction and development management services for some of our properties. Other than with respect to tenant improvements, as described below, we will pay a construction and development management fee in an amount of 2% of the cost of any construction or development that our property manager undertakes. When our property manager provides construction management services with respect to tenant improvements, the construction and development management fee may be up to, but will not exceed, 5% of the cost of the tenant improvements.
    None.    
Not determinable at this time.
               
 
 
14

 
 

 
Type of Compensation
 
Determination of Amount
   Amount Paid During
Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
Asset Management Fees
 
Until the NAV pricing start date, we will pay our advisor or its assignees a monthly fee equal to one-twelfth ( 1/12) of 0.75% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) then owned plus one-twelfth ( 1/12) of 0.75% of the amount advanced for each loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment) then owned, payable on the first business day of each month. Commencing on the NAV pricing start date, we will pay our advisor or its assignees a monthly fee equal to the greater of (a) the amount as calculated in the preceding sentence, and (b) one-twelfth ( 1/12) of 1% of the average of our daily NAV for the preceding month, payable on the first business day of each month.
    $140,479    
Not determinable at this time. Because the fee is based on a fixed percentage of NAV or contract purchase price or the amount advanced for a loan or other investment with respect to all our assets then owned during the months for which such fee is payable, there is no maximum dollar amount of this fee.
               
Property Management Fees
 
Property management fees equal to 4.5% of the monthly gross receipts from the properties managed by our property manager will be payable monthly to our property manager. Our property manager may subcontract the performance of its property management duties to third parties, and our property manager may pay all or a portion of its property management fees to the third parties with whom it subcontracts for these services. We will reimburse the costs and expenses incurred by our property manager on our behalf, including legal, travel and other out-of-pocket expenses that are directly related to the management of specific properties, as well as the expenses of third-party service providers. We will not, however, reimburse our property manager for the fees of third-party service providers, for general overhead costs or for the wages and salaries and other employee-related expenses of employees of our property manager other than employees who are engaged in the on-site operation, management, maintenance or access control of our properties.
    $65,096    
Not determinable at this time. Because these fees are based on a percentage of the monthly gross receipts, there is no maximum dollar amount to these fees.
 
 
15

 
 
Type of Compensation
 
Determination of Amount
   Amount Paid During
Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
Leasing Fees
 
We expect to engage our property manager to provide leasing services with respect to our properties. We will pay a leasing fee to our property manager in an amount that is equal to 2% of the sum of all rent payments that a tenant will be contractually obligated to make under a renewal lease at the time of the execution of such renewal lease and 5% of the sum of all rent payments that a tenant will be contractually obligated to make under a new lease at the time of the execution of such new lease. A leasing fee will be payable upon the execution of the applicable lease. Our property manager may subcontract the performance of its leasing duties to third parties, and our property manager may pay all or a portion of its leasing fees to the third parties with whom it subcontracts for these services.
    None.    
Not determinable at this time. Because these fees are based on the sum of all rent payments due under leases, there is no maximum dollar amount to these fees.
               
Oversight Fee
 
For services in overseeing property management and leasing services provided by any person or entity that is not our property manager or an affiliate of our property manager, we will pay our advisor an oversight fee equal to 1% of the gross revenues of the property managed.
    $1,161    
Not determinable at this time. Because the fee is based on a fixed percentage of gross revenue, there is no maximum dollar amount of this fee.
               
Operating Expenses
 
We will reimburse our advisor’s costs of providing administrative services, subject to the limitation that we will not reimburse our advisor (except in limited circumstances) for any amount by which our total operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of (i) 2% of average invested assets and (ii) 25% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash reserves and excluding any gain from the sale of assets for that period. For these purposes, “average invested assets” means, for any period, the average of the aggregate book value of our assets (including lease intangibles) invested, directly or indirectly, in equity interests in and loans secured by real estate assets (including amounts invested in REITs and other real estate operating companies) before deducting depreciation or bad debts or other non-cash reserves, computed by taking the average of these values at the end of each month during the period.
 
Our advisor incurred $7,154,845 of total operating expenses during the period, of which $1,270,386 was reimbursed by us.
   
Not determinable at this time.
 
 
16

 
 
Type of Compensation
 
Determination of Amount
   Amount Paid During
 Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
   
Additionally, we will reimburse our advisor for personnel costs in connection with other services, in addition to paying an asset management fee; however, we will not reimburse our advisor for personnel costs in connection with services for which the advisor receives acquisition fees or real estate disposition commissions.
   None.      
               
Financing Coordination Fee
 
If our advisor provides services in connection with the origination or refinancing of any debt that we obtain and use, directly or indirectly, to finance properties or other investments, or that we assume, directly or indirectly, in connection with the acquisition of properties or other investments, we will pay the advisor or its assignees a financing coordination fee equal to 1% of the amount available or outstanding under such financing or such assumed debt. The advisor may reallow some of or all this financing coordination fee to reimburse third parties with whom it may subcontract to procure such financing.
  $160,000    
Not determinable at this time. Because the fee is based on a fixed percentage of any debt financing, there is no maximum dollar amount of this fee.
               
Supplemental Transaction-Based Advisory Fees
 
If our independent directors approve, we may engage URP, from time to time, to provide certain services, which might include brokerage services, services in connection with the origination or refinancing of debt, or advice in connection with joint venture opportunities and equity financing opportunities for our properties. We only engage URP for such services if it can provide the same level of service as an unaffiliated third party provider and at a cost similar to that of an unaffiliated third party. As a result, on a single acquisition transaction, we may pay to our affiliates an acquisition fee, a financing coordination fee, a supplemental brokerage fee, a supplemental financing fee and a supplemental joint venture advisory fee.
   $234,000    
Not determinable at this time.

 
17

 
 
Type of Compensation
 
Determination of Amount
   Amount Paid During
Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
Awards Under Our Stock Incentive Plan
 
We have adopted a stock incentive plan, pursuant to which our independent directors, officers and employees (if we ever have employees), employees of our advisor and other affiliates, certain of our consultants and certain consultants to our advisor and other affiliates who directly or indirectly provide consulting services to us may be granted equity incentive awards in the form of stock options, stock appreciation rights, restricted stock, performance shares and other stock-based awards. Our compensation committee will determine all awards under our stock incentive plan and the vesting schedule for the grants.
  $59,850
 
During the year ended December 31, 2013, we awarded 8,800 fully vested restricted shares to employees of and consultants to our advisor, and to associated persons of United Realty Securities.
 
We also awarded 9,474 restricted shares to our independent directors in lieu of paying their annual fees in cash. These shares will vest over a 15-month period that began on April 1, 2013. During the year ended December 31, 2013 we expensed $54,000 related to the amortization of the independent directors’ retention-based restricted shares.
 
In addition, subject to the vesting provisions described below and further subject to the provisions of our stock incentive plan, we agreed to award an aggregate of 275,000 retention-based restricted shares and an aggregate of 187,500 incentive restricted shares to certain officers and associated persons of United Realty Securities. The retention-based restricted shares will vest over a four- or five-year period, as applicable, on the anniversaries of each awardee’s hire date (assuming such awardee is still employed by United Realty Securities or our advisor, as applicable, as of such anniversary date). The incentive restricted shares will vest over a five-year period on the anniversaries of each awardee’s hire date (assuming such awardee is still employed by our advisor as of such anniversary date). The number of incentive restricted shares that will vest will be determined based on the number of Common Shares sold by participating dealers within each respective awardee’s geographic territory.
   
The aggregate number of Common Shares that may be issued or used for reference purposes or with respect to which awards may be granted under our stock incentive plan will not exceed 5.0% of our outstanding Common Shares on a fully diluted basis at any time and in any event will not exceed 5,000,000 Common Shares (subject to adjustment for stock splits, combinations, reclassifications, reorganizations and certain other specified events pursuant to the stock incentive plan).
               
Compensation of Independent Directors
 
We pay to each of our independent directors a retainer of $30,000 per year (the chairperson of the audit committee also will receive an additional annual award of $15,000), plus $2,000 for each board or board committee meeting the director attends in person, and $1,500 for each meeting the director attends by telephone or remotely. If there is a meeting of the board and one or more committees in a single day, the fees will be limited to $2,500 per day.
  $90,000
 
During the year ended December 31, 2013, we granted 9,474 shares of restricted stock to our independent directors in lieu of paying their annual fees in cash, and expensed $54,000 related to the amortization of such restricted stock.
   
The independent directors, as a group, will receive for a full fiscal year, estimated aggregate compensation of approximately $260,000, payable in cash or Common Shares.
               
   
We may issue Common Shares pursuant to our stock incentive plan in lieu of paying an independent director his or her annual fees or meeting fees in cash. Our independent directors also may receive awards under our stock incentive plan. Our compensation committee will determine all awards to our independent directors under our stock incentive plan and the vesting schedule for such awards.
         
 
 
18

 
 
Type of Compensation
 
Determination of Amount
   Amount Paid During
Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
Subordinated Share of Annual Cash Flows
 
Our advisor will receive, annually, an amount equal to 15% of any net cash flows in respect of each calendar year remaining after payment to holders of Common Shares of distributions (including from sources other than operating cash flow) for such calendar year, such that the holders of Common Shares have received a 7% pre-tax, non- compounded annual return on the capital contributed by holders of Common Shares. “Net cash flows” means, for any period, the excess of: (i) the sum of (A) our revenues for such period, as determined under GAAP, from ownership and/or operation of properties, loans and other investments and (B) the net cash proceeds we realize during such period from any sale of assets; over (ii) the sum of all costs and expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation or to corporate business, including advisory fees, the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and listing of our Common Shares, interest payments, taxes, non-cash expenditures such as depreciation, amortization and bad debt reserves, incentive fees paid in compliance with the NASAA REIT Guidelines, acquisition fees and acquisition expenses, real estate commissions on the sale of property and other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property). Our use of “net cash flow”, a non-GAAP measure, as a metric instead of GAAP net income likely will result in the payment of a higher amount to our advisor than if our advisor were to receive, annually, an amount equal to 15% of GAAP net income after payment of such 7% annual return. We cannot assure you that we will provide such 7% annual return, which we have disclosed solely as a measure for our advisor’s incentive compensation. Because such 7% annual return may consist in part of distributions from sources other than operating cash flow, the source of such 7% annual return may not be entirely from net income; to the extent that the source of such 7%
   None.    
Actual amounts depend on the results of our operations; we cannot determine these amounts at the present time.

 
19

 
 
Type of Compensation
 
Determination of Amount
   Amount Paid During
 Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
   
annual return is not from net income, then the value of your Common Shares may be impacted negatively. Our advisor may have an incentive to increase the amount of distributions from sources other than operating cash flow in order to maximize its subordinated share of annual cash flows. Our advisor may receive a subordinated share of annual cash flows even if distributions to holders of Common Shares have exceeded our cash flows from operations.
 
         
   Liquidation/Listing Stage  
 
Real Estate Disposition Commissions
 
For substantial assistance in connection with the sale of properties, we will pay our advisor or its affiliates a real estate disposition commission equal to 2% of the contract sales price of such property, but in no event will such commission be greater than one-half of a real estate commission that is reasonable, customary and competitive in light of the size, type and location of the property; provided, however, that in no event may the real estate commissions paid to our advisor, its affiliates and unaffiliated third parties exceed the lesser of 6% of the contract sales price and a real estate commission that is reasonable, customary and competitive in light of the size, type and location of the property. Our independent directors will determine whether the advisor or its affiliates have provided substantial assistance to us in connection with the sale of a property. Substantial assistance in connection with the sale of a property includes the preparation by our advisor or its affiliates of an investment package for the property (including an investment analysis, an asset description and other due diligence information) or such other substantial services performed by the advisor or its affiliates in connection with a sale.
   None.    
Not determinable at this time. Because the commission is based on a fixed percentage of the contract price for a sold property, there is no maximum dollar amount of these commissions.

 
20

 
 
Type of Compensation
 
Determination of Amount
    Amount Paid During
 Year Ended 
December 31, 2013
   
Estimated Amount for
Maximum Offering
(100,000,000
Common Shares)*
Sponsor Preferred Shares (or Common Shares, if Sponsor Preferred Shares are converted)
 
Upon (and for 180 days following) the occurrence of a Triggering Event, as defined under “Description of Shares — Sponsor Preferred Shares,” each outstanding Sponsor Preferred Share becomes convertible into one Common Share for each $100 million, rounded down to the nearest $100 million, of gross proceeds raised by us through the date of conversion in this public offering and any subsequent public offering of Common Shares, combined.
  
Following our liquidation, dissolution or winding up, our sponsor will receive 15% of the amount of any excess of the proceeds over the amount of Invested Capital, as defined below, plus a non-compounded pre-tax annual return to holders of Common Shares of 7% on Invested Capital. The term “Invested Capital” means the amount calculated by multiplying the total number of Common Shares issued by us by the original issue price for each such Common Share, reduced by an amount equal to the total number of Common Shares that we repurchased under our share repurchase program, as the same may be amended, supplemented or replaced from time to time, multiplied by the original issue price for each such repurchased Common Share when initially purchased from us.
   None.    
If the Sponsor Preferred Shares are converted into Common Shares, their value is estimated to range from $0 (if less than $100 million of gross proceeds is raised) to $52.25 million (if the maximum offering is sold). (These estimates assume that a Common Share is worth $10.45 and that no investors participate in our DRIP).
 

  * For purposes of calculating the estimated fee amounts set forth in the table, we have not taken into consideration the effect that repurchases of Common Shares by our stockholders would have upon such fee amounts.
 
How many real estate investments do you currently own?

As of December 31, 2013, we had acquired interests in three real estate-related assets. As of December 31, 2013, we had total real estate investments, at cost, of approximately $25.8 million. See “Description of Real Estate Investments”. Because we have not yet identified any additional assets that we will acquire, we are considered to be a blind pool. As property acquisitions become probable, we will supplement this prospectus to provide information regarding the likely acquisition to the extent material to an investment decision with respect to our Common Shares. We also will describe material changes to our portfolio, including the closing of property acquisitions, by means of a supplement to this prospectus.

Will you acquire properties or other assets in joint ventures?

We have acquired assets in joint ventures, and we may continue to do so. Among other reasons, joint venture investments permit us to own interests in large assets without unduly restricting the diversity of our portfolio. We also may want to acquire properties and other investments through joint ventures in order to diversify our portfolio by investment size or investment risk. In determining whether to invest in a particular joint venture, our advisor will evaluate the real estate assets that such joint venture owns or is being formed to own under the same criteria as our advisor would use to evaluate our other investments.
 
 
21

 
 
If I buy Common Shares, will I receive distributions and how often?
 
On December 28, 2012, our board of directors declared daily distributions on our Common Shares at a daily rate of $0.00210958904 per Common Share. The distributions began to accrue as of daily record dates beginning on January 1, 2013, and are aggregated and paid monthly, on payment dates determined by us, to stockholders who hold Common Shares as of such daily record dates. We expect to continue paying distributions monthly unless our results of operations, our general financial condition, general economic conditions or other factors make it imprudent to do so.  The timing and amount of distributions will be determined by our board and will be influenced in part by its intention to comply with REIT requirements of the Code.
 
We expect to have little, if any, funds from operations available for distribution until we make substantial investments.  Further, because we may receive income from interest or rents at various times during our fiscal year and because we may need funds from operations during a particular period to fund capital expenditures and other expenses, we expect that at least during the early stages of our development and from time to time during our operational stage, our board will authorize and we will declare distributions in anticipation of funds that we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds.  In these instances, we expect to look to proceeds from this offering, to proceeds from the issuance of securities in the future, or to third-party borrowings, to fund our distributions.  We also may fund such distributions from advances from our sponsor or from any waiver of fees by our advisor.
 
Our board has the authority under our organizational documents, to the extent permitted by Maryland law, to authorize the payment of distributions from any source without limits, including proceeds from this offering, from borrowings or from the proceeds from the issuance of securities in the future, and we expect that, at least in the early stages of our existence, we will use the proceeds of this offering to pay distributions.
 
To maintain our qualification as a REIT, we generally are required to make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain.  If we meet the REIT qualification requirements, we generally will not be subject to U.S. federal income tax on that portion of our taxable income or capital gain which is distributed to our stockholders.
 
We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.
 
The following table shows the sources for the payment of distributions to common stockholders for the periods presented:
 
 
   
Three months ended
 
   
March 31, 2013
 
June 30, 2013
 
September 30, 2013
 
Distributions:
       
Percentage
of
Distributions
       
Percentage
of
Distributions
       
Percentage
of
Distributions
 
Distributions paid in cash
 
$
16,832
   
53.6%
 
$
52,100
   
60.2%
 
$
62,096
   
58.6%
 
Distributions reinvested
   
14,577
   
46.4%
 
 
34,435
   
39.8%
 
 
43,811
   
41.4%
 
Total distributions
 
$
31,409
   
100.0%
 
$
86,535
   
100.0%
 
$
105,907
   
100.0%
 
Source of distribution coverage:
                                     
Cash flows provided by operations
 
$
   
0.0%
 
$
   
0.0%
 
$
62,096
   
58.6%
 
Common Shares issued under the DRIP
   
14,577
   
46.4%
 
 
34,435
   
39.8%
 
 
43,811
   
41.4%
 
Proceeds from issuance of Common Shares
   
16,832
   
53.6%
 
 
52,100
   
60.2%
 
 
   
0%
 
Total sources of distributions
 
$
31,409
   
100.0%
 
$
86,535
   
100.0%
 
$
105,907
   
100.0%
 
Cash flows (used in) provided by operations (GAAP basis)
 
$
(2,328,232
)
     
$
(943,008
)
     
$
231,416
       
Net loss attributable to stockholders (in accordance with
GAAP)
 
$
(1,969,778
)
     
$
(133,989
)
     
$
(185,281
)
     
 
 
   
Three months ended
December 31, 2013
 
Year Ended
December 31, 2013
 
Distributions:
       
Percentage of Distributions
       
Percentage of Distributions
 
Distributions paid in cash
 
$
65,744
   
60.0%
 
$
196,749
   
59.0%
 
Distributions reinvested
   
43,740
   
40.0%
 
 
136,586
   
41.0%
 
Total distributions
 
$
109,484
   
100.0%
 
$
333,335
   
100.0%
 
Source of distribution coverage:
                         
Cash flows provided by operations
 
$
   
0.0%
 
$
62,096
   
18.6%
 
Common Shares issued under the DRIP
   
43,740
   
40.0%
 
 
136,586
   
41.4%
 
Proceeds from issuance of Common Shares
   
65,744
   
60.0%
 
 
134,653
   
40.0%
 
Total sources of distributions
 
$
109,484
   
100.0%
 
$
333,335
   
100.0%
 
Cash flows (used in) provided by operations (GAAP basis)
 
$
(170,523
)
     
$
(3,210,348
)
     
Net loss attributable to stockholders (in accordance with GAAP)
 
$
(402,888
)
     
$
(2,691,937
)
     
 
May I reinvest my distributions in Common Shares of United Realty Trust Incorporated?

Yes. You may participate in our DRIP by checking the appropriate box on the subscription agreement or by filling out an enrollment form we will provide to you at your request. Until the NAV pricing start date, the offering price per Common Share under our DRIP will be $10.00. After the NAV pricing start date, the offering price per Common Share under our DRIP will be equal to the NAV per Common Share. Please note that the NAV pricing start date could occur as late as January 15, 2015. At no time will the offering price per Common Share under our DRIP be less than 95% of the fair market value per Common Share. No selling commissions or dealer manager fee will be payable on Common Shares sold under our DRIP. We may amend, suspend or terminate our DRIP for any reason at any time upon 10 days’ notice to the participants.
 
What is the “NAV pricing start date” and how will it be determined?

The “NAV pricing start date” is the earliest to occur of: (a) our investing in assets with an aggregate cost, including our pro rata share (direct or indirect) of debt attributable to such assets, in excess of $1 billion; (b) our raising net offering proceeds of in excess of $650 million in our primary offering; (c) our advisor's determination, subject to oversight by our board of directors and based in part on an appraisal of our properties by the independent valuer in accordance with the valuation guidelines established by our board of directors, that our NAV per Common Share is greater than $10.45; and (d) January 15, 2015.
 
 
22

 
 
How will your advisor calculate NAV per Common Share?

Commencing on the NAV pricing start date, our advisor will be responsible for calculating our daily NAV at the end of each business day. Our board of directors will review the method of NAV calculation quarterly. To calculate our daily NAV per Common Share, our advisor will determine the net value of our operating partnership’s real estate and real estate-related assets, based in part on a valuation by an independent valuer. First, our advisor will subtract liabilities of the operating partnership, such as estimated accrued fees and expenses, and will multiply the resulting amount by our percentage ownership interest in the operating partnership. Our advisor will then add the value of any assets held by URTI, including cash and cash equivalents (other than the value of its interest in the operating partnership), and subtract any estimated accrued REIT liabilities, including accrued distributions and certain legal and administrative costs. The result of this calculation will be our NAV as of the end of any business day.

In determining the value of the real estate and real estate-related assets, our advisor will consider an estimate provided by an independent valuer of the market value of our real estate assets, which will be held primarily in our operating partnership, and also will consider the metrics that the independent valuer used in arriving at those values. The independent valuer will provide these metrics to our advisor, and they will be incorporated into our advisor’s daily calculation of NAV. In order to estimate our portfolio’s market value, the independent valuer will analyze the cash flow from, and other characteristics of, each property in the portfolio and compile a projection of cash flows for the portfolio as a whole. The independent valuer will analyze the portfolio’s projected cash flows utilizing a discounted cash flow approach to valuation and also may consider additional valuation methodologies; provided, however , that all methodologies, opinions and judgments used by the independent valuer will be consistent with our valuation guidelines, as established by our board of directors, and industry practices.

We aim to provide a reasonable estimate of the market value of our Common Shares. However, the methodologies will be based on a number of judgments, assumptions and opinions about future events that may or may not prove to be correct, and if different judgments, assumptions or opinions are used, different estimates likely will result. Therefore, the daily NAV per Common Share calculation may not reflect the precise amount that you could receive for your Common Shares in a market transaction. It is not known whether repurchasing or non-repurchasing stockholders whose shares are or are not being repurchased, or stockholders electing or not electing to purchase, or to participate in our DRIP, will benefit from such disparity.

In addition, our published NAV per Common Share may not fully reflect the economic impact of certain extraordinary events on our portfolio that may have occurred since the prior valuation because we may not be able to immediately quantify the economic impact of such events. If our advisor determines there has been an extraordinary event that may have materially changed the estimated value of our portfolio, we will make an announcement regarding such extraordinary event. Our advisor will analyze the impact of such extraordinary event and determine any appropriate adjustment to be made to our NAV. We will not, however, retroactively adjust NAV.

Will the distributions I receive be taxable as ordinary income?

Yes and no. Distributions that you receive (not designated as capital gain dividends or qualified dividend income), including distributions reinvested pursuant to our DRIP, will be taxed as ordinary income to the extent they are paid from our earnings and profits (as determined for U.S. federal income tax purposes). However, distributions that we designate as capital gain dividends generally will be taxable as long-term capital gain to the extent that they are attributable to net capital gain recognized by us. Some portion of your distributions may not be subject to tax in the year in which it is received because depreciation expense reduces the amount of taxable income, but does not reduce cash available for distribution. The portion of your distribution which is not designated as a capital gain dividend or qualified dividend income, and which is in excess of our current and accumulated earnings and profits, is considered a return of capital for U.S. federal income tax purposes and will reduce the tax basis of your investment, deferring such portion of your tax until your investment is sold or our company is liquidated, at which time you will be taxed at capital gains rates (subject to certain exceptions for corporate stockholders). Please note that each investor’s tax considerations are different; therefore, you should consult with your tax advisor prior to making an investment in our Common Shares.

 
23

 
 
How will you use the proceeds raised in this offering?

The amounts listed in the table below represent our current estimates concerning the use of the offering proceeds. Since these are estimates, they may not accurately reflect the actual receipt or application of the offering proceeds. The scenario assumes that we sell the maximum of 100,000,000 Common Shares in this offering, with an offering price of $10.45 per Common Share, prior to the NAV pricing start date, and that no Common Shares under our DRIP are sold. Our organizational documents permit us to pay distributions from any source, including proceeds of the offering.

The table does not give effect to special sales or volume discounts which could reduce selling commissions or the dealer manager fee and many of the figures represent management’s best estimate because they cannot be precisely calculated at this time. Furthermore, it assumes that offering proceeds are not used to pay distributions or any fees that are described under “Compensation Table” but that are not set forth in the table. Percentages are rounded to the nearest hundredth of a percent.
 
    Maximum Offering
(Not Including DRIP)
 
    Amount     Percent  
Total offering price paid by investors
 
$
1,045,000,000
     
100.00
Less offering expenses:
               
Selling commissions and dealer manager fee(1)
 
$
104,000,000
     
9.95
%
Organization and offering expenses(2)
 
$
20,900,000
     
2.00
%
Amount available for investment or distribution
 
$
920,100,000
     
88.05
Acquisition:
               
Acquisition fees
 
$
9,201,000
     
0.88
%
Acquisition expenses
 
$
5,520,600
     
0.53
%
Amount invested in assets(3)
 
$
905,378,400
     
86.64
 

  (1)
The table assumes that the amounts of the selling commissions and dealer manager fee were and will be, for the life of this offering, as disclosed herein with respect to the pre-NAV pricing start date commission structure. However, the actual aggregate amounts of the selling commissions and dealer manager fee over the life of this offering, assuming a pre-NAV pricing start date commission structure, will be lower than as set forth in this table, and the amount available for investment or distribution higher, because prior to May 30, 2013, the amounts of the selling commissions and dealer manager fee were lower, as a percentage of the gross offering price of a Common Share, than the amounts described in this prospectus with respect to the pre-NAV pricing start date commission structure. Total underwriting compensation could be up to 10% of total offering proceeds as a result of non-cash compensation items paid to registered representatives of our dealer manager and the participating broker-dealers, including gifts, business entertainment, sales incentives and training and education meetings, as well as non-transaction-based compensation associated with retailing and wholesaling activities and legal expenses paid to our dealer manager’s Financial Industry Regulatory Authority, Inc., or FINRA counsel.
  (2) Our advisor will advance our organization and offering expenses (which may include reimbursements to be paid to the dealer manager, registered investment advisors and participating broker-dealers for due diligence fees set forth in detailed and itemized invoices) to the extent we do not have the funds to pay such expenses. We will reimburse our advisor up to 2% of the total offering price paid by investors for organization and offering expenses.
  (3)
This table does not give effect to any leverage.
 
 
24

 
 
What kind of offering is this?
 
We are offering up to 100,000,000 Common Shares on a “best efforts” basis at $10.45 per Common Share. Volume discounts and discounts for certain categories of purchaser also are available, as described under “Plan of Distribution.” We also are offering up to 20,000,000 Common Shares pursuant to our DRIP. Until the NAV pricing start date, the offering price per Common Share under our DRIP will be $10.00. After the NAV pricing start date, the offering price per Common Share in our primary offering will be equal to the NAV per Common Share, plus applicable selling commissions and dealer manager fees. After the NAV pricing start date, the offering price per Common Share under our DRIP will be equal to the NAV per Common Share. No selling commissions or dealer manager fee will be payable on Common Shares sold under our DRIP. At no time will the offering price per Common Share under our DRIP be less than 95% of the fair market value per Common Share. We reserve the right to reallocate the Common Shares we are offering between the primary offering and our DRIP.
 
How does a “best efforts” offering work?

When Common Shares are offered on a “best efforts” basis, the dealer manager will be required to use only its best efforts to sell the Common Shares and it has no firm commitment or obligation to purchase any of the Common Shares. Therefore, we may sell substantially less than what we are offering.

Who is the dealer manager?

United Realty Securities, our dealer manager, is a division of Cabot Lodge Securities, LLC, a Delaware limited liability company and a member of FINRA, that is directly or indirectly owned by our sponsor.  United Realty Securities serves as a dealer manager for our best efforts offering and also has authorized other broker-dealers that are FINRA members to sell our Common Shares.

 
25

 
 
How long will this offering last?
 
We expect to sell the 100,000,000 Common Shares offered in our primary offering by August 15, 2015. At the discretion of our board of directors, we may elect to extend the termination date of our offering of Common Shares reserved for issuance pursuant to our DRIP until we have sold all Common Shares allocated to our DRIP through the reinvestment of distributions, in which case participants in our DRIP will be notified. This offering must be registered in every state in which we offer or sell Common Shares. Generally, such registrations are for a period of one year. Thus, we may have to stop selling Common Shares in any state in which our registration is not renewed or otherwise extended annually.

Who can buy Common Shares?

An investment in our Common Shares is only suitable for persons who have adequate financial means and who will not need immediate liquidity from their investment. An investor can buy Common Shares in this offering if such investor has either (a) a net worth of at least $70,000 and an annual gross income of at least $70,000, or (b) a net worth of at least $250,000. For the purpose of determining suitability, net worth does not include an investor’s home, home furnishings or personal automobiles. The minimum suitability standards are more stringent for investors in certain states, as described under “Investor Suitability Standards”.

Who might benefit from an investment in our Common Shares?

An investment in our Common Shares may be beneficial for you if you meet the minimum suitability standards described in this prospectus, seek to diversify your personal portfolio with a real estate-based investment, seek to receive current income, seek to preserve capital, seek to obtain the benefits of potential long-term capital appreciation and are able to hold your investment for a 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, that an investment in our Common Shares will not meet those needs.

Is there any minimum investment required?

Yes. We require a minimum investment of 250 Common Shares (prior to the NAV pricing start date, $2,612.50). After you have satisfied the minimum investment requirement, any additional purchases must be in increments of at least $100. The investment minimum for subsequent purchases does not apply to Common Shares purchased pursuant to our DRIP.

Are there any special restrictions on the ownership or transfer of Common Shares?

Yes. Our charter contains restrictions on the ownership and transfer of our shares that, among other restrictions, prevent any one person from owning more than 9.8% in value of the aggregate of our outstanding shares of stock or more than 9.8% (in value or number of shares, whichever is more restrictive) of our outstanding Common Shares, unless exempted by our board of directors (prospectively or retroactively). These restrictions are designed to, among other purposes, enable us to comply with ownership restrictions imposed on REITs by the Code. Our charter also limits your ability to transfer your Common Shares unless (a) the prospective purchaser meets the suitability standards regarding income or net worth, and (b) the transfer complies with the minimum purchase requirements.

Are there any special considerations that apply to employee benefit plans subject to ERISA or other retirement plans that are investing in Common Shares?

Yes. The section of this prospectus titled “ERISA Considerations” describes the effect the purchase of Common Shares will have on IRAs and retirement plans subject to the Code or ERISA. ERISA is a federal law that regulates the operation of certain tax-advantaged retirement plans. Any retirement plan trustee or individual considering purchasing Common Shares for a retirement plan or an IRA should carefully read this section of the prospectus. Prospective investors with investment discretion over the assets of an IRA, employee benefit plan or other retirement plan or arrangement that is covered by ERISA or Section 4975 of the Code should carefully review the information in the section of this prospectus titled “ERISA Considerations.” Any such prospective investors are required to consult their own legal and tax advisors on these matters.

 
26

 
 
We may make some investments that generate “excess inclusion income” which, when passed through to our tax-exempt stockholders, can be taxed as unrelated business taxable income, or UBTI, or, in certain circumstances, can result in a tax being imposed on us. Although we do not expect the amount of such income to be significant, there can be no assurance in this regard.

May I make an investment through my IRA, SEP or other tax-deferred account?

Yes. You may make an investment through your IRA, a simplified employee pension, or SEP, plan or other tax-deferred account. In making these investment decisions, you should consider, at a minimum: (a) whether the investment is in accordance with the documents and instruments governing your IRA, plan or other account; (b) whether the investment satisfies the fiduciary requirements associated with your IRA, plan or other account; (c) whether the investment will generate UBTI to your IRA, plan or other account; (d) whether there is sufficient liquidity for such investment under your IRA, plan or other account; (e) the need to value the assets of your IRA, plan or other account annually or more frequently; and (f) whether the investment would constitute a prohibited transaction under applicable law. Prospective investors with investment discretion over the assets of an IRA, employee benefit plan or other retirement plan or arrangement that is covered by ERISA or Section 4975 of the Code should carefully review the information in the section of this prospectus titled “ERISA Considerations.” Any such prospective investors are required to consult their own legal and tax advisors on these matters.

How do I subscribe for Common Shares?

If you choose to purchase Common Shares in this offering, you will need to complete and sign a subscription agreement (in substantially the form attached to this prospectus as Appendix B) for a specific number of Common Shares and pay for the Common Shares at the time of your subscription.

Can I be certain that I will be able to liquidate my investment immediately at the time of my choosing?

No. Our Common Shares are not listed on a national securities exchange and we will not seek to list our Common Shares until the time, if such time ever occurs, that our independent directors believe that the listing of our Common Shares would be in the best interest of our stockholders. Stockholders who have held their Common Shares for at least one year may make daily requests that we repurchase all or a portion (but generally at least 25%) of their Common Shares pursuant to our share repurchase program, but we may not be able to fulfill all repurchase requests. Prior to the NAV pricing start date, stockholders who have held their Common Shares for at least one year may have their Common Shares repurchased (a) in the case of hardship, as defined below, at the total offering price paid, or (b) in the sole discretion of our advisor, at a price of 92% of the total offering price paid, but in neither event at a price greater than the offering price per Common Share under our DRIP. Commencing on the NAV pricing start date, the repurchase price per Common Share on any business day will be 95% of our NAV per Common Share for that day, calculated after the close of business on the repurchase request day, without giving effect to any share purchases or repurchases to be effected on such day; provided, however, that while the primary offering is ongoing, in no event will the repurchase price commencing on the NAV pricing start date exceed the then-current offering price under the primary offering. We define “hardship” to mean: (i) the death of a stockholder; (ii) the bankruptcy of a stockholder; (iii) a mandatory distribution under a stockholder’s IRA; or (iv) another involuntary exigent circumstance, as approved by our board. Prior to the NAV pricing start date, we will limit the Common Shares repurchased during any calendar quarter to 1.25% of the weighted average number of Common Shares outstanding during the previous calendar quarter, or approximately 5% of the weighted average number of Common Shares outstanding in any 12-month period. Commencing on the NAV pricing start date, we will limit Common Shares repurchased during any calendar quarter to 5% of our NAV as of the last day of the previous calendar quarter or as of the NAV pricing start date if it occurred during the then-current quarter, or approximately 20% of our NAV in any 12-month period. Please note that the NAV pricing start date could occur as late as January 15, 2015. Our advisor will evaluate our capital needs and the amount of available cash and other liquid assets each quarter and may elect to increase the amount available for repurchase during such quarter. In addition, you will only be able to repurchase your Common Shares to the extent that we have sufficient liquid assets. Most of our assets will consist of properties which cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition. We may not always have sufficient liquid resources to satisfy all repurchase requests. In order to provide liquidity for repurchases, we intend to maintain the following percentage of the overall value of our portfolio in cash, cash equivalents and other short-term investments and certain types of real estate related assets that can be liquidated more readily than properties (collectively, “liquid assets”): (A) 15% of our NAV up to $333 million; (B) 10% of our NAV between $333 million and $667 million; and (C) 5% of our NAV in excess of $667 million. In addition, our board of directors may decide, but is not obligated, to maintain borrowing capacity under a line of credit. Our board of directors in its discretion may modify, suspend or terminate our share repurchase program for any reason. See “Share Repurchase Program.”
 
 
27

 
 
What are your exit strategies?

It is our intention to begin the process of achieving a liquidity event not later than six to nine years after the termination of this offering, although we cannot guarantee an exit within this timeframe. A “liquidity event” could include a sale of our assets, a sale or merger of our company or a listing of our Common Shares on a national securities exchange.

If we do not begin the process of achieving a liquidity event by the eighth anniversary of the termination of this offering, our charter requires either (a) an amendment to our charter to extend the deadline to begin the process of achieving a liquidity event, or (b) the holding of a stockholders meeting to vote on a proposal for an orderly liquidation of our portfolio.

If we seek and fail to obtain stockholder approval of a charter amendment extending the deadline with respect to a liquidity event, our charter requires us to submit a plan of liquidation for the approval of our stockholders. If we seek and fail to obtain stockholder approval of both such a charter amendment and such a plan of liquidation, we will continue our business. If we seek and obtain stockholder approval of such a plan of liquidation, we will begin an orderly sale of our properties and other assets. In making the decision to apply for listing of our Common Shares, our board of directors will try to determine whether listing our Common Shares or liquidating our assets will result in greater value for stockholders.

One of the factors our board of directors will consider when making this determination is the liquidity needs of our stockholders. In assessing whether to list or liquidate, our board of directors would likely solicit input from financial advisors as to the likely demand for our Common Shares upon listing. If, after listing, the board believed that it would be difficult for stockholders to dispose of their Common Shares, then that factor would weigh against listing. The board also would likely consider whether there was a large pent-up demand to sell our Common Shares when making decisions regarding listing or liquidation.
 
Are there any JOBS Act considerations?

In April 2012, President Obama signed into law the Jumpstart Our Business Startups Act, or the JOBS Act. We are an “emerging growth company,” as defined in the JOBS Act, and are eligible to take advantage of certain exemptions from, or reduced disclosure obligations relating to, various reporting requirements that normally are applicable to public companies. Such exemptions include, among other things, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or SOX, reduced disclosure obligations relating to executive compensation in proxy statements and periodic reports, and exemptions from the requirement to hold a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We have not yet made a decision whether to take advantage of any of or all such exemptions. If we decide to take advantage of any of these exemptions, some investors may find our Common Shares a less attractive investment as a result.

Additionally, under Section 107 of the JOBS Act, an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. This means an emerging growth company” can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. However, we are electing to “opt out” of such extended transition period, and therefore will comply with new or revised accounting standards on the applicable dates on which the adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.

 
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We could remain an “emerging growth company” for up to five years, or until the earliest to occur of (i) the last day of the first fiscal year in which we have total annual gross revenue of $1 billion or more, (ii) the date that we become a large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act (which would occur if the market value of our common stock held by non-affiliates exceeds $700 million, measured as of the last business day of our most recently completed second fiscal quarter), and (iii) the date on which we have, during the preceding three-year period, issued more than $1 billion in non-convertible debt.

Are there any Investment Company Act considerations?

We intend to conduct our operations so that the company and each of its subsidiaries is not an investment company under the Investment Company Act. Under Section 3(a)(1)(A) of the Investment Company Act, a company is an “investment company” if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed to be an “investment company” if it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of government securities and cash items) on an unconsolidated basis (the “40% test”). “Investment securities” exclude U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We intend to conduct our operations so that our company and most, if not all, of its wholly owned and majority-owned subsidiaries are not investment companies under the 40% test or can rely on Rule 3a-1 under the Investment Company Act. Rule 3a-1 under the Investment Company Act, generally provides that, notwithstanding Section 3(a)(1)(C) of the Investment Company Act, an issuer will not be deemed to be an “investment company” under the Investment Company Act; provided, that (a) it does not hold itself out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting or trading in securities, and (b) on an unconsolidated basis no more than 45% of the value of its total assets, consolidated with the assets of any wholly owned subsidiary (exclusive of U.S. government securities and cash items), consists of, and no more than 45% of its net income after taxes, consolidated with the net income of any wholly owned subsidiary (for the last four fiscal quarters combined), is derived from, securities other than U.S. government securities, securities issued by employees' securities companies, securities issued by certain majority-owned subsidiaries of such company and securities issued by certain companies that are controlled primarily by such company. We believe that we, our operating partnership and the subsidiaries of our operating partnership will satisfy this exclusion.

We will continuously monitor our holdings on an ongoing basis to determine the compliance of our company with Section 3(a)(1)(C) or the exemption provided in Rule 3a-1.

In addition, we believe that neither our company nor any of its wholly owned or majority-owned subsidiaries will be considered investment companies under Section 3(a)(1)(A) of the Investment Company Act because they will not engage primarily or propose to engage primarily, or hold themselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, our company and its subsidiaries will be primarily engaged in non-investment company businesses related to real estate. Consequently, the company and its subsidiaries expect to be able to conduct their respective operations such that none of them will be required to register as an investment company under the Investment Company Act.

The determination of whether an entity is a majority-owned subsidiary of our company is made by us. The Investment Company Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by that person, or by another company which is a majority-owned subsidiary of that person. The Investment Company Act further defines voting securities as any security presently entitling the owner or holder thereof to vote for the election of directors of a company. We treat companies in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries for purposes of the 40% test. We have not requested that the SEC staff approve our treatment of any entity as a majority-owned subsidiary and the SEC staff has not done so. If the SEC staff were to disagree with our treatment of one or more subsidiary entities as majority-owned subsidiaries, we would need to adjust our strategy and our assets in order to comply with the 40% test. Any such adjustment in our strategy could have a material adverse effect on us.

 
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A change in the value of any of our assets could cause us or one or more of our wholly or majority-owned subsidiaries to fall within the definition of “investment company” and negatively affect our ability to maintain our exemption from regulation under the Investment Company Act. To avoid being required to register the company or any of its subsidiaries as an investment company under the Investment Company Act, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional income- or loss-generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire interests in companies that we would otherwise want to acquire and would be important to our investment strategy. Our advisor will continually review our investment activity to attempt to ensure that we will not be regulated as an investment company.

To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon the definition of “investment company” and the exceptions to that definition, we may be required to adjust our investment strategy accordingly. Additional guidance from the SEC staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the investment strategy we have chosen.

What types of reports on my investment will I receive?

We will provide you with periodic updates on the performance of your investment with us, including:
 
  so long as we are making distributions to stockholders, four quarterly or 12 monthly distribution reports;
  three quarterly financial reports;
  an annual report;
  supplements to the prospectus, via mailings or website access; and
  commencing on the NAV pricing start date, our current NAV per Common Share via our toll-free, automated line, (855) REIT-NAV, or on our website at www.unitedrealtytrust.com.
 
When will I get my detailed tax information?

We intend to issue and mail your IRS Form 1099-DIV tax information, or such other successor form, by January 31 of each year.

Who can help answer my questions about the offering?

If you have more questions about the offering, or if you would like additional copies of this prospectus, you should contact your registered representative or contact:

United Realty Trust Incorporated – Investor Relations
60 Broad Street, 34th Floor
New York, NY 10004
(855) REIT-NAV (734-8629)
(212) 388-6800
Email: IR@UnitedRealtyTrust.com
www.UnitedRealtyTrust.com

 
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Who is the transfer agent?

The name and address of our transfer agent is as follows:

Phoenix American Financial Services, Inc.
2401 Kerner Boulevard
San Rafael, CA 94901-5529
(888) 966-1763
Email: UnitedRealtyServiceTeam@phxa.com

To ensure that any account changes are made promptly and accurately, all changes (including your address, ownership type and distribution mailing address) should be directed to the transfer agent.

 
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Your purchase of Common Shares involves a number of risks. You should carefully consider the following risk factors in conjunction with the other information contained in this prospectus before purchasing our Common Shares. The risks discussed in this prospectus could adversely affect our business, operating results, prospects and financial condition. This could cause the value of our Common Shares to decline and could cause you to lose all or part of your investment. The risks and uncertainties described below are not the only ones we face, but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may harm our business.

Risks Related to an Investment in United Realty Trust Incorporated

There is no public trading market for our Common Shares, and there may never be one; therefore, it will be difficult for you to sell your Common Shares except pursuant to our share repurchase program. If you sell your Common Shares to us under our share repurchase program, you may receive less than the total price you paid for the Common Shares.

There currently is no public market for our Common Shares, and there may never be one. If you are able to find a buyer for your Common Shares, you may not sell your Common Shares unless the buyer meets applicable suitability and minimum purchase standards and the sale does not violate state securities laws. Our charter also prohibits the ownership of more than 9.8% in value of the aggregate of our outstanding shares of stock or more than 9.8% (in value or in number of shares, whichever is more restrictive) of our outstanding Common Shares, unless exempted by our board of directors (prospectively or retroactively), which may inhibit large investors from desiring to purchase your Common Shares.

Repurchase of Common Shares through our share repurchase program may be the only way to dispose of your Common Shares, but there are a number of limitations placed on such repurchases. Prior to the NAV pricing start date, stockholders may have their Common Shares repurchased (a) in the case of hardship, as defined in the section of this prospectus titled “Share Repurchase Program,” at the total offering price paid, or (b) in the sole discretion of our advisor, at a price equal to 92% of the total offering price paid, but in neither event at a price greater than the offering price per Common Share under our DRIP. Commencing on the NAV pricing start date, the Common Shares may be repurchased at a price equal to 95% of the NAV per Common Share as of the repurchase date (although while the primary offering is ongoing, in no event will the repurchase price commencing on the NAV pricing start date exceed the then-current offering price under the primary offering), not the original total offering price. Moreover, our share repurchase program includes numerous restrictions that would limit your ability to sell your Common Shares to us, including a requirement that you shall have held your Common Shares for a period of one year before they will be eligible for repurchase. Therefore, you may be required to sell your Common Shares at a substantial discount to the price you originally paid. Furthermore, our board of directors reserves the right, in its sole discretion, at any time and from time to time, to amend the terms of, suspend or terminate our share repurchase program. Additionally, our board of directors reserves the right, in its sole discretion, to reject an individual stockholder’s request for repurchase for any reason at any time. Therefore, it will be difficult for you to sell your Common Shares promptly or at all.

It also is likely that your Common Shares would not be accepted as the primary collateral for a loan. You should purchase the Common Shares only as a long-term investment because of the illiquid nature of the Common Shares. See “Investor Suitability Standards,” “Description of Shares — Restrictions on Ownership of Shares” and “Share Repurchase Program” elsewhere in this prospectus for a more complete discussion on the restrictions on your ability to transfer your Common Shares.

 
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You are limited in your ability to sell your Common Shares pursuant to our share repurchase program and may have to hold your Common Shares for an indefinite period of time.

Our board of directors may amend the terms of our share repurchase program without stockholder approval. Our board of directors also is free to suspend or terminate the program or to reject any request for repurchase. In addition, our share repurchase program includes numerous restrictions that would limit your ability to sell your Common Shares. Our ability to fulfill repurchase requests is subject to a number of limitations. Most importantly, most of our assets consist of real estate properties which cannot generally be readily liquidated without impacting our ability to realize full value upon their disposition. In addition, commencing on the NAV pricing start date, we will limit Common Shares repurchased during a calendar quarter to 5% of our NAV as of the last day of the previous calendar quarter, or approximately 20% of our NAV in any 12-month period. Please note that the NAV pricing start date could occur as late as January 15, 2015. Furthermore, our board of directors may limit, modify or suspend our share repurchase program, and our advisor may limit the amount of repurchases on a quarterly basis. Repurchase of Common Shares through our share repurchase program may be the only way to dispose of your Common Shares, but there are a number of limitations placed on such repurchases. Prior to the NAV pricing start date, stockholders may have their Common Shares repurchased (a) in the case of hardship, as defined in the section of this prospectus titled “Share Repurchase Program,” at the total offering price paid, and (b) otherwise, in the discretion of our board of directors, at 92% of the total offering price paid, but in neither event at a price greater than the offering price per Common Share under our DRIP. Commencing on the NAV pricing start date, the Common Shares may be repurchased at a price equal to 95% of the NAV per Common Share as of the repurchase date; provided, however, that while the primary offering is ongoing, in no event will the repurchase price commencing on the NAV pricing start date exceed the then-current offering price under the primary offering. See “Share Repurchase Program.”

This is a blind pool offering, so you will not have the opportunity to evaluate our investments before we make them.

Because we have made only three investments in real estate or real estate-related assets, this is considered a blind pool offering, and you will not have the opportunity to evaluate our investments before we make them. We will seek to invest substantially all our offering proceeds available for investment, after the payment of fees and expenses, in the acquisition of real estate and real estate-related assets. We have established policies relating to the creditworthiness of tenants, but our board of directors will have wide discretion in implementing these policies, and you will not have the opportunity to evaluate potential tenants. In light of our desire to purchase properties that we believe present an opportunity for enhanced future value, the creditworthiness of existing tenants may not be a significant factor in determining whether to acquire the property. We anticipate that we will invest in properties that we believe may be repositioned for greater value due, in whole or in part, to the presence of tenants that do not have strong credit. In such cases, our strategy will include repositioning the property to attract new, more creditworthy or different types of tenants. For a more detailed discussion of our investment policies, see “Investment Objectives and Criteria — Acquisition Policies.”

The principal of our sponsor has been involved in investments that have faced adverse business developments.

Mr. Frydman, the principal of our sponsor, has been involved in prior programs and investment activities that faced adverse business developments. For more information on these adverse business developments, please see “Prior Performance Summary —Recent Adverse Business Developments.” These adverse developments may negatively affect a potential investor’s assessment of our ability to meet our investment objectives, which in turn may hinder our ability to raise substantial funds in this offering. If we are unable to raise substantial funds, we will be limited in the number and type of investments we may make, which may negatively affect the value of your investment.
 
We and our advisor have a limited operating history, we have no established financing sources, our sponsor has limited experience operating a public REIT, and the performance of the prior real estate investment programs of the principal of our sponsor may not be indicative of our future results.

We and our advisor have a limited operating history. You should not rely upon the past performance of other real estate investment programs sponsored by the principal of our sponsor to predict our future results. We were incorporated on November 8, 2011 and, as of the date of this prospectus, have made only three investments in real estate or real estate-related assets. Accordingly, the prior performance of real estate investment programs sponsored by the principal of our sponsor may not be indicative of our future results.

Moreover, we have no established financing sources other than our offering proceeds. If our capital resources are insufficient to support our operations, we will not be successful.

You should consider our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies that are, like us, in their early stage of development. To be successful in this market, we must, among other things:
 
  identify and acquire investments that further our investment strategies;
  attract, integrate, motivate and retain qualified personnel to manage our day-to-day operations;
  respond to competition for our targeted real estate properties and other investments, as well as for potential investors in us; and
 
 
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  continue to build and expand our operations structure to support our business.
 
We cannot guarantee that we will succeed in achieving these goals, and our failure to do so could cause you to lose all or a portion of your investment.

Our sponsor has limited experience in managing a public REIT.

Our sponsor was formed on July 1, 2011 and has a limited operating history. Further, our sponsor has limited experience operating a public REIT in compliance with the numerous technical restrictions and limitations set forth in the Code applicable to REITs or in compliance with the restrictions required to maintain an exemption from the Investment Company Act. Our sponsor’s limited experience in managing an investment portfolio under regulatory constraints applicable to public REITs may hinder our ability to achieve our investment objectives. In addition, our sponsor’s limited experience in managing a public REIT makes it more likely that we will experience challenges that could hinder our operations or otherwise adversely affect our status as a REIT and our ability to maintain our exemption from registration under the Investment Company Act. However, our sponsor is directly or indirectly controlled by Mr. Frydman, who has been involved in prior programs and investment activities. For information about the qualifications and experience of the principal of our sponsor, see “Management — Executive Officers and Directors,” “Prior Performance Summary” and the tables included in Appendix A herein.
 
Our dealer manager, United Realty Securities, has a limited operating history and our ability to implement our investment strategy is dependent, in part, upon the ability of United Realty Securities to successfully conduct this offering, which makes an investment in us more speculative.
 
We have retained United Realty Securities, an affiliate of our advisor, to serve as the dealer manager of this offering. United Realty Securities has a limited operating history, and this is the first public offering it has conducted. The success of this offering, and our ability to implement our business strategy, is dependent upon the ability of United Realty Securities to build and maintain a network of broker-dealers to sell our Common Shares to their clients. These broker-dealers also may be engaged by other REITs and they may choose to emphasize the sale of those REITs’ shares over the sale of our Common Shares. If United Realty Securities is not successful in establishing, operating and managing this network of broker-dealers, our ability to raise proceeds through this offering will be limited and we may not have adequate capital to implement our investment strategy. If we are unsuccessful in implementing our investment strategy, our stockholders could lose all or a part of their investment.
 
We may suffer from delays in locating suitable investments, which could adversely affect the return on your investment.

Our ability to achieve our investment objectives and to make distributions to our stockholders is dependent upon the performance of our advisor in the acquisition of our investments and the determination of any financing arrangements, as well as the performance of our property manager in the selection of tenants and the negotiation of leases. The current market for properties that meet our investment objectives is highly competitive, as is the leasing market for such properties. The more Common Shares we sell in this offering, the greater our challenge will be to invest all the net offering proceeds on attractive terms. You will have no opportunity to evaluate the terms of transactions or other economic or financial data concerning our investments. You must rely entirely on the oversight of our board of directors, the management ability of our advisor and the performance of the property manager. We cannot be sure that our advisor will be successful in obtaining suitable investments on financially attractive terms.

Additionally, as a public company, we are subject to the ongoing reporting requirements under the Exchange Act. Pursuant to the Exchange Act, we may be required to file with the SEC financial statements of properties we acquire or, in certain cases, financial statements of the tenants of the acquired properties. To the extent any required financial statements are not available or cannot be obtained, we may not be able to acquire the property. As a result, we may not be able to acquire certain properties that otherwise would be a suitable investment. We could suffer delays in our property acquisitions due to these reporting requirements.

Furthermore, where we acquire properties prior to the start of construction or during the early stages of construction, it will typically take several months to complete construction and rent available space. Therefore, you could suffer delays in the receipt of distributions attributable to those particular properties.

Delays we encounter in the selection, acquisition and development of properties could adversely affect your returns. In addition, if we are unable to invest our offering proceeds in real properties in a timely manner, we will hold the proceeds of this offering in an interest-bearing account, invest the proceeds in short-term, investment-grade investments or, ultimately, liquidate. In such an event, our ability to pay distributions to our stockholders and the returns to our stockholders would be adversely affected.

 
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We will make some of or all our distributions from sources other than our cash flow from operations; this will reduce our funds available for the acquisition of properties, and your overall return may be reduced.

Our organizational documents permit us to make distributions from any source, including from the proceeds of this offering or other offerings, cash advances to us by our advisor, cash resulting from a waiver of asset management fees, and borrowings, including borrowings secured by our assets. We will make some of or all our distributions from financings or the net proceeds from our public offering; this will reduce the funds available for acquiring properties and other investments, and your overall return may be reduced. Further, to the extent distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced. Our organizational documents do not limit the amount of distributions we can fund from sources other than operating cash flow. Our cash flows used in operations of ($3,210,347) for the year ended December 31, 2013 was a shortfall of $3,543,683 to our distributions paid of $333,336 (inclusive of $199,093 of Common Shares issued under our DRIP) during such period. Such shortfall was paid from proceeds from the issuance of Common Shares, including under our DRIP.
 
You may be more likely to sustain a loss on your investment because our sponsor does not have as strong an economic incentive to avoid losses as does a sponsor that has made significant equity investments in its company.

Our sponsor has only invested $250,000 in us, through the purchase of 18,182 Common Shares at $10.00 per share, and 500,000 shares of preferred stock, subsequently exchanged for 500,000 Sponsor Preferred Shares, at $0.10 per share. Therefore, if we are successful in raising enough proceeds to be able to reimburse our sponsor for our significant organization and offering expenses, our sponsor will have less exposure to loss, notwithstanding its ownership of the Sponsor Preferred Shares, if the value of our Common Shares decreases, than it would if it held a greater number of Common Shares. Without a large holding of Common Shares by our sponsor aligning the incentives of our sponsor with those of our stockholders, our stockholders may be at a greater risk of loss.

To the extent offering proceeds are used to pay fees to our advisor or its affiliates or to fund distributions, our investors will realize dilution and later investors also may realize a lower rate of return than investors who invest earlier in this offering.

Our advisor and its affiliates provide services for us in connection with, among other things, the offer and sale of our Common Shares, the selection and acquisition of our investments, the management and leasing of our properties, the servicing of our mortgage, bridge, mezzanine or other loans and the disposition of our assets. We pay them substantial upfront fees for some of these services, which reduces the amount of cash available for investment in real estate or distribution to you. Largely as a result of these substantial fees, we expect that approximately 86.64% of the total offering price received from investors will be available for investment in real estate or distribution, depending primarily upon the number of Common Shares we sell.

In addition, we may use offering proceeds to fund distributions, and later investors who do not receive those distributions will therefore experience additional immediate dilution of their investment. Also, to the extent we incur debt to fund distributions earlier in our public offering, the amount of cash available for distributions in future periods will be decreased by the repayment of such debt.

The use of offering proceeds to pay fees to our advisor and its affiliates or to fund distributions increases the risk that the amount available for distribution to stockholders upon a liquidation of our portfolio would be less than the purchase price of the Common Shares in our offering.

 
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  Investors who invest in us at the beginning of our offering may realize a lower rate of return than later investors because earlier investors may receive a relatively larger proportion of distributions from sources other than operating cash flow.
 
  There can be no assurances as to when we will begin to generate sufficient cash flow to fully fund the payment of distributions. As a result, investors who invest in us before we generate significant cash flow may realize a lower rate of return than later investors. We expect to have little cash flow from operations available for distribution until we make substantial investments. In addition, to the extent our investments are in development or redevelopment projects or in properties that have significant capital requirements, our ability to make distributions may be negatively impacted, especially during our early periods of operation. Therefore, until such time as we have sufficient cash flow from operations to fully fund the payment of distributions therefrom, some of or all our distributions will be paid from other sources, such as from the proceeds of our public offering, cash advances to us by our advisor, cash resulting from a waiver of asset management fees, and borrowings, including borrowings secured by our assets, in anticipation of future operating cash flow.
 
Investors who invest in us before the NAV pricing start date may be diluted if the NAV pricing start date occurs before the end of our primary offering and our NAV per Common Share falls below the price such investors paid. If, during our primary offering, our daily NAV falls significantly below our offering price, investors may be deterred from purchasing Common Shares.

Commencing on the NAV pricing start date, the offering price per Common Share in our primary offering and under the DRIP and the share repurchase program will vary from day to day based on our NAV per Common Share on each business day. Investors who invest in us before the NAV pricing start date may be diluted if the NAV pricing start date occurs before the end of our primary offering and our NAV per Common Share falls below the price such investors paid, because other stockholders may purchase shares in our primary offering and under our DRIP at the lower price of NAV per Common Share. If, during our primary offering, our daily NAV falls significantly below our offering price, investors may be deterred from purchasing Common Shares. If we do not raise significant additional funds in this offering, it is likely that we will not be able to achieve optimal diversification and that our profitability will fluctuate with the performance of individual assets. We are not limited in the number or size of our investments or the percentage of net proceeds we may dedicate to a single investment. Your investment in our Common Shares will be subject to greater risk to the extent that we lack a diversified portfolio of investments. In addition, to the extent we are not able to raise additional funds, our fixed operating expenses, as a percentage of gross income, would be higher, and our financial condition and ability to pay distributions could be adversely affected.

There will be dilution of stockholders’ interests upon conversion of the Sponsor Preferred Shares.

Our sponsor holds 500,000 Sponsor Preferred Shares that are convertible into Common Shares, as described under “Stock Ownership.” The Sponsor Preferred Shares are convertible into Common Shares upon (and for 180 days following) the occurrence of a Triggering Event, as specifically described under “Description of Shares — Sponsor Preferred Shares”. The conversion of the Sponsor Preferred Shares into Common Shares will result in dilution of the interests of holders of Common Shares.

If the Sponsor Preferred Shares become convertible into Common Shares, each outstanding Sponsor Preferred Share may be converted into one Common Share for each $100 million, rounded down to the nearest $100 million, of gross proceeds raised by us through the date of conversion in this public offering and any subsequent public offering of Common Shares, combined.

Our sponsor, as the sole manager of the general partner of our advisor, can influence the conversion of the Sponsor Preferred Shares issued to it and the resulting dilution of other stockholders’ interests. See “Conflicts of Interest — Conflicts with Respect to Sponsor Preferred Shares.”

 
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The Sponsor Preferred Shares have preferences that limit the amount of proceeds that the holders of Common Shares may receive upon our liquidation, dissolution or winding up.

Our sponsor holds all the outstanding 500,000 Sponsor Preferred Shares, which have a preference upon our liquidation, dissolution or winding up as described below. Upon our liquidation, dissolution or winding up, the Sponsor Preferred Shares will receive a preference in the amount of 15% of any excess of the net sales proceeds from the sale of all the assets in connection with such liquidation, dissolution or winding up over the amount of Invested Capital, as defined under “Description of Shares — Sponsor Preferred Shares,” plus a cumulative non-compounded pre-tax annual return to holders of Common Shares of 7% on Invested Capital. Our sponsor can influence whether substantially all of our assets, stock or business is transferred or sold, whether our Common Shares are listed and whether our advisory agreement is terminated or allowed to expire without renewal, resulting in the convertibility of the Sponsor Preferred Shares into Common Shares. The effect of the conversion of the Sponsor Preferred Shares is that our sponsor would own approximately 2.7% to 5.5% of the total number of Common Shares outstanding following the conversion (assuming (a) the maximum selling commissions and dealer manager fee, and (b) no reinvestments of distributions), pursuant to the conversion ratio applicable to the Sponsor Preferred Shares, in exchange for an aggregate payment of $50,000. See “Description of Shares — Sponsor Preferred Shares.”
 
The investment objectives of the prior programs of the principal of our sponsor Jacob Frydman, and investments for his own account, were markedly different from our own, so the performance of such prior investments are not indicative of the returns, if any, we may achieve.

Our primary investment objectives are to achieve stable cash distributions, preservation of capital, diversification, growth, and future liquidity, through a dual strategy involving acquisitions of stabilized, cash-flowing properties and of opportunistic properties. The section of this prospectus titled “Prior Performance Summary” and the tables included in Appendix A herein, which we have filed with the SEC, disclose the prior performance of affiliates of our sponsor, but the investment objectives of the programs and other investments disclosed were markedly different from our own. For example, the primary investment objectives of some of Mr. Frydman’s prior investments were capital appreciation with a secondary objective of income, which differ from our investment objectives of stable cash distributions, preservation of capital contributions, portfolio diversification, growth in the value of our assets upon their sale and the potential for future liquidity. Because the investment objectives of such prior programs and other investments diverged so widely from ours, the results of those programs and other investments are not indicative of the returns, if any, we may achieve.

Our advisor will receive a subordinated share of annual cash flows for years in which a specified return to holders of our Common Stock is achieved. However, if the return is not achieved in subsequent years, and even if our company suffers a loss, the advisor will not be obligated to return to our company any portion of the subordinated share of annual cash flows it has received.
 
 
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Our advisor will receive, annually, an amount equal to 15% of any net cash flows in respect of each calendar year remaining after payment to holders of Common Shares of distributions (including from sources other than operating cash flow) for such calendar year, such that the holders of Common Shares have received a 7% pre-tax, non-compounded annual return on the capital contributed by holders of Common Shares. However, if such 7% annual return is not achieved in subsequent years, and even if our company suffers a loss, our advisor will not be obligated to return to our company any portion of the subordinated share of annual cash flows it has received. “Net cash flows” means, for any period, the excess of: (i) the sum of (A) our revenues for such period, as determined under GAAP, from ownership and/or operation of properties, loans and other investments and (B) the net cash proceeds we realize during such period from any sales of assets; over (ii) the sum of all costs and expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation or to corporate business, including advisory fees, the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and listing of our Common Shares, interest payments, taxes, non-cash expenditures such as depreciation, amortization and bad debt reserves, incentive fees paid in compliance with the NASAA REIT Guidelines, acquisition fees and acquisition expenses, real estate commissions on the sale of property and other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property). Our use of “net cash flow”, a non-GAAP measure, as a metric instead of GAAP net income likely will result in the payment of a higher amount to our advisor than if our advisor were to receive, annually, an amount equal to 15% of GAAP net income after payment of such 7% annual return. We cannot assure you that we will provide such 7% annual return, which we have disclosed solely as a measure for our advisor’s incentive compensation. Because such 7% annual return may consist in part of distributions from sources other than operating cash flow, the source of such 7% annual return may not be entirely from net income; to the extent that the source of such 7% annual return is not from net income, then the value of your Common Shares may be impacted negatively. Our advisor may have an incentive to increase the amount of distributions from sources other than operating cash flow in order to maximize its subordinated share of annual cash flows. Our advisor may receive a subordinated share of annual cash flows even if distributions to holders of Common Shares have exceeded our cash flows from operations. In addition, our sponsor owns the Sponsor Preferred Shares, which upon our liquidation, dissolution or winding up, would receive a preference in the amount of 15% of any excess of the net sales proceeds from the sale of all the assets in connection with such liquidation, dissolution or winding up over the amount of Invested Capital, as defined under “Description of Shares — Sponsor Preferred Shares,” plus a cumulative non-compounded pre-tax annual return to holders of Common Shares of 7% on Invested Capital. Any cash flows to holders of Common Shares in excess of the 7% annual return contemplated by the subordinated share of annual cash flows would constitute a return of capital for purposes of the preference of the Sponsor Preferred Shares, so the amount of Invested Capital for purposes of the preference of the Sponsor Preferred Shares would be lower, allowing the sponsor to receive a larger amount of cash flow upon our liquidation, dissolution or winding up.

We may have to make decisions on whether to invest in certain properties without detailed information on the property.

To effectively compete for the acquisition of properties and other investments, our advisor and board of directors may be required to make decisions or post substantial non-refundable deposits prior to the completion of our analysis and due diligence on property acquisitions. In such cases, the information available to our advisor and board of directors at the time of making any particular investment decision, including the decision to pay any non-refundable deposit and the decision to consummate any particular acquisition, may be limited, and our advisor and board of directors may not have access to detailed information regarding any particular investment property, such as physical characteristics, environmental matters, zoning regulations or other local conditions affecting the investment property. Therefore, no assurance can be given that our advisor and board of directors will have knowledge of all circumstances that may adversely affect an investment. In addition, our advisor and board of directors expect to rely upon independent consultants in connection with their evaluation of proposed investment properties, and no assurance can be given as to the accuracy or completeness of the information provided by such independent consultants.

 
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If we are unable to raise substantial funds, we will be limited in the number and type of investments we may make, and the value of your investment in us will fluctuate with the performance of the specific investments we make.

This offering is being made on a “best efforts” basis, meaning that our dealer manager is only required to use its best efforts to sell our Common Shares and has no firm commitment or obligation to purchase any of the Common Shares. As a result, we cannot assure you of the amount of proceeds that will be raised in this offering. We are dependent on funds from this offering to make additional investments, resulting in greater diversification in terms of the number of investments owned, the geographic regions in which our investments are located and the types of investments that we acquire. If we do not raise significant additional funds in this offering, the more likely it will be that we will not be able to achieve significant diversification and the likelihood of our profitability being affected by the performance of any one of our investments will increase. We are not limited in the number or size of our investments or the percentage of net proceeds we may dedicate to a single investment. Your investment in our Common Shares will be subject to greater risk to the extent that we lack a diversified portfolio of investments. In addition, to the extent we are not able to raise additional funds, our fixed operating expenses, as a percentage of gross income, would be higher, and our financial condition and ability to pay distributions could be adversely affected.

If we lose or are unable to obtain key personnel, our ability to implement our investment strategies could be delayed or hindered.

Our success depends to a significant degree upon the continued contributions of our chairman, certain executive officers and other key personnel of us, United Realty Securities, our advisor and its affiliates. We do not have employment agreements with our chairman and executive officers, and we cannot guarantee that they will remain affiliated with us. Although our chairman and president and several of our executive officers and other key personnel have entered into employment agreements with our advisor or affiliates of our advisor, including URTI GP, LLC, the general partner of our advisor, these agreements are terminable at will, and we cannot guarantee that such persons will remain affiliated with our advisor. If any of our key personnel were to cease their affiliation with us, United Realty Securities, our advisor or its affiliates, our operating results could suffer. We do not intend to maintain key person life insurance on any of our key personnel. We believe that our future success depends, in large part, upon our advisor’s and its affiliates’ ability to hire and retain highly skilled managerial, operational and marketing personnel. Competition for persons with these skills is intense, and we cannot assure you that our advisor will be successful in attracting and retaining such skilled personnel. If we lose or are unable to obtain the services of key personnel, our ability to implement our investment strategies could be delayed or hindered.

If we internalize our management functions, your interest in us could be diluted, and we could incur other significant costs associated with being self-managed.

Our strategy may involve becoming “self-managed” by internalizing our management functions, particularly if we seek to list our Common Shares on an exchange as a way of providing our stockholders with a liquidity event. The method by which we could internalize these functions could take many forms. We may hire our own group of executives and other employees or we may elect to negotiate to acquire our advisor’s and property manager’s assets and personnel. At this time, we cannot be sure of the form or amount of consideration or other terms relating to any such acquisition. Such consideration could take many forms, including cash payments, promissory notes and shares of our stock. An internalization transaction could result in significant payments to affiliates of our advisor irrespective of whether you enjoyed the returns on which we have conditioned our subordinated share of annual cash flows. The payment of such consideration could result in dilution of your interests as a stockholder and could reduce the net income per Common Share and modified funds from operations per Common Share attributable to your investment. We will not be required to seek a stockholder vote to become self-managed.

In addition, our direct expenses would include general and administrative costs, including legal, accounting and other expenses related to corporate governance and SEC reporting and compliance. If stockholders or other interested parties file a lawsuit related to, or challenging, an internalization transaction, we could incur high litigation costs that would adversely affect the value of your Common Shares. We also would incur the compensation and benefits costs of our officers and other employees and consultants that are now paid by our advisor or its affiliates. In addition, we may issue equity awards under our stock incentive plan, which awards would decrease net income and modified funds from operations and may further dilute your investment. We cannot reasonably estimate the amount of fees to our advisor and its affiliates we would save and the costs we would incur if we became self-managed. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our advisor and its affiliates, our net income per Common Share and funds from operations per Common Share would be lower as a result of the internalization than it otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders and the value of our Common Shares.

 
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As currently organized, we do not directly employ any employees. If we elect to internalize our operations, we would employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances. Nothing in our charter prohibits us from entering into the transaction described above.

Additionally, there is no assurance that internalizing our management functions will prove to be beneficial to us and our stockholders. We could have difficulty integrating our management functions as a stand-alone entity. Certain personnel of our advisor and its affiliates perform property management, asset management and general and administrative functions, including accounting and financial reporting, for multiple entities. We could fail to properly identify the appropriate mix of personnel and capital needs to operate as a stand-alone entity. An inability to manage an internalization transaction effectively could thus result in our incurring excess costs or suffering deficiencies in our disclosure controls and procedures or our internal control over financial reporting. Such deficiencies could cause us to incur additional costs, and our management’s attention could be diverted from most effectively managing our portfolio of investments.

If we internalize our management or if another investment program, whether sponsored by our sponsor or otherwise, hires the employees of our advisor or our property manager in connection with its own internalization transaction or otherwise, our ability to conduct our business may be adversely affected.

We rely on persons employed by our advisor and its affiliates to manage our day-to-day operations. If we were to effectuate an internalization of our advisor or our property manager, we may not be able to retain all the employees of the advisor or property manager or to maintain a relationship with our sponsor. In addition, some of the employees of the advisor or property manager may provide services to one or more other investment programs. These programs or third parties may decide to retain some of or all the advisor’s or property manager’s key employees in the future. If this occurs, these programs could hire certain of the persons currently employed by the advisor or property manager who are most familiar with our business and operations, thereby potentially adversely impacting our business.

Our rights and the rights of our stockholders to recover claims against our independent directors are limited, which could reduce your and our recovery against them if they negligently cause us to incur losses.

Maryland law provides that a director has no liability in that capacity if he performs his duties in good faith, in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter provides that no independent director shall be liable to us or our stockholders for monetary damages and that we will generally indemnify them for losses unless they are grossly negligent or engage in willful misconduct. As a result, you and we may have more limited rights against our independent directors than might otherwise exist under common law, which could reduce your and our recovery from these persons if they act in a negligent manner. In addition, we may be obligated to fund the defense costs incurred by our independent directors (as well as by our other directors, officers, employees and agents) in some cases, which would decrease the cash otherwise available for distributions to you. See “Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents.”

If our advisor or its affiliates waive certain fees due to them, our results of operations and distributions may be artificially high.

From time to time, our advisor or its affiliates may agree to waive all or a portion of the acquisition, asset management or other fees, compensation or incentives due to them, pay general administrative expenses or otherwise supplement stockholder returns in order to increase the amount of cash available to make distributions to stockholders. If our advisor or its affiliates choose to no longer waive such fees and incentives, our results of operations will be lower than in previous periods and your return on your investment could be negatively affected.

 
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Commencing on the NAV pricing start date, your purchase and the repurchase of our Common Shares under our share repurchase program will be at a price equal to our NAV per Common Share, which will be calculated based upon subjective judgments, assumptions and opinions about future events, and may not be accurate. As a result, our daily NAV per Common Share may not reflect the amount that you might receive for your Common Shares in a market transaction, and you will not know the NAV per Common Share at the time of purchase.

Commencing on the NAV pricing start date, we will base the purchase price of Common Shares and the repurchase price for Common Shares under our share repurchase program on our NAV per Common Share. NAV will be calculated by estimating the market value of our assets and liabilities, many of which may be illiquid. An independent valuer will perform valuations of our real estate portfolio and provide the board with the metrics to be used in calculating our daily NAV, all of which the board of directors will approve. The valuation may not be precise because the valuation methodologies used to value a real estate portfolio involve subjective judgments, assumptions and opinions about future events. Any resulting disparity may benefit the stockholders whose shares are or are not being repurchased under our share repurchase program, those purchasing or not purchasing Common Shares or those participating or not participating in our DRIP. Investors will not know the NAV per Common Share at which they will purchase Common Shares at the time they submit a purchase order following the NAV pricing start date. See “Valuation Policies” for more details about how our NAV will be calculated.

It may be difficult to accurately reflect material events that may impact our daily NAV between valuations and, accordingly, commencing on the NAV pricing start date, we may be selling Common Shares and repurchasing Common Shares under our share repurchase program at too high or too low a price.

Commencing on the NAV pricing start date, our independent valuer will estimate at least annually the market value of our principal assets and liabilities, and also provide the metrics to be used in the subsequent calculation of NAV, and we will rely on those estimates to determine the daily NAV per Common Share. As a result, the published NAV per Common Share may not fully reflect changes in value that may have occurred since the prior valuation. Furthermore, it may be difficult to reflect changing market conditions or material events that may impact the value of our portfolio between valuations, or to obtain timely complete information regarding any such events. Therefore, the NAV per Common Share published after the announcement of an extraordinary event may differ significantly from our actual NAV until such time as sufficient information is available and analyzed, the financial impact is fully evaluated, and the appropriate adjustment to be made to NAV, on a going forward basis, is determined by our advisor and our independent valuer. Any resulting disparity may benefit the stockholders whose shares are or are not being repurchased, those purchasing or not purchasing Common Shares or those who do or do not elect to participate in our DRIP.

If any of our public communication is held to be in violation of federal securities laws relating to public communications, we could be subject to potential liability. Investors in this offering should rely only on the statements made in this prospectus, as supplemented to date, in determining whether to purchase Common Shares.

From time to time, we or our representatives make public statements relating to our business and its prospects. Such communications are subject to federal securities laws. If any of our public communications is held by a court to be in violation of Section 5 of the Securities Act and a claim for damages is brought against us in connection therewith by one or more of our stockholders that purchased Common Shares on the basis of such communications before receiving a copy of this prospectus, as supplemented to date, and potentially other stockholders, we could be subject to liability in connection with the Common Shares we sold to such persons during such period. Such stockholders would have a period of 12 months following the date of any violation determined by a court to have occurred to bring a Section 5 claim. Our liability in a Section 5 claim could include statutory interest from the date of such stockholder’s purchase, in addition to possibly other damages determined by a court. If any of our communications is claimed to have been made in violation of Section 5 of the Securities Act, we expect that we would vigorously contest such claim. Nevertheless, we could not give any assurance as to any court’s ultimate determination with respect to any such claim. Accordingly, there is a risk that we could be subject to potential liability with respect to any Section 5 claim brought against us, and such liability may adversely affect our operating results or financial position.

 
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Risks Related to Conflicts of Interest

We will be subject to conflicts of interest arising out of our relationships with our advisor and its affiliates, including the material conflicts discussed below. The “Conflicts of Interest” section of this prospectus provides a more detailed discussion of the conflicts of interest between us and our advisor and its affiliates and our policies to reduce or eliminate certain potential conflicts.

Our advisor and its affiliates, including all our executive officers and some of our directors, will face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.

Our advisor and its affiliates, including our property manager and United Realty Securities, are entitled to substantial fees from us under the terms of the advisory agreement, the property management agreement and the dealer manager agreement. These fees could influence our advisor’s advice to us as well as the judgment of affiliates of our advisor performing services for us. Among other matters, these compensation arrangements could affect their judgment with respect to:
 
  the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement and the property management agreement, the dealer manager agreement with United Realty Securities and any agreements we may have with URP;
  public offerings of equity by us, which will entitle our dealer manger to dealer manger fess and will likely entitle our advisor to increased acquisition and asset management fees;
  property sales, which may result in compensation to our advisor or URP;
  property acquisitions from third parties, which entitle our advisor to acquisition fees and asset management fees;
  whether to lease to a less creditworthy tenant, since our property manager will receive a leasing fee regardless of tenant quality, and a default by a tenant under its lease obligations may give our property manager an opportunity to earn an additional leasing fee;
  borrowings to acquire properties, which borrowings may increase the acquisition, asset management and financing coordination fees payable to our advisor, as well as supplemental transaction-based fees payable to URP;
  determining the compensation paid to employees for services provided to us, which could be influenced in part by whether the advisor is reimbursed by us for the related salaries and benefits;
  whether we seek to internalize our management functions, which internalization could result in our retaining some of our advisor’s and its affiliates’ key officers and employees for compensation that is greater than that which they currently earn or which could require additional payments to affiliates of our advisor to purchase the assets and operations of our advisor and its affiliates;
  whether and when we seek to list our Common Shares on a national securities exchange, which listing would entitle our sponsor to the issuance of Common Shares through the conversion of its Sponsor Preferred Shares; and
  whether and when we seek to sell or transfer substantially all of our assets, stock or business, which sale or transfer may result in the issuance of Common Shares to our sponsor through the conversion of its Sponsor Preferred Shares.
 
The fees our advisor receives, and URP may receive, in connection with transactions involving the purchase and management of an asset may be based on the cost of the investment rather than the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us. Furthermore, the fact that these fees are initially calculated in part based on budgeted amounts could influence our advisor to overstate the estimated costs of development, construction, or improvements in order to accelerate the cash flow it receives. In addition, the conversion feature of our Sponsor Preferred Shares could cause us to make different decisions with respect to whether and when to sell or transfer substantially all our assets, stock or business, list our Common Shares on a national securities exchange, or terminate or decline to renew the advisory agreement, than we would otherwise make.

 
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Our advisor and its affiliates face conflicts of interest relating to the incentive fee structure under our advisory agreement and pursuant to the terms of the Sponsor Preferred Shares; these conflicts of interest could result in actions that are not necessarily in the long-term best interests of our stockholders.

Our advisor and its affiliates face conflicts of interest relating to the incentive fee structure under our advisory agreement, which could result in actions that are not necessarily in the long-term best interests of our stockholders. For example, after the NAV pricing start date, we will pay to our advisor or its assignees a monthly fee equal to the greater of (a) one-twelfth (1/12) of 1% of the average of our daily NAV for the preceding month and (b) one-twelfth (1/12) of 0.75% of the contract purchase price of each property (including our pro rata share (direct or indirect) of debt attributable to such property) then owned plus one-twelfth (1/12) of 0.75% of the amount advanced for each loan or other investment (including our pro rata share (direct or indirect) of debt attributable to such investment) then owned. Because in the case of (a) above, this fee will be based on NAV, the advisor will benefit from our Common Shares having higher NAV and therefore the advisor has an incentive to cause the NAV to be higher. In the case of (b) above, fees payable to our advisor are based on the purchase price of the investments acquired and may create an incentive for our advisor to accept a higher purchase price or purchase assets that may not be in the best interest of our stockholders. Furthermore, because our advisor and its affiliates do not maintain a significant equity interest in us and are entitled to receive substantial minimum compensation regardless of performance, their interests are not wholly aligned with those of our stockholders.

Our advisor is entitled to a subordinated share of annual cash flows in an amount, annually, equal to 15% of any net cash flows in respect of each calendar year remaining after payment to holders of Common Shares of distributions (including from sources other than operating cash flow) for such calendar year, such that the holders of Common Shares have received a 7%, pre-tax, non-compounded annual return on the capital contributed by holders of Common Shares. “Net cash flows” means, for any period, the excess of: (i) the sum of (A) our revenues for such period, as determined under GAAP, from ownership and/or operation of properties, loans and other investments and (B) the net cash proceeds we realize during such period from any sales of assets; over (ii) the sum of all costs and expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation or to corporate business, including advisory fees, the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and listing of our Common Shares, interest payments, taxes, non-cash expenditures such as depreciation, amortization and bad debt reserves, incentive fees paid in compliance with the NASAA REIT Guidelines, acquisition fees and acquisition expenses, real estate commissions on the sale of property and other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property). In that regard, our advisor could be motivated to recommend riskier or more speculative investments in order for us to generate the specified levels of performance or sales proceeds that would entitle our advisor to fees. In addition, our advisor’s or its affiliates’ entitlement to fees upon the sale of our assets could result in our advisor recommending sales of our investments even if continued ownership of those investments might be in our best long-term interest. Furthermore, our sponsor has the right to convert its Sponsor Preferred Shares into Common Shares upon (and for 180 days following) the sale or transfer of substantially all of our assets, stock or business (other than a sale of assets in our liquidation, dissolution or winding up), the listing of our Common Shares on any national securities exchange or the termination or expiration without renewal of the advisory agreement. To avoid enabling the sponsor to convert its Sponsor Preferred Shares into Common Shares, our independent directors may decide against any of such events even if, but for the conversion of the Sponsor Preferred Shares into Common Shares, such an event would be in our best interest. For a more detailed discussion of the fees payable to our advisor and its affiliates in respect of this offering, see “Compensation Table.”

 
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Our advisor and URP will face conflicts of interest relating to joint ventures, tenant-in-common investments or other co-ownership arrangements that we enter into with affiliates of our sponsor or advisor or with other programs sponsored by our sponsor or its principal, or our advisor, which could result in a disproportionate benefit to affiliates of our sponsor or advisor or to another program.

We may enter into joint ventures, tenant-in-common investments or other co-ownership arrangements with other programs sponsored by affiliates of our advisor for the acquisition, development or improvement of properties as well as the acquisition of real estate-related investments. The executive officers of our advisor and URP are also the executive officers of other real estate investment vehicles, and may in the future sponsor or be the executive officers of other REITs and their advisors, the general partners of other United Realty-sponsored partnerships or the advisors or fiduciaries of other United Realty-sponsored programs. These executive officers will face conflicts of interest in determining which United Realty-sponsored program should enter into any particular joint venture, tenant-in-common or co-ownership arrangement. These persons also may have a conflict in structuring the terms of the relationship between our interests and the interests of the United Realty-sponsored co-venturer, co-tenant or partner as well as conflicts of interest in managing the joint venture. Further, the fiduciary obligations that our advisor or our board of directors may owe to a co-venturer, co-tenant or partner affiliated with our sponsor or advisor may make it more difficult for us to enforce our rights.

If we enter into a joint venture, tenant-in-common investment or other co-ownership arrangement with another program (whether sponsored by us or by the principal of our sponsor or his affiliates) or joint venture, our advisor and its affiliates may have a conflict of interest when determining when and whether to buy or sell a particular real estate property, exercise buy/sell rights or make other major decisions, and you may face certain additional risks. For example, if we become listed for trading on a national securities exchange, and any of the other programs sponsored by us or our sponsor’s principal or his affiliates are not traded on any exchange, we may develop more divergent goals and objectives from such joint venturer with respect to the sale of properties in the future. In addition, if we enter into a joint venture with another program sponsored by us or the principal of our sponsor or his affiliates that has a term shorter than ours, the joint venture may be required to sell its properties at the time of the other program’s liquidation. We may not desire to sell the properties at such time. Even if the terms of any joint venture agreement between us and another program sponsored by us or the principal of our sponsor or his affiliates grant us a right of first refusal to buy such properties, we may not have sufficient funds to exercise our right of first refusal under these circumstances.

Because Mr. Frydman and his affiliates control us and would control any other United Realty-sponsored programs, agreements and transactions among the parties with respect to any joint venture, tenant-in-common investment or other co-ownership arrangement between or among such parties will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers. Under these joint ventures, neither co-venturer may have the power to control the venture, and under certain circumstances, an impasse could be reached regarding matters pertaining to the co-ownership arrangement, which might have a negative influence on the joint venture and decrease potential returns to you. If a co-venturer has a right of first refusal to buy out the other co-venturer, it may be unable to finance such buyout at that time. If our interest is subject to a buy/sell right, we may not have sufficient cash, available borrowing capacity or other capital resources to allow us to elect to purchase an interest of a co-venturer subject to the buy/sell right, in which case we may be forced to sell our interest as the result of the exercise of such right when we would otherwise prefer to keep our interest. Furthermore, we may not be able to sell our interest in a joint venture if we desire to exit the venture for any reason or if our interest is likewise subject to a right of first refusal of our co-venturer or partner, our ability to sell such interest may be adversely impacted by such right.

If we use debt to finance the acquisition of investments, we may pay our advisor and URP twice with respect to such debt, which would adversely affect our operating results and may encourage our advisor to maximize its use of debt financing for acquisitions of investments.
 
 
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As described under “Compensation Table,” we will pay to our advisor or its assignees 1% of the contract purchase price of each property acquired, which amount includes our pro rata share (direct or indirect) of debt attributable to such property, or 1% of the amount advanced for a loan or other investment, which amount includes our pro rata share (direct or indirect) of debt attributable to such investment, as applicable. We also may pay URP a supplemental transaction-based advisory fee for brokerage services with respect to investments we acquire; such fee may be calculated as a percentage of the debt attributable to such investment. Further, if our advisor provides services in connection with the origination or refinancing of any debt that we obtain and use, directly or indirectly, to finance properties or other investments, or that we assume, directly or indirectly, in connection with the acquisition of properties or other investments, we will pay our advisor or its assignees a financing coordination fee equal to 1% of the amount available or outstanding under such financing or such assumed debt. We also may pay URP a supplemental transaction-based advisory fee for providing services in connection with the origination or refinancing of any debt that we obtain and use, directly or indirectly, to finance properties or other investments, or that we assume, directly or indirectly, in connection with the acquisition of properties or other investments; such fee may be calculated as a percentage of the debt attributable to such investment. There is nothing to prevent our advisor and URP from receiving both acquisition-related fees and financing-related fees with respect to the amount of acquisition financing with respect to a property that we acquire. Such double payment would adversely affect our operating results and may encourage our advisor to maximize its use of debt financing for acquisitions of investments.

Our advisor’s executive officers and key personnel and the executive officers and key personnel of United Realty-affiliated entities that conduct our day-to-day operations and this offering will face competing demands on their time, and this may cause our investment returns to suffer.

We rely upon the executive officers of our advisor and the executive officers and employees of United Realty-affiliated entities to conduct our day-to-day operations and this offering. These persons also conduct the day-to-day operations of other investment programs and may in the future also conduct the day-to-day operations of other programs we sponsor and may have other business interests as well. Because these persons have competing interests on their time and resources, they may have conflicts of interest in allocating their time between our business and these other activities. During times of intense activity in other programs and ventures, they may devote less time and fewer resources to our business than is necessary or appropriate. If this occurs, the returns on our investments may suffer.

Our officers face conflicts of interest related to the positions they hold with entities affiliated with our advisor, which could diminish the value of the services they provide to us.

Certain of our executive officers are also officers of our advisor, URP, United Realty Securities, our property manager and other entities affiliated with our advisor, which may include the advisors and fiduciaries to other United Realty-sponsored programs. As a result, these individuals owe fiduciary duties to these other entities and their investors, which may conflict with the fiduciary duties that they owe to us and our stockholders. Their loyalties to these other entities and investors could result in action or inaction that is detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. Conflicts with our business and interests are most likely to arise from involvement in activities related to (a) allocation of new investments and management time and services between us and the other entities, (b) the timing and terms of the investment in or sale of an asset, (c) development of our properties by affiliates of our advisor, (d) investments with affiliates of our advisor, (e) compensation to our advisor and its affiliates, and (f) our relationships with United Realty Securities, URP and our property manager. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to you and to maintain or increase the value of our assets.

Because we rely on affiliates of United Realty for the provision of advisory, property management and dealer manager services, if United Realty is unable to meet its obligations, we may be required to find alternative providers of these services, which could result in a significant and costly disruption of our business.

United Realty, through one or more of its subsidiaries, owns and controls our advisor, URP, United Realty Securities and our property manager. The operations of our advisor, URP, United Realty Securities and our property manager rely substantially on United Realty. United Realty is dependent on its principal, who in turn depends on fee income from his sponsored real estate programs. Real estate market disruptions could adversely affect the amount of such fee income. If the principal of our sponsor becomes unable to meet his obligations as they become due, he might liquidate United Realty, and we might be required to find alternative service providers, which could result in a significant disruption of our business and would likely adversely affect the value of your investment in us.

 
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Risks Related to Our Business in General

A limit on the number of shares a person may own may discourage a takeover of our company.

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. Our charter prohibits the ownership of more than 9.8% in value of the aggregate of our outstanding shares of stock or more than 9.8% (in value or number of shares, whichever is more restrictive) of our outstanding Common Shares, unless exempted by our board of directors (prospectively or retroactively), which may inhibit large investors from purchasing your Common Shares. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might otherwise provide stockholders with the opportunity to receive a control premium for their Common Shares. See “Description of Shares —  Restrictions on Ownership of Shares.”

Our charter permits our board of directors to issue stock with terms that may subordinate the rights of the holders of our Common Shares or discourage a third party from acquiring us.

Our charter permits our board of directors to issue up to 200,000,000 Common Shares and up to 50,000,000 shares of preferred stock, $0.01 par value per share, 500,000 shares of which are classified as Sponsor Preferred Shares. Our board of directors, without any action by our stockholders, may (a) amend our charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series we have authority to issue or (b) classify or reclassify any unissued Common Shares or shares of preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, and terms and conditions of the repurchase of any such stock. Thus, our board of directors could authorize the issuance of such stock with terms and conditions that could further subordinate the rights of the holders of our Common Shares beyond their existing subordination to the preferences of the Sponsor Preferred Shares, or have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our Common Shares. See “Description of Shares — Preferred Stock.”

Maryland law prohibits certain business combinations, which may make it more difficult for us to be acquired.

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer, an issuance or reclassification of equity securities, liquidations or dissolutions in which an interested stockholder will receive something other than cash and any loans, advances, pledges, guarantees or similar arrangements in which an interested stockholder receives a benefit. An interested stockholder is defined as:
 
  any person who beneficially owns 10% or more of the voting power of the then outstanding voting stock of the corporation; or
  an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation.
 
A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which he otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.
 
 
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After the expiration of the five-year period described above, any business combination between a Maryland corporation and an interested stockholder must generally be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:
 
  80% of the votes entitled to be cast by holders of the then outstanding shares of voting stock of the corporation voting together as a single group; and
  two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder voting together as a single group.
 
These supermajority vote requirements do not apply if the corporation’s holders of voting stock receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. Maryland law also permits various exemptions from these provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder. The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. For a more detailed discussion of the Maryland laws governing us and the ownership of our Common Shares, see “Description of Shares — Business Combinations.”

Maryland law also limits the ability of a third party to buy a large stake in us and exercise voting power in electing directors.

Maryland law provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights except to the extent approved by the affirmative vote of stockholders entitled to cast two-thirds of the votes entitled to be cast on the matter. Shares of stock owned by interested stockholders, that is, by the acquirer, by officers or by employees who are directors of the corporation, are excluded from the vote on whether to accord voting rights to the control shares. “Control shares” are voting shares of stock that would entitle the acquirer to exercise voting power in electing directors within specified ranges of voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of issued and outstanding control shares. The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by a corporation’s charter or bylaws. Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock. We can offer no assurance that this provision will not be amended or eliminated at any time in the future. This statute could have the effect of discouraging offers from third parties to acquire us and increasing the difficulty of successfully completing this type of offer by anyone other than our affiliates or any of their affiliates. For a more detailed discussion of the Maryland laws governing control share acquisitions, see “Description of Shares — Control Share Acquisitions.”

Our charter includes a provision that may discourage a stockholder from launching a tender offer for our Common Shares.

Our charter provides that any tender offer made by a stockholder, including any “mini-tender” offer, must comply with most provisions of Regulation 14D of the Exchange Act. The offering stockholder must provide our company notice of such tender offer at least ten business days before initiating the tender offer. If the offering stockholder does not comply with these requirements, the non-complying stockholder shall be responsible for all our company’s expenses in connection with that stockholder’s noncompliance. This provision of our charter may discourage a stockholder from initiating a tender offer for our Common Shares and prevent you from receiving a premium price for your Common Shares in such a transaction.

 
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Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act.

The company is not registered, and does not intend to register itself or any of its subsidiaries, as an investment company under the Investment Company Act. If we become obligated to register the company or any of its subsidiaries as an investment company, the registered entity would have to comply with a variety of substantive requirements under the Investment Company Act imposing, among other things:
  limitations on capital structure;
  restrictions on specified investments;
  prohibitions on transactions with affiliates; and
  compliance with reporting, recordkeeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations.
The company intends to conduct its operations, directly and through wholly owned or majority-owned subsidiaries, so that the company and each of its subsidiaries is not an investment company under the Investment Company Act. Under Section 3(a)(1)(A) of the Investment Company Act, a company is deemed to be an “investment company” if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed to be an “investment company” if it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or propose to acquire “investment securities” having a value exceeding 40% of the value of its total assets (exclusive of government securities and cash items) on an unconsolidated basis. Rule 3a-1 under the Investment Company Act, however, generally provides that, notwithstanding Section 3(a)(1)(C) of the Investment Company Act, an issuer will not be deemed to be an “investment company” under the Investment Company Act; provided, that (a) it does not hold itself out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting or trading in securities, and (b) on an unconsolidated basis no more than 45% of the value of its total assets, consolidated with the assets of any wholly owned subsidiary (exclusive of U.S. government securities and cash items), consists of, and no more than 45% of its net income after taxes, consolidated with the net income of any wholly owned subsidiary (for the last four fiscal quarters combined), is derived from, securities other than U.S. government securities, securities issued by employees’ securities companies, securities issued by certain majority-owned subsidiaries of such company and securities issued by certain companies that are controlled primarily by such company. We believe that we, our operating partnership and the subsidiaries of our operating partnership will satisfy this exclusion.

A change in the value of any of our assets could cause us or one or more of our wholly or majority-owned subsidiaries to fall within the definition of “investment company” and negatively affect our ability to maintain our exemption from regulation under the Investment Company Act. To avoid being required to register the company or any of its subsidiaries as an investment company under the Investment Company Act, we may be unable to sell assets we would otherwise want to sell and may need to sell assets we would otherwise wish to retain. In addition, we may have to acquire additional income- or loss-generating assets that we might not otherwise have acquired or may have to forgo opportunities to acquire interests in companies that we would otherwise want to acquire and would be important to our investment strategy. Our advisor will continually review our investment activity to attempt to ensure that we will not be regulated as an investment company.

If we were required to register the company as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of us and liquidate our business.

 
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Rapid changes in the values of potential investments in real estate-related investments may make it more difficult for us to maintain our qualification as a REIT or our exception from the Investment Company Act.

If the market value or income potential of our real estate-related investments declines, including as a result of increased interest rates, prepayment rates or other factors, we may need to increase our real estate investments and income or liquidate our non-qualifying assets in order to maintain our REIT qualification or our exception from registration under the Investment Company Act. If the decline in real estate asset values or income occurs quickly, this may be especially difficult to accomplish. This difficulty may be exacerbated by the illiquid nature of any non-real estate assets that we may own. We may have to make investment decisions that we otherwise would not make absent REIT and Investment Company Act considerations.

Stockholders have limited control over changes in our policies and operations.

Our board of directors determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under our charter and the Maryland General Corporation Law, our stockholders generally have a right to vote only on the following matters:
 
  the election or removal of directors;
  any amendment of our charter, except that our board of directors may amend our charter without stockholder approval to:
  change our name;
  increase or decrease the aggregate number of shares that we have the authority to issue;
  increase or decrease the number of our shares of any class or series that we have the authority to issue; and
  effect reverse stock splits;
  our liquidation and dissolution; and
  our being a party to any merger, consolidation, sale or other disposition of all or substantially all of our assets or statutory share exchange.
 
All other matters are subject to the discretion of our board of directors.

Our board of directors may change our investment policies and objectives generally and at the individual investment level without stockholder approval, which could alter the nature of your investment.

Our charter requires that our independent directors review our investment policies at least annually to determine that the policies we are following are in the best interests of the stockholders. In addition to our investment policies and objectives, we also may change our stated strategy for any investment in an individual property. These policies may change over time. The methods of implementing our investment policies also may vary, as new investment techniques are developed. Our investment policies, the methods for their implementation, and our other objectives, policies and procedures may be altered by our board of directors without the approval of our stockholders. As a result, the nature of your investment could change without your consent.

We may not successfully implement our exit strategy, in which case you may have to hold your investment for an indefinite period.

Depending upon then-prevailing market conditions, it is our intention to consider beginning the process of liquidating our assets and distributing the net proceeds to our stockholders within six to nine years after the termination of our initial public offering, although we cannot guarantee an exit within this timeframe. If we do not begin the process of achieving a liquidity event by the eighth anniversary of the termination of this offering, our charter requires either (a) an amendment to our charter to extend the deadline to begin the process of achieving a liquidity event, or (b) the holding of a stockholders meeting to vote on a proposal for an orderly liquidation of our portfolio.

 
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Market conditions and other factors could cause us to delay the commencement of our liquidation or to delay the listing of our Common Shares on a national securities exchange beyond eight years from the termination of our initial public offering. If so, our board of directors and our independent directors may conclude that it is not in our best interest to hold a stockholders meeting for the purpose of voting on a proposal for our orderly liquidation. Therefore, if we are not successful in implementing our exit strategy, your Common Shares will continue to be illiquid and you may, for an indefinite period of time, be unable to convert your investment into cash easily with minimum loss.

The offering price of our Common Shares in this offering was not determined on an independent basis; as a result, the offering price of the Common Shares in this offering is not related to any independent valuation.

Our board of directors arbitrarily determined the offering price of the Common Shares in this offering, and such price bears no relationship to any established criteria for valuing issued or outstanding shares. Our board of directors arbitrarily determined the offering price of our Common Shares based primarily on the range of offering prices of other REITs that do not have a public trading market. Consequently, the offering price of our Common Shares may not reflect the price at which the Common Shares would trade if they were listed on an exchange or actively traded by brokers, nor the proceeds that a stockholder would receive if we were liquidated or dissolved.
 
Because the dealer manager is an affiliate of our sponsor, you will not have the benefit of an independent due diligence review of us, which is customarily performed in underwritten offerings; the absence of an independent due diligence review increases the risks and uncertainty you face as a stockholder.

Our dealer manager, United Realty Securities, is an affiliate of our sponsor. Because United Realty Securities is an affiliate of our sponsor, its due diligence review and investigation of us and the prospectus cannot be considered to be an independent review. Therefore, you do not have the benefit of an independent review and investigation of this offering of the type normally performed by an unaffiliated, independent underwriter in a public securities offering.
 
Your interest will be diluted if we issue additional securities.

Stockholders do not have preemptive rights to any shares issued by us in the future. Our charter authorizes us to issue 250,000,000 shares of capital stock, of which 200,000,000 shares are classified as Common Shares and 50,000,000 shares are classified as preferred stock. Our board of directors may amend our charter from time to time to increase or decrease the number of authorized shares of capital stock, or the number of authorized shares of any class or series of stock designated, and may classify or reclassify any unissued shares into one or more classes or series without the necessity of obtaining stockholder approval. Shares will be issued at the discretion of our board of directors. Stockholders will likely experience dilution of their equity investment in us if we: (a) sell Common Shares in this offering or sell additional Common Shares in the future, including those issued pursuant to our DRIP; (b) sell securities that are convertible into Common Shares; (c) issue Common Shares upon the conversion by our sponsor of its Sponsor Preferred Shares; (d) issue Common Shares upon the exercise of any options under our stock incentive plan; (e) issue Common Shares to our advisor, its affiliates, successors or assigns, or our property manager, in payment of an outstanding fee obligation as set forth under our advisory agreement or other agreements; or (f) issue Common Shares to sellers of properties acquired by us in connection with an exchange of limited partnership interests of our operating partnership. In addition, the operating partnership agreement for our operating partnership contains provisions that allow, under certain circumstances, other entities, including other United Realty-sponsored programs, to merge into or cause the exchange or conversion of their interest for interests of our operating partnership. Because the limited partnership interests in our operating partnership may be exchanged for Common Shares, any merger, exchange or conversion of our operating partnership and another entity ultimately could result in the issuance of a substantial number of Common Shares, thereby diluting the percentage ownership interest of other stockholders. Because of these and other reasons described in this “Risk Factors” section, you should not expect to be able to own a significant percentage of our Common Shares.

 
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We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements.

In April 2012, President Obama signed into law the Jumpstart Our Business Startups Act, or the JOBS Act. We are an “emerging growth company,” as defined in the JOBS Act, and are eligible to take advantage of certain exemptions from, or reduced disclosure obligations relating to, various reporting requirements that are normally applicable to public companies.

We could remain an “emerging growth company” for up to five years, or until the earliest to occur of (1) the last day of the first fiscal year in which we have total annual gross revenue of $1 billion or more, (2) December 31 of the fiscal year that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act (which would occur if the market value of our Common Shares held by non-affiliates exceeds $700 million, measured as of the last business day of our most recently completed second fiscal quarter, and we have been publicly reporting for at least 12 months) and (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period. Under the JOBS Act, emerging growth companies are not required to (1) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting, pursuant to Section 404 of SOX, (2) comply with new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, which may require mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor must provide additional information about the audit and the issuer’s financial statements, (3) comply with new audit rules adopted by the PCAOB after April 5, 2012 (unless the SEC determines otherwise), (4) provide certain disclosures relating to executive compensation generally required for larger public companies or (5) hold stockholder advisory votes on executive compensation. Other than as set forth in the following paragraph, we have not yet made a decision as to whether to take advantage of any or all of the JOBS Act exemptions that are applicable to us. If we do avail ourselves of any of the remaining exemptions from various reporting requirements, we do not know if some investors will find our Common Shares less attractive as a result.

Additionally, the JOBS Act provides that an “emerging growth company” may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means an“emerging growth company” can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. However, we are electing to “opt out” of such extended transition period, and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.

We disclose modified funds from operations, or MFFO, a non-GAAP financial measure, in communications with investors, including documents filed with the SEC; however, MFFO is not equivalent to our net income or loss as determined under GAAP, and you should consider GAAP measures to be more relevant to our operating performance.

We use internally, and disclose to investors, MFFO, a non-GAAP financial measure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds From Operations and Modified Funds From Operations,” incorporated herein by reference to our quarterly financial reports. MFFO is not equivalent to our net income or loss as determined under GAAP, and you should consider GAAP measures to be more relevant to our operating performance. MFFO differs from GAAP net income by excluding gains or losses from sales of property and asset impairment write-downs, adding back depreciation and amortization, adjusting for unconsolidated partnerships and joint ventures, and further excluding acquisition-related expenses, amortization of above- and below-market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests.

Because of the manner in which MFFO differs from GAAP net income or loss, it may not be an accurate indicator of our operating performance, especially during periods in which properties are being acquired. Furthermore, MFFO is not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate funds from operations or MFFO. Also, because not all companies calculate MFFO the same way, comparisons with other companies may not be meaningful.

 
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Payment of fees to our advisor and its affiliates will reduce cash available for investment and payment of distributions.

Our advisor and its affiliates will perform services for us in connection with, among other things, the selection, financing and acquisition of our investments, the management and leasing of our properties, the servicing of our mortgage, bridge, mezzanine or other loans, the administration of our other investments and the disposition of our assets. They will be paid substantial fees for these services. These fees will reduce the amount of cash available for investment or distributions to stockholders. For a more detailed discussion of these fees, see “Compensation Table.”

Distributions may be paid from capital and there can be no assurance that we will be able to achieve expected cash flows necessary to continue to pay initially established distributions or maintain distributions at any particular level, or that distributions will increase over time.

There are many factors that can affect the availability and timing of cash distributions to stockholders. Distributions generally will be based upon such factors as the amount of cash available or anticipated to be available from real estate investments and real estate-related securities, mortgage, bridge or mezzanine loans and other investments, current and projected cash requirements and tax considerations. Because we may receive income from interest or rents at various times during our fiscal year, distributions paid may not reflect our income earned in that particular distribution period. The amount of cash available for distributions will be affected by many factors, such as our ability to make acquisitions as offering proceeds become available, the income from those investments and yields on securities of other real estate programs that we invest in, and our operating expense levels, as well as many other variables. Actual cash available for distributions may vary substantially from estimates. We can give no assurance that we will be able to achieve our anticipated cash flow or that distributions will increase over time. Nor can we give any assurance that rents from the properties will increase, that the securities we buy will increase in value or provide constant or increased distributions over time, that loans we make will be repaid or paid on time, that loans will generate the interest payments that we expect, or that future acquisitions of real properties, mortgage, bridge or mezzanine loans, other investments or our investments in securities will increase our cash available for distributions to stockholders. Our actual results may differ significantly from the assumptions used by our board of directors in establishing the distribution rates to stockholders.

Many of the factors that can affect the availability and timing of cash distributions to stockholders are beyond our control, and a change in any one factor could adversely affect our ability to pay future distributions. For instance:
 
  If one or more tenants defaults or terminates its lease, there could be a decrease or cessation of rental payments, which would mean less cash available for distributions.
  Any failure by a borrower under our mortgage, bridge or mezzanine loans to repay the loans or interest on the loans will reduce our income and distributions to stockholders.
  Cash available for distributions may be reduced if we are required to spend money to correct defects or to make improvements to properties.
  Cash available to make distributions may decrease if the assets we acquire have lower yields than expected.
  There may be a delay between the sale of the Common Shares and our purchase of real properties. During that time, we may invest in lower-yielding short-term instruments, which could result in a lower yield on your investment.
  If we lend money to others, such funds may not be repaid in accordance with the loan terms or at all, which could reduce cash available for distributions.
 
 
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  •  U.S. federal income tax law requires that a REIT distribute annually to its stockholders at least 90% of its REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to dividends paid and excluding net capital gain, to maintain REIT status, and 100% of REIT taxable income and net capital gain to avoid U.S. federal income tax. This limits the earnings that we may retain for corporate growth, such as property acquisition, development or expansion and makes us more dependent upon additional debt or equity financing than corporations that are not REITs. If we borrow more funds in the future, more of our operating cash will be needed to make debt payments and cash available for distributions may therefore decrease.
  In connection with future property acquisitions, we may issue additional Common Shares, interests in our operating partnership or interests in other entities that own our properties. We cannot predict the number of Common Shares, units or interests that we may issue, or the effect that these additional Common Shares might have on cash available for distributions to you. If we issue additional Common Shares, they could reduce the cash available for distributions to you.
  In connection with future property acquisitions which are under development, construction or repositioning, we may experience budget overruns; delays in completion; failure of a contractor or sub-contractor, construction risks including damage, vandalism or accidents; a change in market conditions before such project is ready to be placed in use; the placement of liens on our properties as a result of construction disputes, and numerous additional development, construction and repositioning risks, any of which could require expenditure of more cash than anticipated, increase our borrowings and costs of such borrowings, delay the commencement of cash flow or reduce cash available for distribution.
  We make distributions to our stockholders to comply with the distribution requirements of the Code and to eliminate, or at least minimize, exposure to federal income taxes and the nondeductible REIT excise tax. Differences in timing between the receipt of income and the payment of expenses, and the effect of required debt payments, could require us to borrow funds on a short-term basis to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT.
 
In addition, our board of directors, in its discretion, may retain any portion of our cash on hand for working capital. We cannot assure you that sufficient cash will be available to make distributions to you.

Development projects in which we invest may not be completed successfully or on time, and guarantors of the projects may not have the financial resources to perform their obligations under the guaranties they provide.

We may make equity investments in, acquire options to purchase interests in or make mezzanine loans to the owners of real estate development projects. Our return on these investments is dependent upon the projects being completed successfully, on budget and on time. To help ensure performance by the developers of properties that are under construction, completion of these properties is generally guaranteed either by a completion bond or performance bond. Our advisor may rely upon the substantial net worth of the contractor or developer or a personal guarantee accompanied by financial statements showing a substantial net worth provided by an affiliate of the entity entering into the construction or development contract as an alternative to a completion bond or performance bond. For a particular investment, we may obtain guaranties that the project will be completed on time, on budget and in accordance with the plans and specifications and that the mezzanine loan will be repaid. However, we may not obtain such guaranties and cannot ensure that the guarantors will have the financial resources to perform their obligations under the guaranties they provide. If we are unable to manage these risks effectively, our results of operations, financial condition and ability to make distributions to you will be adversely affected.

We are uncertain of our sources for funding of future capital needs, which could adversely affect the value of our investments.

Substantially all the gross proceeds of this offering will be used to make investments in real estate and real estate-related assets and to pay various fees and expenses related to this offering. We will establish capital reserves on a property-by-property basis, as we deem appropriate. In addition to any reserves we establish, a lender may require escrow of capital reserves in excess of our established reserves. If these reserves are insufficient to meet our cash needs, we may have to obtain financing from either affiliated or unaffiliated sources to fund our cash requirements. Accordingly, if we develop a need for additional capital in the future for the improvement of our properties or for any other reason, we have not identified any sources for such funding, and we cannot assure you that such sources of funding will be available to us for potential capital needs in the future.
 
 
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We may suffer adverse consequences due to the financial difficulties, bankruptcy or insolvency of our tenants.

The current economic conditions may cause the tenants in any properties we own to experience financial difficulties, including bankruptcy, insolvency or a general downturn in their business. We cannot assure you that any tenant that files for bankruptcy protection will continue to pay us rent. A bankruptcy filing by, or relating to, one of our tenants or a lease guarantor would bar efforts by us to collect pre-bankruptcy debts from that tenant or lease guarantor, or its property, unless we receive an order permitting us to do so from the bankruptcy court. In addition, we cannot evict a tenant solely because of bankruptcy. The bankruptcy of a tenant or lease guarantor could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. If, however, a lease is rejected by a tenant in bankruptcy, we would have only a general, unsecured claim for damages. An unsecured claim would only be paid to the extent that funds are available and only in the same percentage as is paid to all other holders of general, unsecured claims. Restrictions under the bankruptcy laws further limit the amount of any other claims that we can make if a lease is rejected. As a result, it is likely that we would recover substantially less than the full value of the remaining rent during the term.

The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.

The Federal Deposit Insurance Corporation, or FDIC, only insures limited amounts per depositor per insured bank. In the future, we may deposit cash, cash equivalents and restricted cash in certain financial institutions in excess of federally insured levels. If any of the banking institutions in which we have deposited funds ultimately fails, we may lose our deposits over the federally insured levels. The loss of our deposits could reduce the amount of cash we have available to distribute or invest and could result in a decline in the value of your investment.

Recent market disruptions may adversely impact aspects of our operating results and operating condition.

U.S. and international markets recently experienced increased levels of volatility due to a combination of many factors, including depressed home prices, limited access to credit markets, higher fuel prices, less consumer spending and fears of a national and global recession. The effects of the recent market dislocation may persist as financial institutions continue to take the necessary steps to restructure their business and capital structures. As a result, the recent economic downturn has reduced demand for space and removed support for rents and property values. Since we cannot predict when the real estate markets may recover, the value of our properties may decline if recent market conditions reemerge.

In August 2011, Standard & Poor’s Ratings Services, or S&P, downgraded the U.S. government’s AAA sovereign credit rating to AA+ with a negative outlook and downgraded the credit ratings of certain long-term debt instruments issued by Fannie Mae and Freddie Mac and other U.S. government agencies linked to long-term U.S. debt. Moody’s Investors Service, Inc., or Moody’s, changed its outlook on the U.S. government to negative on August 2, 2011 and Fitch Inc., or Fitch, changed its outlook to negative on November 28, 2011. On June 10, 2013, S&P changed its outlook from negative to stable. However, it has not raised its credit rating from AA+ and cautioned that policy makers could place downwards pressure on the rating if they relax fiscal policy without addressing longer-term fiscal challenges. On June 28, 2013, Fitch affirmed the U.S. government credit rating at AAA but kept its outlook at negative, stating still-elevated debt levels leave the country vulnerable to shocks without deficit reduction. On July 19, 2013, Moody’s raised its outlook on the U.S. government to stable and restored its top rating of Aaa. There continues to be a perceived risk of future sovereign credit ratings downgrade of the U.S. government, including the ratings of U.S. Treasury securities. A further downgrade of U.S. sovereign credit ratings could correspondingly impact the credit ratings of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly linked to the U.S. government, such as debt issued by Fannie Mae and Freddie Mac.

In addition, certain European nations continue to experience varying degrees of financial stress, and yields on government-issued bonds in Cyprus, Greece, Ireland, Italy, Portugal and Spain have risen and remain volatile. EU leaders have not reached an agreement on a comprehensive solution to the credit crisis, and worries about sovereign finances persist. Concerns also exist regarding the ability of countries that already have received financial assistance to avoid default, even after having received such assistance.

 
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Market concerns over the direct and indirect exposure of European banks and insurers to these EU peripheral nations has resulted in a widening of credit spreads and increased costs of funding for some European financial institutions. These recent events may reduce investor confidence and lead to further weakening of the U.S. and global economies. In particular, this could cause disruption in the capital markets and impact the stability of future U.S. Treasury auctions and the trading market for U.S. government securities, resulting in increased interest rates and borrowing costs. In addition, the evolving efforts to correct the market instability make the valuation of real estate assets highly unpredictable. The fluctuation in market conditions may make judging the future performance of real estate assets difficult. There is a risk that we may purchase real estate assets at discounted rates and that these assets may continue to decline in value.

Our business may be affected by market and economic challenges experienced by the U.S. and global economies. These conditions may materially affect the value and performance of our properties, and may affect our ability to pay distributions, the availability or the terms of financing that we have or may anticipate utilizing, and our ability to make principal and interest payments on, or refinance, any outstanding debt when due. These challenging economic conditions also may impact the ability of certain of our tenants to enter into new leasing transactions or satisfy rental payments under existing leases. Specifically, recent global market disruptions may have adverse consequences, as follows:
 
  the financial condition of tenants occupying the properties we acquire may be adversely affected, which may result in us having to increase concessions, reduce rental rates or make capital improvements beyond those contemplated at the time we acquired the properties in order to maintain occupancy levels or to negotiate for reduced space needs, which may result in a decrease in our occupancy levels;
  significant job losses have occurred and may continue to occur, which may decrease demand for office space, multifamily communities and hospitality properties and result in lower occupancy levels, which will result in decreased revenues for properties that we acquire, which could diminish the value of such properties that depend, in part, upon the cash flow generated by such properties;
  there may be an increase in the number of bankruptcies or insolvency proceedings of tenants and lease guarantors, which could delay our efforts to collect rent and any past due balances under the relevant leases and ultimately could preclude collection of these sums;
  credit spreads for major sources of capital may continue to widen as investors demand higher risk premiums, resulting in lenders increasing the cost for debt financing;
  our ability to borrow on terms and conditions that we find acceptable, or at all, may be limited, which could result in our investment operations generating lower overall economic returns and a reduced level of cash flow, which could potentially impact our ability to make distributions to our stockholders at current levels, reduce our ability to pursue acquisition opportunities if any, and increase our interest expense;
  there could be a further reduction in the amount of capital that is available to finance real estate, which, in turn, could lead to a decline in real estate values generally, slow real estate transaction activity, reduce the loan-to-value ratio upon which lenders are willing to lend, and make sourcing or refinancing our debt more difficult;
  the value of certain properties we may acquire may decrease below the amounts we paid for them, which may limit our ability to dispose of assets at attractive prices or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans;
  to the extent that we may use or purchase derivative financial instruments, one or more counterparties to such derivative financial instruments could default on their obligations to us, or could fail, increasing the risk that we may not realize the benefits of those instruments; and
 
 
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  the value and liquidity of our short-term investments could be reduced as a result of the dislocation of the markets for our short-term investments and increased volatility in market rates for such investments or other factors.
 
Further, in light of the current economic conditions, we cannot provide assurance that we will be able to meet any particular distribution target or sustain any future level of distributions. If such conditions continue, our board may reduce or cease our distributions in order to conserve cash.

To hedge against exchange rate and interest rate fluctuations, we may use derivative financial instruments that may be costly and ineffective and may reduce the overall returns on your investment and affect cash available for distribution to our stockholders.

We may use derivative financial instruments to hedge exposures to changes in exchange rates and interest rates on loans secured by our assets and investments in real estate-related assets. Derivative instruments may include interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, options or repurchase agreements. Our actual hedging decisions will be determined in light of the facts and circumstances existing at the time of the hedge and may differ from time to time. Our hedging may fail to protect or could adversely affect us because, among other things:
 
  interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates;
  available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;
  the duration of the hedge may not match the duration of the related liability or asset;
  the amount of income that a REIT may earn from hedging transactions to offset interest rate losses is limited by federal income tax provisions governing REITs;
  the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction;
  the party owing money in the hedging transaction may default on its obligation to pay; and
  we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of the money.
 
Any hedging activity we engage in may adversely affect our earnings, which could adversely affect cash available for distribution to our stockholders. Therefore, while we may enter into such transactions to seek to reduce interest rate risks, unanticipated changes in interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged or liabilities being hedged may vary materially. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended accounting treatment and may expose us to risk of loss.

To the extent that we use derivative financial instruments to hedge against exchange rate and interest rate fluctuations, we will be exposed to credit risk, basis risk and legal enforceability risks. In this context, credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. Basis risk occurs when the index upon which the contract is based is more or less variable than the index upon which the hedged asset or liability is based, thereby making the hedge less effective. Finally, legal enforceability risks encompass general contractual risks, including the risk that the counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract. If we are unable to manage these risks effectively, our results of operations, financial condition and ability to make distributions to you will be adversely affected.

 
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Hedging instruments often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities and involve risks and costs.

The cost of using hedging instruments increases as the period covered by the instrument increases and during periods of rising and volatile interest rates. We may increase our hedging activity and thus increase our hedging costs during periods when interest rates are volatile or rising and hedging costs have increased. In addition, hedging instruments involve risk since they often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities. Consequently, there are no requirements with respect to recordkeeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying derivative transactions may depend on compliance with applicable statutory, commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. The business failure of a hedging counterparty with whom we enter into a hedging transaction will most likely result in a default. Default by a party with whom we enter into a hedging transaction may result in the loss of unrealized profits and force us to cover our resale commitments, if any, at the then-current market price. It may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty, and we may not be able to enter into an offsetting contract in order to cover our risk. We cannot be certain that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in losses.

There can be no assurance that the direct or indirect effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010 for the purpose of stabilizing or reforming the financial markets, will not have an adverse effect on our interest rate hedging activities.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, became law in the United States. Title VII of the Dodd-Frank Act contains a sweeping overhaul of the regulation of privately negotiated derivatives. The provisions of Title VII became effective on July 16, 2011 or, with respect to particular provisions, on such other date specified in the Dodd-Frank Act or by subsequent rulemaking. While the full impact of the Dodd-Frank Act on our interest rate hedging activities cannot be assessed until implementing rules and regulations are promulgated, the requirements of Title VII may affect our ability to enter into hedging or other risk management transactions, may increase our costs in entering into such transactions, and may result in us entering into such transactions on more unfavorable terms than prior to effectiveness of the Dodd-Frank Act. The occurrence of any of the foregoing events may have an adverse effect on our business.

Recent disruptions in the financial markets could adversely affect the multifamily property sector’s ability to obtain financing and credit enhancement from Fannie Mae and Freddie Mac, which could adversely impact us.

Fannie Mae and Freddie Mac are major sources of financing for the multifamily sector. Since 2007, Fannie Mae and Freddie Mac have reported substantial losses and a need for significant amounts of additional capital. In response to the deteriorating financial condition of Fannie Mae and Freddie Mac and the recent credit market disruption, the U.S. Congress and Treasury undertook a series of actions to stabilize these government-sponsored enterprises and the financial markets. Pursuant to legislation enacted in 2008, the U.S. government placed both Fannie Mae and Freddie Mac under its conservatorship.

Currently, Fannie Mae and Freddie Mac remain active multifamily lenders. However, there is significant uncertainty surrounding the futures of Fannie Mae and Freddie Mac. Should Fannie Mae and Freddie Mac have their mandates changed or reduced, be disbanded or reorganized by the government or otherwise discontinue providing liquidity to our sector, it would significantly reduce our access to debt capital or increase borrowing costs. If new U.S. government regulations heighten Fannie Mae’s and Freddie Mac’s underwriting standards, adversely affect interest rates and reduce the amount of capital they can make available to the multifamily sector, it could have a material adverse effect on both the multifamily sector and us because many private alternative sources of funding have been reduced or are unavailable. Any potential reduction in loans, guarantees and credit-enhancement arrangements from Fannie Mae and Freddie Mac could jeopardize the effectiveness of the multifamily sector’s derivative securities market, potentially causing breaches in loan covenants, and through reduced loan availability, impact the value of multifamily assets, which could impair the value of a significant portion of multifamily communities. Specifically, the potential for a decrease in liquidity made available to the multifamily sector by Fannie Mae and Freddie Mac could: (a) make it more difficult for us to secure takeout financing for multifamily development projects; (b) hinder our ability to refinance completed multifamily assets; (c) decrease the amount of available liquidity and credit that could be used to diversify a portfolio of multifamily assets; and (d) require us to obtain other sources of debt capital with potentially different terms.
 
 
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General Risks Related to Investments in Real Estate

Valuations and appraisals of our properties and valuations of our investments in real estate-related assets are estimates of fair value and may not necessarily correspond to realizable value, which could adversely affect the value of your investment.

Commencing on the NAV pricing start date, in order to calculate our daily NAV, our properties will initially be valued at cost, which we expect to represent fair value. After this initial valuation, valuations of properties will be conducted in accordance with our valuation guidelines and will be based partially on appraisals performed by our independent valuer. Similarly, our real estate-related asset investments will initially be valued at cost, and thereafter will be valued at least annually, or in the case of liquid securities, daily, as applicable, at fair value as determined by our advisor. See “Valuation Policies.” The valuation methodologies used to value our properties will involve subjective judgments concerning factors such as comparable sales, rental and operating expense data, capitalization or discount rate, and projections of future rent and expenses. Appraisals and valuations will be only estimates, and ultimate realization depends on conditions beyond our advisor’s control. Further, valuations do not necessarily represent the price at which we would be able to sell an asset, because such prices would be negotiated. We will not retroactively adjust the valuation of such assets, the price of our Common Shares in our primary offering or under our DRIP, the price we paid to repurchase Common Shares or NAV-based fees we paid to our advisor. Because commencing on the NAV pricing start date, the price of Common Shares in our primary offering or under our DRIP and the price at which your Common Shares may be repurchased by us pursuant to our share repurchase plan are based on our estimated NAV per Common Share, you may pay more than realizable value or receive less than realizable value for your investment.

Commencing on the NAV pricing start date, in calculating our daily NAV, our advisor will base its calculations in part on independent appraisals of our properties, the accuracy of which our advisor will not independently verify.

In calculating our daily NAV, our advisor will include valuations of individual properties and the metrics which will be used to calculate our daily NAV that were obtained from our independent valuer. We will not independently verify the appraised value of our properties or the metrics used to arrive at those valuations. As a result, the appraised value of a particular property may be greater or less than its potential realizable value, which would cause our estimated NAV to be greater or less than the potential realizable NAV.

Commencing on the NAV pricing start date, our NAV per Common Share may suddenly change if the appraised values of our properties materially change or the actual operating results differ from what we originally budgeted for that month.

Appraisals of our properties used to calculate our daily NAV will probably not be spread evenly throughout the calendar year. Each of our properties will be appraised at least annually, and appraisals will be scheduled over the course of a year so that approximately 25% of all properties are appraised each quarter. We anticipate that such appraisals will be conducted near the end of the calendar quarter in which they occur. Therefore, when these appraisals are reflected in our NAV calculation, there may be a sudden change in our NAV per Common Share. In addition, actual operating results for a given month may differ from our original estimate, which may affect our NAV per Common Share. We will base our calculation of estimated income and expenses on a monthly budget. As soon as practicable after the end of each month, we will adjust the estimated income and expenses to reflect the income and expenses actually earned and incurred. We will not retroactively adjust the daily NAV per Common Share for the previous month. Therefore, because the actual results from operations may be better or worse than what we previously budgeted for a particular month, the adjustment to reflect actual operating results may cause our NAV per Common Share to change, and such change will occur on the day the adjustment is made.
 
 
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Commencing on the NAV pricing start date, the NAV per Common Share that we publish may not necessarily reflect changes in our NAV and in the value of your Common Shares or the impact of extraordinary events that we cannot immediately quantify.

We may experience events affecting our investments that may have a material impact on our NAV. For example, if a material lease is unexpectedly terminated or renewed, or a property experiences an unanticipated structural or environmental event, the value of a property may materially change. Furthermore, if we cannot immediately quantify the financial impact of any extraordinary events, our NAV per Common Share as published on any given day will not reflect such events. As a result, the NAV per Common Share published after the announcement of a material event may differ significantly from our actual NAV per Common Share until we are able to quantify the financial impact of such event and our NAV is appropriately adjusted on a going forward basis. The resulting potential disparity may benefit repurchasing or non-repurchasing stockholders whose Common Shares are or are not being repurchased, stockholders electing to purchase or not to purchase, or stockholders electing or not electing to participate in our DRIP, in each case at the expense of the other, depending on whether NAV is overstated or understated.

One of our strategies for building our portfolio will involve acquiring assets opportunistically. This strategy will involve a higher risk of loss than more conservative investment strategies.

In order to meet our investment objectives we intend to embark on a dual strategy in building our portfolio. The first strategy will focus on acquiring existing stabilized cash-flowing assets to support stable, consistent dividend distributions to our stockholders. The second strategy will focus on acquiring opportunistic assets which we can reposition, redevelop or remarket to create value enhancement and capital appreciation. Our second strategy for acquiring properties may involve the acquisition of properties in markets that are depressed or overbuilt, or have high growth potential in real estate lease rates and sale prices. As a result of our investment in these types of markets, we will face increased risks relating to changes in local market conditions and increased competition for similar properties in the same market, as well as increased risks that these markets will not recover and the value of our properties in these markets will not increase, or will decrease, over time. For these and other reasons, we cannot assure you that we will be profitable or that we will realize growth in the value of our real estate properties, and as a result, our ability to make distributions to our stockholders could be affected. Our intended approach to acquiring and operating income-producing properties involves more risk than comparable real estate programs that have a targeted holding period for investments that is longer than ours, utilize leverage to a lesser degree or employ more conservative investment strategies.

Our revenue and net income may vary significantly from one period to another due to investments in opportunity-oriented properties and portfolio acquisitions, which could increase the variability of our cash available for distributions.

Our opportunistic property-acquisition strategy may include investments in properties in various phases of development, redevelopment or repositioning and portfolio acquisitions, which may cause our revenues and net income to fluctuate significantly from one period to another. Projects do not produce revenue while in development or redevelopment. During any period when our projects in development or redevelopment or those with significant capital requirements increase without a corresponding increase in stable revenue-producing properties, our revenues and net income will likely decrease. Many factors may have a negative impact on the level of revenues or net income produced by our portfolio of properties and projects, including higher-than-expected construction costs, failure to complete projects on a timely basis, failure of the properties to perform at expected levels upon completion of development or redevelopment, and increased borrowings necessary to fund higher-than-expected construction or other costs related to the project. Further, our net income and stockholders’ equity could be negatively affected during periods with large portfolio acquisitions, which generally require large cash outlays and may require the incurrence of additional financing. Any such reduction in our revenues and net income during such periods could cause a resulting decrease in our cash available for distributions during the same periods.
 
 
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Our operating results will be affected by economic and regulatory changes that have an adverse impact on the real estate market in general, and we cannot assure you that we will be profitable or that we will realize growth in the value of our real estate properties.

Our operating results will be subject to risks generally incident to the ownership of real estate, including:
 
  changes in general economic or local conditions;
  changes in supply of or demand for similar or competing properties in an area;
  changes in interest rates and availability of permanent mortgage funds that may render the sale of a property difficult or unattractive;
  the illiquidity of real estate investments generally;
  changes in tax, real estate, environmental and zoning laws; and
  periods of high interest rates and tight money supply.
 
For these and other reasons, we cannot assure you that we will be profitable or that we will realize growth in the value of our real estate properties.

If we fail to diversify our investment portfolio, downturns relating to certain geographic regions, types of assets, industries or business sectors may have a more significant adverse impact on our assets and our ability to pay distributions than if we had a diversified investment portfolio.

We are not required to observe specific diversification criteria. Therefore, our target portfolio may at times be concentrated in certain asset types that are subject to higher risk of foreclosure, or secured by assets concentrated in a limited number of geographic locations. To the extent that our portfolio is concentrated in limited geographic regions, types of assets, industries or business sectors, downturns relating generally to such region, type of asset, industry or business sector may result in tenants defaulting on their lease obligations at a number of our properties within a short time period, which may reduce our net income and the value of our Common Shares and accordingly limit our ability to pay distributions to you.

Properties that have significant vacancies could be difficult to sell, which could diminish the return on your investment.

A property may incur vacancies either by the continued default of tenants under their leases or the expiration of tenant leases. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in decreased distributions to stockholders. In addition, the value of the property could be diminished because the market value of a particular property will depend principally upon the value of the leases of such property.

Our investments will be dependent on tenants for revenue, and lease expirations and terminations could reduce our ability to make distributions to stockholders.

The success of our real property investments will be materially dependent on the occupancy rates of our properties and the financial stability of our tenants. If we are unable to renew or extend expiring leases under similar terms or are unable to negotiate new leases, it would negatively impact our liquidity and consequently adversely affect our ability to fund our ongoing operations. In addition, lease payment defaults by tenants could cause us to reduce the amount of distributions to stockholders. A default by a significant tenant on its lease payments to us would cause us to lose the revenue associated with such lease and cause us to have to find an alternative source of revenue to meet mortgage payments and prevent a foreclosure if the property is subject to a mortgage. If there is a tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting our property. If significant leases are terminated, we cannot assure you that we will be able to lease the property for the rent previously received or sell the property without incurring a loss. Additionally, loans that we make generally will relate to real estate. As a result, the borrower’s ability to repay the loan may be dependent on the financial stability of the tenants leasing the related real estate.

 
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We may be unable to secure funds for future tenant improvements, which could adversely impact our ability to make cash distributions to our stockholders.

When tenants do not renew their leases or otherwise vacate their space, in order to attract replacement tenants, we will be required to expend substantial funds for tenant improvements and tenant refurbishments to the vacated space. If we have insufficient capital reserves, we will have to obtain financing from other sources. We intend to establish capital reserves on a property-by-property basis, as we deem necessary. In addition to any reserves we establish, a lender may require escrow of capital reserves in excess of our established reserves. If these reserves or any reserves otherwise established are designated for other uses or are insufficient to meet our cash needs, we may have to obtain financing from either affiliated or unaffiliated sources to fund our cash requirements. We cannot assure you that sufficient financing will be available or, if available, will be available on economically feasible terms or on terms acceptable to us. Moreover, certain reserves required by lenders may be designated for specific uses and may not be available for capital purposes such as future tenant improvements. Additional borrowings for capital purposes will increase our interest expense, and therefore our financial condition and our ability to make cash distributions to our stockholders may be adversely affected.

We may be unable to sell a property if or when we decide to do so, which could adversely impact our ability to make cash distributions to our stockholders.

We intend to hold the various real properties in which we invest until such time as our advisor determines that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that such objectives will not be met. Otherwise, our advisor, subject to approval of our board of directors, may exercise its discretion as to whether and when to sell a property, and we will have no obligation to sell properties at any particular time, except upon our liquidation. If we do not begin the process of achieving a liquidity event by the eighth anniversary of the termination of this offering, our charter requires either (a) an amendment to our charter to extend the deadline to begin the process of achieving a liquidity event, or (b) the holding of a stockholders meeting to vote on a proposal for an orderly liquidation of our portfolio. The real estate market is affected, as discussed above, by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell any asset for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of an asset. If we are unable to sell an asset when we determine to do so, it could have a significant adverse effect on our cash flow and results of operations.

Our co-venture partners, co-tenants or other partners in co-ownership arrangements could take actions that decrease the value of an investment to us and lower your overall return.

We may enter into joint ventures, tenant-in-common investments or other co-ownership arrangements with other United Realty programs or third parties having investment objectives similar to ours for the acquisition, development or improvement of properties, as well as the acquisition of real estate-related investments. We also may purchase and develop properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements with the sellers of the properties, affiliates of the sellers, developers or other persons. Such investments may involve risks not otherwise present with other forms of real estate investment, including, for example:
 
  the possibility that our co-venturer, co-tenant or partner in an investment might become bankrupt;
  the possibility that the investment may require additional capital that we or our partner do not have, which lack of capital could affect the performance of the investment or dilute our interest if the partner were to contribute our share of the capital;
  the possibility that a co-venturer, co-tenant or partner in an investment might breach a loan agreement or other agreement or otherwise, by action or inaction, act in a way detrimental to us or the investment;
 
 
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  that such co-venturer, co-tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals;
  the possibility that we may incur liabilities as the result of the action taken by our partner or co-investor;
  that such co-venturer, co-tenant or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, including our policy with respect to qualifying and maintaining our qualification as a REIT; or
  that such partner may exercise buy/sell rights that force us to either acquire the entire investment, or dispose of our share, at a time and price that may not be consistent with our investment objectives.
 
Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce our returns on that investment.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage may adversely affect your returns.

The nature of the activities at certain properties we may acquire will expose us and our operators to potential liability for personal injuries and, in certain instances, property damage claims. For instance, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, pollution, environmental matters or extreme weather conditions such as hurricanes, floods and snow storms that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential terrorist acts could sharply increase the premiums we pay for coverage against property and casualty claims. Mortgage lenders generally insist that specific coverage against terrorism be purchased by commercial property owners as a condition for providing mortgage, bridge or mezzanine loans. It is uncertain whether such insurance policies will be available, or available at reasonable cost, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We cannot assure you that we will have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss. In addition, other than the capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured damaged property, and we cannot assure you that any such sources of funding will be available to us for such purposes in the future. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in decreased distributions to stockholders.

Our operating results may be negatively affected by potential development and construction delays and result in increased costs and risks, which could diminish the return on your investment.

We may invest some of or all the proceeds available for investment in the acquisition, development or redevelopment of properties upon which we will develop and construct improvements. We could incur substantial capital obligations in connection with these types of investments. We will be subject to risks relating to uncertainties associated with rezoning for development and environmental concerns of governmental entities or community groups and our builder’s ability to control construction costs or to build in conformity with plans, specifications and timetables. The builder’s failure to perform may necessitate legal action by us to rescind the purchase or the construction contract or to compel performance. Performance also may be affected or delayed by conditions beyond the builder’s control. Delays in completion of construction also could give tenants the right to terminate preconstruction leases for space at a newly developed project. We may incur additional risks when we make periodic progress payments or other advances to such builders prior to completion of construction. These and other such factors can result in increased costs of a project or loss of our investment. Substantial capital obligations could delay our ability to make distributions. In addition, we will be subject to normal lease-up risks relating to newly constructed projects. Furthermore, we must rely upon projections of rental income and expenses and estimates of the fair market value of property upon completion of construction when agreeing upon a price to be paid for the property at the time of acquisition of the property. If our projections are inaccurate, we may pay too much for a property, and the return on our investment could suffer.
 
 
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In addition, we may invest in unimproved real property. Returns from development of unimproved properties are also subject to risks and uncertainties associated with rezoning the land for development and environmental concerns of governmental entities or community groups. Your investment is subject to the risks associated with investments in unimproved real property.

Competition with third parties in acquiring properties and other assets may reduce our profitability and the return on your investment.

We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, real estate limited partnerships, and other entities engaged in real estate investment activities, many of which have greater resources than we have. Larger real estate programs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable properties may increase. Any such increase would result in increased demand for these assets and therefore increased prices paid for them. If we pay higher prices for properties and other investments, our profitability will be reduced and you may experience a lower return on your investment.

A concentration of our investments in any one property class may leave our profitability vulnerable to a downturn in such sector.

At any one time, a significant portion of our investments could be in one property class. As a result, we will be subject to risks inherent in investments in a single type of property. If our investments are substantially in one property class, then the potential effects on our revenues, and as a result, on cash available for distribution to our stockholders, resulting from a downturn in the businesses conducted in those types of properties could be more pronounced than if we had more fully diversified our investments.

Failure to succeed in new markets or in new property classes may have adverse consequences on our performance.

We may from time to time commence development activity or make acquisitions outside of our existing market areas or the property classes of our primary focus if appropriate opportunities arise. The experience of the principal of our sponsor in our existing markets in developing, owning and operating certain classes of property does not ensure that we will be able to operate successfully in new markets, should we choose to enter them, or that we will be successful in new property classes. We may be exposed to a variety of risks if we choose to enter new markets, including an inability to evaluate accurately local market conditions, to obtain land for development or to identify appropriate acquisition opportunities, or to hire and retain key personnel, and a lack of familiarity with local governmental and permitting procedures. In addition, we may abandon opportunities to enter new markets or acquire new classes of property that we have begun to explore for any reason and may, as a result, fail to recover expenses already incurred.

Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect our operations.

From time to time, we may attempt to acquire multiple properties in a single transaction. Portfolio acquisitions are more complex and expensive than single-property acquisitions, and the risk that a multiple-property acquisition does not close may be greater than in a single-property acquisition. Portfolio acquisitions also may result in us owning investments in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio. In these situations, if we are unable to identify another person or entity to acquire the unwanted properties, we may be required to operate or attempt to dispose of these properties. To acquire multiple properties in