WASHINGTON, DC—Fundrise filed plans with the Securities and Exchange Commission last week to launch a $50 million initial public offering under Regulation A+ of the Jumpstart Our Business Startups Act. Clearly this is CEO Ben Miller's baby; in its announcement that was included with the filing, the company called the forthcoming offering no less than "the world's first e-REIT…available to anyone in the United States, no matter their net worth."

The e-REIT moniker, at first glance, needs little explanation to anyone familiar with Fundrise specifically and CRE crowdfunding in general. Fundrise will be offering its shares for sale online and indeed, like so many things that come from the Internet, the cheaper distribution costs will be passed down to investors in the form of lower fees. Because it doesn't charge or pay any broker-dealer distribution fees, investors save approximately 70 percent to 90 percent in upfront expenses as compared to a traditional non-exchange traded REIT, Fundrise said in its filing.

"We expect to be one of the first non-exchange traded REITs offered directly to investors solely over the Internet, and the first available to both accredited and non-accredited investors," the filing said.

But this is not your typical commercial real estate crowdfunding platform, in which individual property investments are offered as private placements to accredited investors, the filing continued.

"We intend to own a more diversified portfolio, with certain tax advantages unique to REITs, that is accessible to both accredited and non-accredited investors at a low investment minimum."

A Very Broadly Defined Qualified Purchaser

Regulation A+ rules were adopted by the SEC in March of this year, expanding small companies' access to capital under the JOBS Act's initial "Regulation A." While the rules were loosened considerable from that first Regulation A of the JOBS Act -- they were so strict that in 2014 only seven qualified offerings were made -- there still is a presumption that investors are qualified and can afford to invest in what can be sophisticated offerings.

By contrast, the Title III crowdfunding rules the SEC approved this month allow non-accredited investors to invest in private offerings.

In its SEC filing, Fundrise makes clear that it is targeting as wide a range as possible of investors.

It said that qualified purchasers must either:

1. have an individual net worth, or joint net worth with a spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence; or

2. have earned income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

If these first two criteria sounds familiar that is because it is the very bare minimum -- and oftentimes not -- required by private equity funds.

Fundrise's third test of a qualified purchaser though, comes in well under that bar.

3. "All other investors so long as their investment in our common shares does not represent more than 10% of the greater of their annual income or net worth…"

And with that sentence the net becomes very wide as the shares will be priced at $1,000.

This is not a secret -- Fundrise spells it out in its filing. "… our common shares are being offered and sold only to those investors that are within the latter category (i.e., investors whose investment in our common shares does not represent more than 10% of the applicable amount), regardless of an investor's status as an 'accredited investor.'"

There are two schools of thought about this approach to investors and their accreditation, or lack thereof. One school of thought, championed by Fundrise, is that its e-REIT democratizes investment in commercial real estate to an extent not possible in the current market. The other school of thought focuses on the risks in the offering, the leap of faith investors will be taking in Fundrise's investment selection skills and the risks of the investment overall -- risks that may not be apparent to someone not steeped in what is happening in the commercial real estate industry.

The Many Specific and Arcane CRE Risks

Namely, investing in commercial buildings, even income-producing ones as appears to be Fundrise's strategy, is not a slam-dunk. Prices are high and there has been a growing suspicion that valuations in recent years have become too inflated. The competition for solid assets is quite fierce and can cause impatient funds to overpay.

There are other risks to the offering but then there are risks to any investment. Again, Fundrise spells out these risks very clearly in the filing -- and in the case of the investment's relative lack of liquidity, turns it into a selling point.

This is fine and well -- it is, one could say, the basis of the free market. But its approach to market does require that the investor knows himself or herself very, very well.

Profile of an Investor

That investor must:

1. Be willing to hang on to the investment for a long time, which Fundrise repeatedly emphasizes in its filing. "Although we have adopted a redemption plan that generally allows investors to redeem shares on a quarterly basis, for investors with a short-term investment horizon, a listed REIT may be a better alternative than investing in our common shares," it said.

2. Accept Fundrise's premise about listed REITs' pricing, a very viable and safer alternative for some investors. It says that it is "attributable to a built-in liquidity premium, since recent unlevered capitalization rates on real estate transactions in the private sector have averaged 6-8%." That 6-8% figure is accurate, but it is up for debate how listed REITs' pricing are determined by the market.

3. Accept that there is an opportunity in CRE debt. One investment tenant of the platform is that "the de-leveraging and risk assessment taking place among the large institutional banks and traditional credit providers, as well as the temporary suspension of securitized vehicles as a means of financing, has left real estate owners with very limited options for obtaining debt financing for acquisitions and refinancings."

4. Must be comfortable with less disclosure. As Fundrise explained in its filing, "…listed REITs are subject to more demanding public disclosure and corporate governance requirements than we will be subject to. While we are subject to the scaled reporting requirements of Regulation A, such periodic reports are substantially less than what would be required for a listed REIT." At first glance this would seem to be a problem for investors -- disclosure is what keeps funds honest, right? Well, yes, but there has been a movement among shareholders, accountants, and investment funds to streamline disclosure to keep the focus on what is important. On the other hand, I will repeat: regular standardized disclosures based on generally-accepted accounting principals and scrubbed free of specially-crafted metrics to suit the investment is what keeps funds honest.

I could go on, but you get the picture. This is a serious investment for serious investors that must know what they are doing.

Because Fundrise is in a quiet period, the company declined to comment for this article.