I appreciate the discussion because we have gotten more clarity. FWIW...I don't consider the REIT question a sideways discussion. I consider the REIT question as part of the journey of figuring out what the heck this MVC points trust is.
I think
@ocdb8r nailed it here:
The question would not be "is this a REIT" the question would be is what Marriott is selling a "security" (and thus subject to the Securities Exchange Act) and if so, what security disclosure regime does it fall under
Keep in mind that real estate can be securities. Much of the 2008 crash involved mortgage-backed securities and securitized real estate. The question is when does this cross the line between being a county recorded real estate deed or a security under the auspices of the SEC which by law must follow portfolio disclosure and shareholder voting protocols?
I still believe this might be a security under SEC authority.
1)
Money must be invested (sweat equity doesn't count)
2) It must be
for profit (there needs to be explicit paperwork disclosing to the equity buyer that there will be no profit ever from this purchase - e.g. Rich Uncle Joe gives you money to start your business and doesn't expect it back.)
3)
Common Entity/Equity Ownership (a loan doesn't count)
4)
From the efforts of others (i.e. you don't work in the business)
Of these #2 is perhaps the most questionable. However, we may be applying a conventional definition of "for profit" and "investment" too narrowly. There is no mandate that "for profit" has to make money or that management has to be good at making money.
- Trust buyers are not giving money to a non-profit entity. I think we all can agree that this is not a 501c3 or other form of charity. MVC is a for profit entity selling management services of a trust portfolio to the public.
- No one goes into a timeshare developer presentation expecting to lose $50k. No one. In fact developers represent it similar to a real estate holding by design. If they represented that this was like a car that depreciates once it is off the lot and will decline in value - they would be on safer ground. But they don't - they represent it as a real estate transaction to create the perception of capital preservation; that's a "for profit" rationale.
- One may say, that because we use the asset it is not an investment. We buy our homes to live in but there is an expectation that the home will retain or exceed its value. How many people would buy homes (instead of rent) if they knew they would lose the capital? Even though one's home may not be considered "for profit" there still is an expectation that it is an investment of capital that may retain or exceed it's value. That's a "for profit" rationale.
- Buyers are not given paperwork in the sale that explicitly says there will be no profits ever on this purchase (would love a points owner to confirm)
- It appears that some trust owners bought their TS trust points with the expectation that they could rent out their points for a profit. That is a "for profit" motive.
- If MVC is typical of most developers, there is usually a sales script that asks the buyer how much they vacation every year for the next 20 years and compares that cost to what they would save by buying into the club aka ROI or breakeven calculation. That's a "for profit" rationale.
If this were a specific deed tied to a specific unit, then it could be considered deeded real estate. The trust acts more like a security with a portfolio of real estate holdings with shares valued as points.
Perhaps legal eagle TUGgers might know of case law differentiating the treatment of land trust oversight from securities.
Bottom line: no matter what this is defined as, it is bad form and out of character if MVC does not fully disclose to owners the land trust properties and have them participate in voting on the composition e.g. management fees that they will be assessed. That's taxation without representation.
