Case Study in Transfer Agent Services – Private Investors in a Public Fund

The transfer agent’s client is a well-known real estate owner, operator, and developer with a portfolio worth more than $60 billion. A publicly-traded preferred stock REIT is their flagship investment product, which is serviced by a transfer agent that handles only publicly-traded investment products. The client intended for the REIT to be a publicly traded investment on NASDAQ but featuring preferred shares (Series A) to be offered to private investors through the advisor-assisted alternative investment market.

The issue was that this hybrid model lacked a natural transfer agent supplier to support it. On its investor ledger, the client’s transfer agent for publicly-traded shares was unable to accommodate the investors in the Series A shares. The transfer agent data for non-traded share investors would be compiled through a separate distribution channel and in a different format than the data for publicly listed shares. The transfer agent’s technology would be incompatible with the Series A investor data. Furthermore, because the Series A shares were never to be publicly-traded, they were to be kept in a separate environment in the transfer agent ledger away from the possibility of a public exchange. The transfer agent was unable to provide an appropriately segregated investor ledger environment. If both sets of investors wanted to invest in the same fund, a solution would have to be developed.

The Solution: Phoenix American used its staff’s experience and the versatility of its technologies to develop a tailored solution with the customer and their transfer agent for publicly listed shares. In its simplicity, it was effective easily implemented. Phoenix American, as an alternative investment transfer agent, would keep an omnibus account for Series A investors on the publicly-traded transfer agent’s investor ledger. The hundreds of non-traded Series A shareholders participating in the fund would be replaced on the investor ledger by “Phoenix Transfer, Inc. as transfer agent and not as record owner,” with an omnibus balance indicating the Series A investor holdings in aggregate. Phoenix American would act as a sub-transfer agent for the Series A preferred investors.

The publicly listed transfer agent would make omnibus payouts to Phoenix American on behalf of the Series A investors. Phoenix American would make distributions to the Series A investors. All of Phoenix American’s transfer agent services would be provided to Series A investors. The rest of the investors would be served by the publicly-traded transfer agent. Within the investor ledger, there would be two appropriately serviced groups of transfer agent client investors with no chance of a publicly traded transaction of any of the Series A shares. Both the client sponsor and their investors benefited greatly from the implementation of this solution. This was the first time a transfer agent had utilized this structure. It effectively broadened the scope of investment fund sponsors’ sales distribution options.

This solution was made possible by a combination of substantial experience in transfer agent services for alternative investments, technological knowledge and a commitment to problem-solving customer care. Phoenix American is unique among transfer agent providers in that it focuses on the specific needs of each transfer agent client fund regardless of how they choose to do business.