The Dodd-Frank Act : impact on real estate investment entities

On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (The Act), which was developed by Congress in response to the financial crisis of 2008. In this paper we briefly discuss the history of U.S. financial regulation, the events leading up to the Dodd-Frank Act, and the intent of the new regulation. We note key events and industry types that contributed to the financial collapse of 2008. We also identify the provisions within the Act that will impact private and publically traded real estate investment entities and analyze the extent of any such impact. The hypothesis of this paper is that certain real estate investment entities are not systemic to the U.S. financial system and if new regulation designed to reform Wall Street and protect consumers is placing a significant burden on these firms without accomplishing the goals of the Act, then real estate investment entities should not be subject to such regulation. The analytic approach of this paper is to: 1) identify the provisions within the Act that will impact real estate equity entities (i.e., private real estate private funds and REITs), 2) conduct industry interviews to identify the likely short-term magnitude of the impacts due to new regulation and, 3) offer a conclusion as to whether the Act will have a substantial negative effect on the industry. In conclusion, with respect to these investment entities, we found that the Dodd-Frank Act has improved transparency to investors through increased disclosures. However, the allencompassing nature of the Act has forced fund managers who were previously exempt from SEC registration to comply with securities regulations regardless of the systemic nature, or lack thereof, of their business practices. While such compliance will not have a substantial negative effect on the industry, we find that the regulation of private real estate funds does not help further the goals of the Dodd-Frank Act.

Department dc:contributor.department

Massachusetts Institute of Technology. Center for Real Estate. Program in Real Estate Development.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2012

Authors dc:creator

• DiMinico, Michael (Michael Robert)
• Lubitz, John Edward

Advisor dc:contributor.advisor

• W. Tod McGrath.

• Center for Real Estate. Program in Real Estate Development.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/77121

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/77121