Regulation A Offering Case Study: Scholar Hospitality Holdings LLC

Royer Cooper Cohen Braunfeld LLC (RCCB) represented Scholar Hospitality Holdings I LLC, a hospitality real estate investment company affiliated with Scholar Hotels LLC, in structuring and launching a $75 million Regulation A offering involving a portfolio of hospitality, retail, and real estate assets in State College, Pennsylvania. The engagement demonstrates RCCB’s ability to navigate the legal and business considerations involved in Regulation A and other sophisticated capital formation strategies, including the use of Regulation A to enable a real estate sponsor to raise capital from both institutional and retail investors on sponsor-set terms.

Why Regulation A

Regulation A is a less commonly used exemption under the Securities Act that offers features distinguishing it from more traditional private offering frameworks. Unlike Regulation D offerings under Rule 506(b), which restrict general solicitation and generally limit participation to accredited investors and a limited number of sophisticated non-accredited purchasers, Regulation A permits issuers to market an offering broadly to the public, including retail investors, subject to applicable requirements.

For certain real estate sponsors, Regulation A may provide additional flexibility because qualifying real estate investment vehicles may be able to rely on the Section 3(c)(5) exception under the Investment Company Act rather than registering as an investment company, while offering securities to a broader investor base.

The framework can provide sponsors with greater flexibility in offering structure and investor outreach, including the ability to solicit interest publicly and reach community members, alumni, and other retail investors who might not otherwise participate in private investment opportunities.

The Opportunity

Scholar Hotels is an owner and operator of hospitality properties serving university markets. Its principals sought to use Regulation A to accomplish two objectives: first, to provide liquidity to legacy investment vehicles approaching the end of their respective investment cycles at fair market value; and second, to make ownership interests in university-adjacent hotel assets available to a broader community of investors, particularly Penn State alumni and others with a connection to State College and Happy Valley.

The offering was designed around a portfolio that, upon full subscription, will include four hotel properties—Hyatt Place State College, Scholar Hotel State College, Courtyard by Marriott State College, and Residence Inn by Marriott State College—and a downtown retail property comprising 396 hotel rooms, conference and meeting space, food and beverage operations, and more than 47,000 square feet of retail space.

The Company is selling Class A Units directly to the public at $1 per unit through its website, with a minimum investment of $5,000 and no underwriting commissions, allowing more of the capital raised to be deployed directly into the investment.

The Regulation A structure enables Scholar to reach a broader pool of potential investors, including those with ties to the State College community. The offering is designed to appeal to alumni, families, and fans who return to State College year after year. As Scholar’s CEO put it: “We are turning the keys over to the people who are passionate about their university.” The offering provides an example of how Regulation A may be used to support a retail-oriented, affinity-driven capital raise.

RCCB's Role

RCCB served as counsel in connection with the structuring and implementation of the Regulation A offering through SEC qualification. The engagement drew on multiple areas of the firm’s legal capabilities:

• Securities law and Regulation A compliance. RCCB prepared and filed the Form 1-A Offering Statement, including the Offering Circular, and guided the offering through the SEC qualification process. The work included addressing Tier 2 requirements, ongoing reporting obligations, and the interplay between Regulation A and the Investment Company Act’s Section 3(c)(5) exception for qualifying real estate vehicles.
• Entity structuring and corporate governance. RCCB advised on the formation of the Delaware limited liability company structure, the LLC Agreement governing investor rights, the Class A/Class B unit capitalization, distribution waterfalls, and the governance framework, including the Manager’s authority, investor protections, voluntary and mandatory redemption mechanics, and drag-along rights.
• Real estate and acquisition structuring. Because the offering involves the acquisition of assets from affiliated Legacy Entities under common control, RCCB advised on the purchase agreement structure, transfer tax planning relating to Pennsylvania and Borough of State College realty transfer taxes, and due diligence protocols for the underlying hotel and retail assets.
• Investor communications and offering materials. RCCB worked closely with the Scholar team on the disclosure framework, including risk factors, use of proceeds, financial projections, and the investor subscription process, balancing applicable Regulation A requirements with the need to communicate the offering clearly to a retail investor audience.
• Management compensation and conflicts disclosure. Given the related-party nature of the Legacy Entity acquisitions, RCCB assisted with disclosure regarding management compensation arrangements, potential conflicts of interest, and the valuation methodology underlying the purchase prices for the assets.

What This Matter Demonstrates

The Scholar offering illustrates RCCB’s capabilities in advising companies, sponsors, real estate operators, entrepreneurs, and growth-stage businesses on sophisticated capital formation matters involving:

• Regulation A and other exempt securities offerings
• Offering structure and securities law considerations, including Investment Company Act analysis
• Entity formation, capitalization, and corporate governance
• Offering materials, disclosures, and investor communications
• Retail investor participation and subscription mechanics
• Real estate and asset-based investment structures
• Hospitality and consumer-facing investment opportunities
• Affinity-driven and community-oriented capital raises
• Transfer tax planning and real estate acquisition structuring
• Coordination with financial, operational, and other offering professionals
• Regulatory compliance and ongoing SEC reporting obligations

The Scholar matter reflects RCCB’s practical, business-focused approach to capital formation. By working closely with clients and their other advisers, the firm helps evaluate available capital-raising structures and develop legal frameworks that align regulatory requirements with business objectives, underlying assets, investor engagement, and long-term strategy.

For additional information about Scholar Hospitality Holdings I LLC and the offering, please visit Scholar's offering page.

Contact: Matt Devine