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Wednesday, 15 November 2017

VEREIT to Sell Non-Traded REIT Business

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Commercial Real Estate Direct Staff Report

VEREIT Inc. has agreed to sell its non-traded REIT investment management business, Cole Capital, to CIM Group in a deal valued at up to $200 million.

The transaction gives CIM, which has $18.1 billion of assets under management, a retail distribution platform, making the Los Angeles investment manager the latest institutional player to set its sights on the retail sector.

Cole Capital, which is headquartered in Phoenix, manages five non-traded REITs that own 1,200 properties with 45.5 million square feet valued at some $7.6 billion. It's among VEREIT's legacy holdings.

VEREIT is the former American Realty Capital Properties Inc. and specializes in the net-leased sector. It had acquired Cole Real Estate Investments Inc., what now is known as Cole Capital, in early 2014. It was formed in 2013 through the merger of Cole Credit Property Trust III Inc., a non-traded REIT that owned 1,013 net-leased properties with 43.1 million square feet, and its manager. It listed its shares in June 2013.

During the latest quarter, Cole Capital generated $27.2 million of revenue, down from $31.1 million a year earlier, simply because it's been selling fewer non-traded shares. The entire non-traded REIT sector has been in the doldrums since 2015, when the then-leading sponsor of non-traded REITs, ARC Global, decided to quit the business in the face of growing regulatory pressures.

Capital-raising in the sector had dropped in the second quarter to the lowest level in 13 years.

VEREIT is effectively selling just the investment management business. It will get $120 million in cash up front from CIM and could get another $80 million over the coming six years as part of what could be viewed as an earn-out. It will receive 40 percent of all revenue in excess of $75 million...

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  • Subject: REITS -general (REITS)
  • Private: Yes
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