Daily market intelligence on mortgages, equity raising, investment sales, and CMBS.

Thursday, 02 July 2009

American Realty Offers Broker-Dealer System to other Non-Traded REITs

By John Covaleski, Commercial Real Estate Direct Staff Writer

American Realty Capital Advisors is making its broker-dealer unit, which markets to the retail investment community shares in its non-traded REIT, available for use by other sponsors of non-traded REITs.

American Realty, based in Jenkintown, Pa, is the first non-traded REIT to formally offer its internal broker-dealer system for use by others.

The broker-dealer unit, Realty Capital Securities, next month launches itself as a third-party service provider when it begins delivering its services to Grubb & Ellis Healthcare REIT Inc. It's also well-advanced in talks to deliver its services to five other non-traded REITs in relationships expected to begin next year.

The unit is charged with raising as much as $3.1 billion for the Grubb REIT - the $900 million of equity that remains to be raised under the REIT's initial registration and $2.2 billion for a subsequent offering that the REIT registered as part for its plan to move to internal management.

That non-traded Grubb Healthcare REIT is relinquishing management services it has received from its sponsor, Grubb & Ellis Investors, which included using Grubb's broker-dealer system. Its registration with the SEC notes that Realty Capital will be paid fees of up to 7 percent of the gross offering proceeds it raises, subject to reductions based on volume and special sales.

If American Realty succeeds in selling its broker-dealer services on a broader scale, it could eliminate a high hurdle for sponsors of additional non-traded REITs - the cost, time and risk involved in launching their own broker-dealer programs.

"What American Realty is doing is unique," said Brian Jones, a director with Robert W. Baird Co., an equity industries analyst. "We advise sponsors that it can take up to $20 million to get a broker-dealer platform started." But he cautioned, "The real question is how robust the platform will be - you can spend $10 million and have a platform that is worth nothing because it does not have the right relationships."

The vast majority of non-traded REITs operate internal broker-dealer systems, which market their companies' shares, usually priced around $10 apiece, to financial planners, securities dealers and retail level brokers who consult with and sell financial products to retail, or individual investors.

The key for the REITs' units, often called management broker-dealers, is...


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Data Digest







Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44




cppichart FP



CMBS 2.0 Spreads


Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41





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