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Monday, 16 November 2015

AR Capital Quitting Non-Traded REIT Business

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Commercial Real Estate Direct Staff Report

AR Capital, the leading sponsor of non-traded REITs, is halting the creation of new investment vehicles and would cease accepting new investments in existing platforms.

The stunning reversal by the New York investment manager, launched in 2006 by Nicholas S. Schorsch, who previously had founded and ran American Financial Realty Trust, and William Kahane, who previously oversaw the real estate activities of a merchant bank, was prompted by what it said were uncertainty surrounding the regulatory and market environments.

"The proposed and pending regulatory changes suggested by the Department of Labor fiduciary standards, as well as the valuation measures prescribed by (the Financial Industry Regulatory Authority's) 15-02 directive pertaining to the alternative-investment industry remain largely opaque in terms of their implications and consequences for the alternative investment industry," Kahane explained.

Rule 15-02 requires that sponsors of non-traded REITs and other so-called direct-participation programs provide shareholders an estimated per-share value on the statements.

"Until there is greater clarity, we have decided to sit this one out. As a result, we do not intend to register any new product offerings nor pursue any of our existing offerings" after the end of the year, Kahane said. But he added, "As the government's position becomes clearer, we may reconsider our present posture on these issues."

AR Capital will continue to manage its existing stable of non-traded REITs and business development companies. The company has some $19 billion of assets under management under a series of non-traded entities. It has listed the shares of some of its offspring, providing liquidity to some of its investor clients.

But the company's fortunes suffered a blow last year, when its flagship vehicle, American Realty Capital Properties Trust Inc., reported an accounting error in its first-quarter financial results. The company, now known as VEREIT Inc., went public in 2011 and was used by AR Capital as a liquidity conduit for a number of other non-traded REITs it had sponsored.

The entire non-traded REIT industry has suffered along with AR Capital, which long has led all sponsors in capital raising. This year through September, only $7.6 billion of equity was raised through the vehicles, according to FBR & Co., down 38 percent from the same period a year ago. AR Capital had raised only $2 billion of that total, down 63 percent from its volume the previous year.

Meanwhile, a deal that AR Capital had struck to sell a 60 percent stake in itself to Apollo Global Management unraveled last week.

According to a statement by AR Capital this morning, it will continue to accept investments in existing programs through the end of the year and will keep in place dividend reinvestment programs at each of its vehicles.

There's no word yet on whether other non-traded REIT sponsors would follow AR Capital's lead and cease offering shares in their investment vehicles.

Separately, the commonwealth of Massachusetts has filed a complaint against Realty Capital Securities, a unit of RCS Capital Corp., the wholesale broker-dealer affiliate of AR Capital, charging the company with casting fake proxy votes for AR Capital-sponsored REITs. The complaint alleges that Realty Capital staffers had impersonated shareholders and cast "fabricated proxy votes." The company had been hired by at least one AR Capital-sponsored entity to solicit proxy votes.

As a result of that complaint, AR Capital said it had directed Realty Capital to halt all proxy activities on its behalf.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.



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  • Subject: REITS -general (REITS)
  • Company: State Teachers Retirement System of Ohio
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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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

 

RCA CPPI

 

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CMBS 2.0 Spreads

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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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