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Monday, 31 October 2016

Cantor Fitzgerald Steps Into Non-Traded REIT World

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Commercial Real Estate Direct Staff Report

Cantor Fitzgerald is getting into the non-traded REIT business. It's launched Rodin Global Property Advisors, through which it aims to raise up to $1.25 billion that will be invested in single-tenant, net-leased properties.

The company would make equity, preferred equity or debt investments in net-leased properties in the United States and Europe. It also could invest in real estate securities, including CMBS.

Capital will be raised through its Cantor Fitzgerald brokerage operation, putting that operation in an entirely new business. In offering material, Rodin admitted that Cantor hasn't ever acted as broker-dealer for a non-traded REIT and its success in raising capital would be dependent on its ability to build and maintain a network of broker-dealers.

That business until recently had been dominated by RCS Capital Corp., which was the main distribution arm for AR Capital's family of non-traded REITs. The company earlier this year filed for bankruptcy. Cantor soon after had hired more than two dozen former RCS wholesalers in its effort to build a broker-dealer business. It's also active in the structured tax-deferred exchange business.

Cantor is a substantial player in the commercial real estate business. It controls Cantor Commercial Real Estate Finance, an active CMBS conduit lender, and BGC Partners, which owns NGKF, among the country's more active property brokerage firms.

In offering material, Rodin said its affiliation with Cantor, and its NGKF operation, would potentially give it access to potential investments that might not be available to its competitors. And its connection to CCRE would give it insight on conditions in the fixed income markets.

Like a growing number of non-traded REITs, Cantor will offer three classes of common shares, each with a different fee structure. Class A shares will be priced at $26.32, out of which selling commissions are deducted up front. Class T shares, priced at $25.52 each, will pay a lower fee up front, but would face a 1 percent annual distribution fee. And class I shares, which would be priced at $25 each, would be sold only to retirement or trust accounts or institutional investors. They wouldn't face upfront sales commissions and would face only a 1.5 percent dealer-manager fee - half of the fee the other share classes would face.

Shares are being sold through Cantor Fitzgerald, which it noted has not served in a dealer-manager role for a non-traded REIT before.

Rodin, like most non-traded REITs, charges a relatively hefty sales commission of 10 percent. But unlike others, Cantor is subsidizing part of that fee as well as the 3 percent dealer-manager fee. In addition, it won't charge investors fees for making investments, but it will charge an asset-management fee of 1.25 percent of the cost of investments.

The REIT will be headed by Michael Lehrman, former global head of real estate for Cantor who had co-founded CCRE and served as co-chief executive of the unit until early this year. Kenneth Carpenter, a Cantor and CCRE managing director with more than 17 years of commercial real estate investment experience, is president.

The company will leverage its investments with mortgages by up to 50 percent and plans to complete a liquidity event - a sale or listing of its shares - five to seven years after it has completed its stock sale.

Cantor becomes the latest in a number of new entrants to the non-traded REIT world, which was impacted profoundly by the exit of AR Global. That company's flagship vehicle, American Realty Capital Properties Trust Inc., which had gone public in 2011 and was used as a liquidity conduit for other non-traded REITs, reported an accounting error two years ago. Then, AR Capital's broker-dealer affiliate was the subject of a complaint by the state of Massachusetts that charged it with impersonating investors in a proxy vote.

AR Global quit the business last year because of mounting regulatory changes, including the Department of Labor's fiduciary standards, as well as the Financial Industry Regulatory Authority's 15-02 directive, which requires direct-participation programs, such as non-traded REITs, to provide shareholders an estimated per-share value on the statements.

Blackstone Group, the biggest real estate investment manager, earlier this year filed to raise capital for a non-traded REIT.

The new entrants are looking to fill a void since AR Global's departure. Equity raising for non-traded REITs has plummeted in its absence. During the second quarter, for instance, only $1.1 billion of equity was raised for 36 REITs that were actively raising capital. That was down from $2.5 billion a year earlier, according to Summit Investment Research.

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



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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

 

cppichart FP

 

 

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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