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Tuesday, 13 November 2018

Senior KBS Execs Form Retail Investment Manager

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The following story has been edited to reflect a correction that was published on Nov. 20, 2018.

Commercial Real Estate Direct Staff Report

Keith Hall and Peter McMillan, who 12 years ago had co-founded KBS Capital Advisors, have formed their own retail investment management operation, Pacific Oak Cos.

The idea is to develop a platform through which retail investors will be able to invest in a broad range of commercial properties. It would be akin to what the two, along with Peter Bren and Charles Schreiber, had developed at KBS, which formed a number of non-traded REITs and other vehicles that were distributed to investors via broker-dealers.

That tactic proved extremely successful, with all non-traded REITs raising some $20 billion of equity from investors, through broker-dealers, at its heyday in 2013. For their part, broker-dealers generated hefty fees of 7 percent or more, for selling shares.

But in 2015, the entire business of selling non-traded REIT shares and other less-liquid instruments to retail investors through broker-dealers was sideswiped by proposed rules that would have made most financial advisers fiduciaries if they were selling financial products to a client's retirement account. Rules requiring greater transparency also were passed that affected how non-traded REITs were structured and sold.

KBS late last year started the migration away from the broker-dealer channel to distribute its offerings, preferring instead to market and sell its investment products directly. It's in the process of formally launching its KBSDirect.com platform, through which investors can buy shares in KBS Growth & Income Fund, a non-traded REIT that it launched two years ago. It's also selling shares through the CrowdStreet crowd-funding platform. By eliminating broker-dealers from its distribution efforts, KBS hopes to be able to lower the fees it has to charge its investor clients. When it launched Growth & Income, it charged a 6.5 percent selling commission and up to a 2 percent dealer-manager fee. So, if a client invested $100 into the REIT, only $91.50 of it would actually be put to work in real estate. KBS now offers the REIT with no upfront fees or commissions. The company also continues to manage capital on behalf of a number of institutional investors through a series of separate accounts.

Pacific Oak plans to take the traditional route to distributing investment products to retail investors. To that end, Hall and McMillan continue to manage two of KBS' offerings, KBS Strategic Opportunity REIT Inc., which had raised $561.7 million of capital that was used to make $1.9 billion of investments, and Strategic Opportunity REIT II Inc., which four years ago started business and raised $267.5 million of capital that was used to pay $555.4 million for eight hotel, office, retail and apartment properties.

The company "is dedicated to the independent broker-dealer channel, and when an adviser is in need of value-add products, we want to provide the solution," Hall explained.

Joining Hall and McMillan is the team that led KBS Capital, including Michael "Mick" Manning, who was named president and chief executive of Pacific Oak; Hans Henselman, chief operating officer, and Jeff Kremin, national sales manager.

Lee Bastidas and Emily Gallagher, meanwhile, will oversee the company's relationships with independent broker-dealers and registered investment advisers.

Before co-founding KBS, Hall was managing director of Credit Suisse First Boston, where he managed business development for the principal transaction group's real estate securities portfolio. And McMillan was chief investment officer of SunAmerica Investments, where he oversaw $75 billion of assets.

Pacific Oak could package investment opportunities as non-traded REITs, presumably perpetual-life entities whose net asset values are regularly re-calculated, Delaware Statutory Trusts and other vehicles. It also might pursue single-family rentals as well as opportunities arising from recent changes in the tax code that gave advantages to investments made in properties in certain economically-distressed areas.

"There are a host of exciting opportunities in the thriving alternative investments arena," Hall said, adding, "Pacific Oak will leverage our well-established relationships and industry expertise to continue to deliver these opportunities to financial advisors and their clients throughout the United States."

Comments? E-mail Orest Mandzy, or call him at (267) 327-4281.



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Additional Info

  • Syndicate to Realpoint: No
  • Subject: Institutional Investment (INS), REITS -general (REITS)
  • Company: KBS Realty Advisors
  • Private: No
Read 252 times Last modified on Tuesday, 20 November 2018

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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