1,485 Non-Traded REIT stockholders have a decision to make

American Realty Capital Properties (Nasdaq: ARCP) announced today that through a wholly owned subsidiary, Desert Acquisitions, Inc., it has made an offer to purchase all shares of Cole Credit Property Trust Inc. (CCPT) for $7.25 per share, net to the seller in cash, with no interest, and subject to any withholding tax. CCPT’s board of directors has recommended that its stockholders tender their shares in response to the offer.

The offer will expire at midnight on April 25, 2014.

The offer also is subject to a number of conditions such as certain third-party consents and a legal opinion by CCPT’s counsel in regards to the company’s REIT status. The agreement also includes certain termination rights for both CCPT and ARCP.

CCPT is a public, non-listed REIT that invests primarily in single-tenant commercial properties that are net leased to creditworthy tenants, long-term. As of December 31, 2013, the REIT owned 39 properties across 19 states totaling 956,000 square feet with an average remaining lease term of 7.4 years.

Launched in April of 2004, CCPT offered shares of common stock at a price of $10 per share. By September of 2005, the REIT had closed its initial public offering after it raised over $100 million.

As of March 26, 2014, CCPT had 10,090,951 shares outstanding held by 1,485 stockholders of record according to DST Systems, Inc., the REITs registrar and transfer agent.

Duff & Phelps, an independent valuation and corporate finance firm, provided CCPT’s board of directors a valuation range of $6.33 to $7.72 per share using the NAV methodology. As of December 31, 2013, the board determined that $6.55 per share was an appropriate estimated valuation and it was correct to use the NAV method.

“Our board of directors determined that the NAV methodology was the most appropriate valuation methodology based on the size of our portfolio, as it may be more likely that a potential liquidity transaction would occur through individual or portfolio asset sales rather than through a listing of our shares on a national securities exchange or other significant sale of our equity securities,” according to a filing.

Cole Corporate Income Trust Considering Options

American Realty Capital Properties’ private capital management business, Cole Properties, announced today that Cole Corporate Income Trust, Inc. (CCIT) is reviewing potential strategic options with guidance from Wells Fargo Securities, LLC (Wells Fargo). CCIT’s initial public offering closed in late 2013 after raising about $1.9 billion.

Formed in 2010, CCIT is a public, non-traded REIT that invests in facilities that it deems “necessity corporate” properties. These include warehouses, manufacturing plants, headquarter buildings, and distribution facilities.

As of December 31, 2014, CCIT owned 77 properties across 28 states, totaling 15.6 million rentable square feet.

“CCIT’s best in class office and industrial-focused portfolio boasts many of the hallmarks of a leading net lease REIT, including geographic diversity and long weighted average lease duration. A large percentage of its portfolio rents are derived from a mix of investment grade and other credit tenants. Ultimately, as one of the largest office and industrial net lease REITs, we foresee a myriad of strategic opportunities for CCIT as we work with Wells Fargo to assess our strategic options,” commented Lisa Beeson, Chief Operating Officer of CCIT’s advisor, in a statement.

American Realty Capital Healthcare Trust Announces New Appointments

American Realty Capital Healthcare Trust, Inc. (ARC Healthcare) it has made some changes within its management team. The adjustments come in preparation for the company’s impending public listing.

In December 2013, the non-traded REIT, which invests in income-producing medical facilities, announced its intent to file an application to list its common stock sometime in the first quarter of 2014.

Anticipating the liquidity event, Thomas P. D’Arcy has been promoted to chief executive officer and Edward F. Lange Jr. has been appointed as chief financial officer and chief operating officer. Nicholas S. Schorsch will remain the company’s executive chairman of the board.

Mr. D’Arcy has been part of the ARC family for some time, serving as the chief executive officer of ARC Healthcare’s advisor since 2012 as well as serving as ARC Healthcare Trust II’s chief executive officer and its advisor and property manager. He has also served as the chairman of the board of directors of Inland Real Estate Corporation since 2008 and as an independent director of Inland since 2005. Before joining ARC Healthcare, Mr. D’Arcy was president and chief executive officer for Grubb & Ellis Company.

Edward F. Lange Jr. has three decades of executive leadership experience in real estate, residential, and healthcare industries. During 2013, Mr. Lange was the chief executive officer at HRC Investors Corp, prior to which, he served as chief financial officer and director of Americold Realty Trust.

Mr. Lange commented, “I am truly excited to become part of ARC Healthcare’s senior management team, and I look forward to contributing to the continuing successful construction and expansion of the business for the benefit of its investors.”

Industry Observations on Inland American’s Tender Offer

Only 14 calendar days remain for Inland American Real Estate Inc. (Inland American) shareholders to determine if they wish to tender all or a portion of their shares for a per share price between $6.10 and $6.50.

Announced on March 14, 2014, industry and media response to the offer has been mixed. 

The REIT has been taking steps to make itself more attractive for a future liquidity event. 

Just last year, it sold close to 300 properties to Nick Schorsch’s AR Capital in a deal valued at $2.3 billion. The transaction resulted in about $1 billion in net proceeds for Inland American.

This was an important step in the REITs strategy to reposition itself by selling off apartment, office, and industrial properties and then focus on building a portfolio of hospitality, shopping centers, and student housing.

Last year, the REIT purchased many properties that fit with its repositioning plan and as of December 31, 2013, owned 277 properties, which include retail, office, industrial, student housing, and hotels.

With its eye on performance, Inland American became self-managed earlier this year and did not pay an internalization fee in connection with the transaction. This eliminates the management fee the REIT has been paying to its external advisor and they expect future savings from the elimination of its property management contract at the end of 2014.

In a statement from March, Inland American offers, “We expect that becoming self-managed will positively impact our net income and funds from operations.”
So how does the industry feel about the tender offer?

Taylor Garret, Managing Director of CTT Auctions a secondary market auction firm, says, “I think it’s a good decision. They have a lot of people looking for liquidity.”

Garret says the $6.10 to $6.50 price range is right in line with what his firm sees for secondary market transactions.

“I think the tender makes a lot of sense for them,” added Garret. 

He also believes that despite a recent valuation of $6.94, from the perspective of managing the REIT for all its investors, a tender of less than that is the prudent thing to do. Inland American has the cash and can offer investors that want out, the option of liquidity through the tender. 

Dan Breen, founder and co-owner of Pacific Partnership Group a secondary market matching service, says, “The pricing seems to be fair enough for somebody that wants to get out prior to an ultimate liquidation. It’s not as big a discount as the secondary market.”

Third Party Mini-Tender

Earlier this year, CMG Partners, LLC, offered Inland American shareholders $4.50 per share for up to 1 million shares through a mini-tender offer. The offer expired February 28, 2014 and 287,636 shares were tendered to CMG for $4.50 per share.

Securities America has the keys to lure an advisor from Wells Fargo

Securities America, home to over 1,700 independent advisors, announced today that Hilary Jones Rojo has become one of their registered representatives.

A wholly owned subsidiary of Ladenburg Thallman Financial Services, Securities America is based in La Vista, Nebraska. Ms. Jones Rojo is joining the Versus Capital Partners, LLC branch of Securities America. She formerly worked for Wells Fargo Advisors where she assisted clients from multiple branches and managed $65 million in assets. She holds her series 7 and 66 licenses.

Ms. Jones Rojo explains what drew her to her current position, stating, “Going independent allows me to develop deeper relationships with my clients. “I really like the feel of an independent broker-dealer, with enough sophistication and support from both Securities America and my managing principal.”

Securities America is responsible for approximately $50 billion in client assets. The independent financial consultants offer a range of investment products, including alternative investments.

Senior vice president of branch office development and acquisitions, Gregg Johnson commented, “Hilary’s desire to both enhance client relationships and grow her practice represents the reasons many advisors are choosing the support and culture Securities America offers.”

He continued, “We look forward to providing her with the resources needed to reach those goals.”

American Realty Capital Hospitality Trust Acquires First Six Hotels

Non-traded REIT hopeful, American Realty Capital Hospitality Trust (ARC Hospitality), announced that it has closed on its first six acquisitions. The company recently acquired interest in six hotels around the U.S.

For an aggregate purchase price of $105.5 million, the company acquired the fee simple interests in the Courtyard® Inner Harbor Hotel in Baltimore, Maryland, the Courtyard® Providence Downtown Hotel in Providence, Rhode Island, and the Homewood Suites® in Stratford, Connecticut, as well as a leasehold interest in the Georgia Tech Hotel & Conference Center in midtown Atlanta, Georgia. The company funded the acquisitions through a Fee and Leasehold Assets Note and a Deutsche Bank Loan.

Rounding out the acquisitions, ARC Hospitality acquired joint venture interests in The Hilton Garden Inn® in Blacksburg, Virginia, and the Westin Virginia Beach Town Center in Virginia Beach, Virginia, for an aggregate purchase price of $5.0 million, exclusive of closing costs. 

The hotels were selected for their location as well as being globally branded. In total, the properties have 1,181 rooms and 38,960 square feet of meeting space.

Jonathan P. Mehlman, Chief Investment Officer of ARC Hospitality, commented, “Each of these hotels is the leader in its respective market from an average daily rate, occupancy and Revenue Per Available Room perspective. We are very excited to have procured this high quality hotel portfolio in an off-market transaction and at a price which is at a discount to current replacement cost.”

ARC Hospitality intends to qualify as non-traded RIET for the taxable year ending December 31, 2014. It seeks to create a diversified portfolio of select-service and full-service hotels throughout North America.

Industry Trade Group provides comments on Regulation A proposed rule changes

REISA has responded to the Securities and Exchange Commission’s (SEC) request for comments regarding proposed changes to Regulation A (Reg A). REISA, a national trade association for alternative investments, provided comments on state preemption, limitation on types of issuers, a cap of 10% on Tier 2 offerings, and rule 15c2-11 of the Exchange Act. 

Deborah Froling of Arent Fox, John Grady from National Fund Advisors and Tom Voekler of Kaplan Voekler Cunningham & Frank make up REISA’s Legislative & Regulatory Drafting Task Force, which is chaired by Darryl Steinhause, a partner with DLA Piper.

For background information on Reg A and the SEC’s proposals, be sure to read Regulation A: Comments are in. Let’s review the Rule and Proposed Changes.

State Preemption

REISA does not believe that state preemption will prohibit states from protecting investors from fraud because they will continue to have full access to all offering documents, since issuers will file publicly. State preemption would eliminate merit review states’ ability to review each issuer and offering. 

Merit review states are those that impose their own restrictions on issuers and the offerings, plus, sometimes limit investors’ allocations to specific investments or categories of investments. 

These states do this in order to protect their citizens, however, some in the industry question how one state’s residents may need a higher income or net worth than another’s’ in order to invest in certain offerings. 

There are only minor differences amongst the merit review states’ restrictions. These could be in the form of income or net worth requirements, limitations on issuer or asset class allocations, amongst others.

“It is very difficult to work through 50 states,” commented Darryl Steinhause, Partner with DLA Piper and Legal Counsel for REISA. “The cost and time is significant.”

“For us to go to multiple states on a $50 million transaction, it’s just not practical,” added Steinhause.

He suggests that if the states could come together and act as one, this would be more suitable. 

Issuer Eligibility

Currently, and included in the proposal, issuers of oil and gas mineral rights are ineligible from using Reg A. REISA would like to see that changed. 

They believe that issuers of fractional interests in oil and gas offerings with an established track record or minimum assets as deemed reasonable by the SEC should be able to benefit from the ease of capital raising under Reg A. 

REISA also feels that BDCs should be eligible and, with proper disclosures, have access to the public markets.

Cap Rates

The SEC has proposed limiting an individual investors maximum investment in any Tier 2 offering to 10% of that individual’s net worth. REISA agrees with the 10% cap on any issuer level, but not as an aggregate across all Tier 2 offerings. They believe that limiting an individual to only a 10% allocation across all Tier 2 offerings could prevent an investor’s ability to diversify.

According to their comment letter, “REISA believes that the 10% Cap on investment in any individual offering strikes an appropriate balance between investor protection and capital formation.”

Rule 15c2-11 of the Exchange Act

Rule 15c2-11 of the Exchange Act allows issuers’ securities to be quoted in the over-the-counter Bulletin Board (OTCBB) after filing certain disclosures. The SEC proposal suggests that the reporting requirements of Reg A Tier 2 offerings meet these disclosures. 

“REISA agrees with the SEC proposal that the reports required of issuers in a Tier 2 offering should qualify as adequate information under Rule 15c2-11,” according to REISA’s comment letter.

“It will give the investors access to a market place that right now only takes place through secondary trading,” said Steinhause. “It’s trying to give people some liquidity.” 

To review REISA’s comment letter, click here.

BDC Sponsor Named One of Philly.com’s Top Workplaces

Sponsor and distributor of alternative Investments, Franklin Square Capital Partners (Franklin Square), earned a spot on Philly.com’s list, Top Workplaces 2014.

Franklin Square was ranked 35 of small companies in the Philadelphia area.

“The Philadelphia region is a great place to do business, raise a family and engage civically. We’re proud to call it home and to be named among the best workplaces in the area,” said Michael C. Forman, Chairman and CEO of Franklin Square Capital Partners.

The list was compiled through information from an employee feedback survey conducted by WorkplaceDynamics, LLC, a research firm on organizational health and employee engagement.

This isn’t the first time Franklin Square has made it onto an online list for its accomplishments. Back in January the company was named one of Chief Executive’s 100 top performing mid-sized companies.

Franklin Square sponsors a variety of alternative investments and, in particular, has made inroads with non-traded BDCs. The company has a number of offerings currently available including FS Investment Corporation III, FS Energy & Power Fund, and FS Global Credit Opportunities Fund.

Advisors, it’s good to have Pal in your office.

Barbara Pal has been named Securities America’s assistant of the year for 2013 and will be honored at Securities America’s Connect! this June in San Francisco, California. Ms. Pal is the administrative assistant to Bradley Schlang of Cedar Brook Financial Partners in Cleveland, Ohio.

In order to qualify for the award, candidates must fit certain criteria, including nomination by a Securities America advisor and a minimum of two years experience. Ms. Pal has been in the financial services industry for over 20 years and serves on Securities America’s Sales Assistant Advisory Board.

Two years ago, Ms. Pal showed particular fortitude when Schlang’s colleague passed away unexpectedly and Pal was able to efficiently transition the more than 100 clients affected by the loss.

“Every time we have been hit with a challenge, Barbara immediately goes into solution mode. She has never complained about the workload or when a problem arises. She simply buckles down and solves the issue. Her only concern has been how I am holding up,” Schlang commented in a statement.

The independent financial consultants at Securities America offer a range of investment products, including alternative investments.

Securities America believes in providing multiple educational opportunities to develop sales assistants’ full potential to better serve clients.

RREEF Property Trust buys in New Jersey

RREEF Property Trust recently entered into an agreement of purchase and sale with DP 1109 Commerce, LLC. The acquired property is a 259,910 square foot warehouse located on 1109 Commerce Blvd. in Logan Township, New Jersey, approximately 24 miles south of Philadelphia.

The asset was purchased for approximately $19.75 million, exclusive of closing costs and with a $500,000 down payment. It is a multi-tenant, industrial warehouse on a 14.4 acre site with an adjacent 9.7 acre land parcel that could be developed.

RREEF America, a unit of Deutsche Asset & Wealth Management, is the sponsor for RREEF Property Trust, which is a continuously offered, publicly registered company that intends to qualify as a non-traded REIT. Its strategy is to invest in a mix of property, real estate securities, debt, and cash.

Just last week, RREEF Property Trust and its dealer manager, SC Distributors LLC, entered into a wholesaling agreement with Realty Capital Securities who will serve as distribution agent to raise up to $2.25 billion for the offering.

The New Jersey acquisition is the company’s third property in its real estate portfolio.[1] As of December 31, 2013, the company’s real estate equity securities portfolio consisted of publicly traded common stock of 45 REITS with a value of $2,882,206.

According to a filing, “We [RREEF Property Trust] believe that investing a portion of our proceeds from our offering into a diversified portfolio of common and preferred shares of REITs and other real estate operating companies will provide the overall portfolio some flexibility with near-term liquidity as well as potentially enhance our NAV over a longer period.”