The board of directors of American Realty Capital—Retail Centers of America II Inc., a publicly registered non-traded real estate investment trust, announced that they will terminate its initial public offering and dissolve and liquidate the company. The REIT will return all subscription payments to investors, as well as the pro rata share of the earned interest.
The $3.125 billion offering was declared effective by the Securities and Exchange Commission in September of last year but had failed to break escrow and admit shareholders. According to a filing with the Securities and Exchange Commission, ARC believes that “the underlying structure of the offering is inconsistent with what the sponsor is committed to providing for all future products in response to FINRA Regulatory Notice 15-02.”
Regulatory Notice 15-02 was approved by the SEC and issued by FINRA to promote greater transparency for shareholders of non-traded direct investment programs by requiring that investor statements reflect the impact of the cost of fees on the company’s share price. Starting in April 2016, publicly registered non-traded REITs must disclose the net value per share – minus commissions, fees, and other expenses – to their investors on an annual basis. As a result, many non-traded offerings are introducing new share classes that offer a smaller front-end fee structure and annual “trailing” fees paid to financial advisers and broker-dealers over time, rather than at the time of purchase. MVP Realty Advisors has registered MVP REIT II, which features no load, with the advisor assuming the cost of all securities commissions and fees. MVP REIT II is not yet effective.
American Realty Capital — Retail Centers of America II intended to invest in retail properties, including power centers, lifestyle centers, grocery-anchored shopping centers with a purchase price in excess of $20 million and other need-based shopping centers in the United States. The company commenced its initial public offering in September 2014, but did not raise sufficient funds to break escrow. As of June 30, 2015, the company had 14,220 shares of common stock outstanding and had raised $200,000 in investor equity.