FS Credit REIT Posts NAV Per Share, Completes First Real Property Acquisition

FS Credit Real Estate Income Trust Inc., a monthly NAV REIT sponsored by FS Investments, has declared a monthly net asset value per share as of June 30, 2022. The company also completed the acquisition of its first real property investment, following the approval of its board of directors.

In late June 2022, the REIT purchased 555 Aviation, a 260,000-square-foot creative office building located in El Segundo, California, for approximately $209.4 million. The property was built in 1966 and renovated in 2017 to convert the property into a creative office building, including LEED Gold certification, a glass façade and an interior open-air atrium. The property sits on 13.3 acres near the Los Angeles International Airport and is fully leased to three tenants: Fabletics, Saatchi & Saatchi, and Belkin.

Class S shares had an NAV per share of $25.17 as of June 30, 2022, compared to $25.18 per share the previous month.

Class T shares had an NAV per share of $24.94, compared to $24.95 per share the previous month.

Class D shares had an NAV per share of $24.97, compared to $24.98 per share the previous month.

Class M shares had an NAV per share of $25.05, compared to $25.06 per share the previous month.

Class I shares had an NAV per share of $24.40, compared to $24.42 per share the previous month.

Class F shares had an NAV per share of $24.98, compared to $24.99 per share the previous month.

Class Y shares had an NAV per share of $24.36, compared to $24.37 per share the previous month.

* Dollar amounts have been rounded to the nearest cent.

Class S shares are available through brokerage and transactional-based accounts, while Class D, Class M and Class I shares are generally available through fee-based programs. Class I shares are available for purchase by endowments, foundations, pension funds and other institutional investors. Class F and Class Y shares were offered via private offerings and are only available in the public offering through the distribution reinvestment plan.

Loans receivable increased from $5.7 billion in May to $6.5 billion in June. Mortgage-backed securities held-to-maturity increased from $68 million to $78.9 million, while mortgage-backed securities available-for-sale increased from $141 million to $153.3 million month-over-month.

Cash and cash equivalents decreased from $159.6 million in May to $73.8 million in June, while restricted cash increased from $3.5 million to $15 million. Other assets increased from $18 million to $83.3 million month-over-month.

Collateralized loan obligations increased from ($2.65 billion) in May to ($3.19 billion) in June. Repurchase agreements payable increased from ($1.10 billion) to ($1.18 billion), month-over-month. Other liabilities increased from ($22.7 million) to ($38.6 million).

The number of shares outstanding totaled 76.8 million as of June 30, 2022, compared to 70.7 million the previous month.

FS Credit REIT invests primarily in floating rate senior loans secured by commercial real estate properties. The REIT launched in September 2017 and has raised $2.1 billion in its public offerings as of June 2022.

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Skyway Capital Markets Creates New IT Leadership Role

Skyway Capital Markets LLC, a boutique investment banking, managing broker-dealer and wholesale securities distribution firm, has hired Tammy Schorr as vice president of CRM enterprise applications.

Schorr, who joins the organization with 23 years of experience in leadership, revenue growth, technology, and startup operations, has developed Enterprise CRM solutions for more than 13 years. CRM, short for customer relationship management, is a technology tool used by businesses that facilitates collaboration and information sharing between employees and their clients.

Schorr is three times Salesforce certified and in her previous role as director at CRM at Preferred Capital Securities, she was responsible for “bridging technical and business architecture frameworks and integrations with solution delivery,” the company said. Before that, she worked for IBM as a senior system engineer.

“Skyway continues to expand and enhance its managing broker-dealer services, and leveraging the latest technology is part of our growth strategy. Creating scalable applications with next-generation infrastructure to connect our team with broker-dealers, registered investment advisors, and their financial professionals,” said Mike Freeman, president and senior managing director.

According to the company, “Skyway utilizes a suite of connected tools including analytics with AI built-in intelligence leveraging machine learning to strengthen client relationships and drive our business forward.  Adopting technology empowers the team to serve the financial professional community in a more sophisticated way, targeting products that meet the needs of the end investor.  Combining quality relationships with the latest technology tools ultimately delivers positive outcomes for all our clients and partners.”

In other hiring news, Skyway recently appointed industry veteran, Greg Mausz, as chief operating officer and senior managing director.

Founded in 2002, Skyway Capital Markets is a national investment banking firm that works with middle market companies, public and private, to deliver customized financial advisory services. The team has raised more than $3 billion in public and private capital market transactions. The managing broker-deal group facilitates the broker-dealer process from initial due-diligence to distribution. The firm is headquartered in Tampa, Florida.

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Kingsbarn Buys Las Vegas Office Building for DST Offering

Kingsbarn Realty Capital, a sponsor of non-traded alternative investment offerings, has purchased a three-story, 67,000-square-foot office building located in Las Vegas for a Delaware statutory trust offering.

Formerly known as LaPour Corporate Center, Kingsbarn will rename the property CityWest Commons.

CityWest Commons is a Class A, LEED certified building located at 9075 West Diablo Drive. The property is situated near “the curve” of the Las Vegas Beltway in the Southwest submarket where I-215 connects the Summerlin master-planned community in the west to Henderson and Green Valley Ranch in the southeast.

Jeff Pori, chief executive officer of Kingsbarn, said that CityWest is 96 percent leased to tenants such as The State of Nevada, Chicago Title, and NV Energy.

“Chicago Title is rated A2 by Moody’s, and NV Energy is a subsidiary of Berkshire Hathaway Energy, which is rated A3 by Moody’s,” said Pori. “[Fifty-one percent] of the tenancy is investment-grade credit or government-related. We are pleased to be able to provide our investors with a very solid 1031 exchange replacement property.”

Kingsbarn Realty Capital offers investments is private equity, exchange traded funds, traditional investment funds, private placements, and Delaware statutory trusts. Kingsbarn’s management team has experience developing, managing, operating, and sponsoring a portfolio of stabilized properties as well as ground-up construction, value-added offerings, opportunity zone investments, and entitlement projects. Kingsbarn has more than $1.5 billion of assets under management throughout the United States.

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Brookfield REIT Reports NAV Per Share and Recent Acquisitions

Brookfield Real Estate Income Trust Inc., a publicly registered non-traded real estate investment trust formerly known as Oaktree Real Estate Income Trust, has declared a monthly net asset value per share for its shares of common stock, as of June 30, 2022.

In addition, during June 2022, the REIT purchased 49 single-family rental properties, growing its portfolio to a total of 376 homes with a total purchase price of $99 million, as of June 30, 2022. The REIT also acquired 13 individual positions in CMBS bonds totaling approximately $38 million. As of June 30, 2022, the REIT’s real estate-related loans and securities consist of 22 investments with a fair value of approximately $124 million.

Class S shares were valued at approximately $13.72 each, compared to $13.78 the previous month.

Class I shares had an NAV per share of $13.81, compared to nearly $13.86 the previous month.

Class C shares were valued at nearly $13.52, compared to $13.58 the previous month.

Class E shares were valued at nearly $14.14, compared to $14.25 the previous month.

Class D shares were valued at nearly $13.71 (no Class D shares were sold the previous month).

Shares were originally priced at $10.00 each, plus applicable upfront selling commissions and dealer manager fees.

Class S shares are available through brokerage and transactional-based accounts, Class I shares are available to institutional investors, and Class D are available through fee-based programs. Class C and Class E shares are sold through a private offering. The REIT also offers Class T shares, which are available through brokerage and transactional-based accounts, but none were sold as of June 30, 2022.

The NAV per share is based on the estimated value of the company’s assets, less the estimated value of its liabilities divided by the number of outstanding shares, all as of June 30, 2022.

Investments in real properties increased from $1.76 million in May to $1.79 billion in June, while investments in real estate-related loan and securities increased from $75.3 million to $123.5 million. Investments in unconsolidated entities decreased from $102.7 million to $96.1 million.

Cash and cash equivalents increased from $46.9 million in May to $93.6 million in June, restricted cash decreased from $147 million to $85.8 million, and other assets increased from $19 million to $35 million, month-over-month.

Debt obligations hovered at around ($1.08 billion) month-over-month, and other liabilities remained flat at ($25 million). Non-controlling interests in joint ventures increased slightly from ($20.8 million) to ($21.1 million).

There were nearly 73 million shares outstanding in June, compared to 61.8 million the previous month.

Brookfield REIT’s initial offering was declared effective in April 2018 and has raised $754.3 million, as of June 2022. The REIT’s portfolio consisted of 89 percent real estate properties, 6 percent real estate-related loans and securities, and the remainder in cash and cash equivalents, as of June 30, 2022. The real estate properties consisted of multifamily (55 percent), alternatives (17 percent), office (17 percent), logistics (6 percent) and single-family rental (5 percent).

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Blackstone Non-Traded BDC Appoints Interim Chief Accounting Officer and Treasurer

Blackstone Private Credit Fund, a non-traded business development company sponsored by private equity giant Blackstone (NYSE: BX), has appointed David Goldberg as interim chief accounting officer and treasurer, according to a filing with the Securities and Exchange Commission. Goldberg replaces Abby Miller, who “has taken leave from her position,” the filing stated.

Goldberg previously served as the fund’s interim CAO and treasurer, after Robert Busch resigned from the positions earlier this year.

Goldberg is a managing director with Blackstone Inc. in the global fund finance group where he oversees the accounting, financial reporting and fund administration for Blackstone’s credit, liquid and insurance funds.

Before joining Blackstone in 2008, he was an associate vice president at Lehman Brothers in the real estate private equity group overseeing two real estate mezzanine funds. Prior to that, he worked as a manager in the joint venture group at New Plan Excel Realty Trust.

Goldberg began his career in the financial services group at PricewaterhouseCoopers and holds a bachelor’s degree from Queens College, City University of New York with a major in accounting and information systems and a minor in economics. He is a licensed certified public accountant.

Blackstone Private Credit Fund is the industry’s first perpetual-life BDC and broke escrow on January 7, 2021. The fund is part of Blackstone Credit’s $74 billion direct lending platform, which provides privately originated, senior secured, floating rate loans to U.S. and European middle market companies. Since inception, the BDC has raised $22.6 billion in its private and public offerings, as of July 20, 2022.

As of June 30, 2022, the fund’s aggregate NAV was $21 billion, the fair value of its investment portfolio was $46.2 billion, and it had $22.6 billion of debt outstanding (at principal).

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Syndicated Equities Sells Shopping Center for $32.5 Million

Syndicated Equities, a sponsor of securitized 1031 exchange offerings, has sold Plaza at the Pointe, a regional shopping center located in Pittsburgh, Pennsylvania, for $32.5 million.

Syndicated purchased the property in 2016 for $24.5 million alongside M&J Wilkow, Ltd., a Chicago-based owner and operator of retail and office properties throughout the country. At the time of acquisition, the 150,000-square-foot retail center was 100 percent occupied by a combination of national and regional tenants, including Bed Bath & Beyond, La-Z-Boy, Party City, Old Navy, Dress Barn, and Bob’s Discount Furniture.

The company noted that most of the tenants had short term leases and below market rental rates. During the hold period, M&J Wilkow executed a value-add strategy of securing lease extensions at higher rental rates and securing two new tenants, Armenia Stone and Sportsmen’s Warehouse, to improve the tenancy at the center.

Syndicated reported that the investment “produced a profitable sale and earned investors a 1.7x equity multiple and 11.6 percent internal rate of return.”

“We are very pleased with the outcome of this investment, especially in light of the struggles that brick and mortar retail faced during the Covid-19 pandemic,” the company said. “M&J Wilkow, having identified a center in a top tier market with below-market rents, was able to manage through that difficult time and still execute on its strategy of securing new tenants and lease renewals at higher rates. They achieved long-term stabilization with significant value enhancement.”

Syndicated Equities provides accredited investors and family offices with commercial real estate investments. Since 1986, the firm has focused on co-investment ownership, net lease brokerage services, global real estate opportunity funds, and more recently, qualified opportunity zones. To date, Syndicated Equities has made more than 100 investments representing over $500 million of equity and $2 billion of total asset value.

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Hartman Launches New Capital Fund to Finance DST Offerings

The Hartman Companies, a Texas-based commercial real estate sponsor, has launched The Hartman Capital Fund, a private placement fund, to provide short-term bridge-financing to the firm’s affiliated Delaware statutory trust offerings. The fund’s initial offering amount is $12.5 million, with an option to increase up to $25 million.

Hartman said that the fund will allow the company “to deliver more 1031 exchange opportunities to the fast-growing 1031 exchange marketplace, while providing an 8 percent annualized return to its investors and the return of 100 percent of their initial investment once the 1031 exchange DST offerings are fully subscribed.” The Hartman Capital Fund will be the company’s 28th offering.

Hartman has fully subscribed three previous DST offerings, ranging in size from $4.3 million to $8.8 million. In August 2021, The DI Wire reported that the company fully subscribed Hartman Retail III DST after raising roughly $8 million from accredited investors to purchase Colony Retail Shopping Center, a net leased retail center in the Dallas Forth Worth Metroplex that is 100 percent leased to tenants under triple-net leases.

Hartman noted that its new capital fund will allow it to launch similar DST offerings in the future.

“We are delighted to announce the launch of The Hartman Capital Fund. We believe that this new high-quality and timely offering will allow us to retain our standing as a top performing real estate sponsor while creating value and exceptional returns for our investors,” said Al Hartman, chairman and chief executive officer.

Since 1983, Hartman has been acquiring and managing commercial real estate investments on behalf of individual investors, focusing on office, retail, light industrial and warehouse properties located in Texas. Hartman and its affiliated entities (including founder, Al Hartman) have sponsored 27 programs and acquired interests in more than 90 real assets totaling over $805 million.

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CPA:18 Shareholders Approve Merger with W. P. Carey

Shareholders of Corporate Property Associates 18 – Global Incorporated, a publicly registered non-traded real estate investment trust, approved the company’s merger with its advisor, W. P. Carey Inc. (NYSE: WPC), a publicly traded REIT, in a transaction valued at approximately $2.7 billion. The transaction is expected to close on August 1, 2022.

W. P. Carey is the second largest net lease REIT and will have a pro forma equity market capitalization of $15.8 billion.

At a special meeting of stockholders held on July 26, 2022, approximately 74.6 million shares voted in favor of the merger, 1.2 million voted against, and 3.3 million abstained.

CPA:18 stockholders will receive total merger consideration of 0.0978 shares of W. P. Carey common stock and $3.00 of cash for each share of CPA:18 Class A and Class C common stock they own. CPA:18’s most recent net asset value per share was $9.07, as of September 30, 2021.

The W. P. Carey shares that will be issued in the merger will be listed on the New York Stock Exchange at the time of issuance.

On Monday, shares of WPC closed at $83.72, down $0.27 or 0.32 percent from the previous close.

Corporate Property Associates 18 – Global invests in commercial real estate properties leased to companies domestically and internationally in addition to self-storage and student housing assets.

As of March 31, 2022, the REIT’s net lease portfolio was comprised of full or partial ownership interests in 52 properties, substantially all of which were fully occupied and triple-net leased to 47 tenants totaling 10.4 million square feet. The remainder of the portfolio was comprised of full or partial ownership interests in 65 self-storage properties, three student housing development projects and one student housing operating property, totaling approximately 5.1 million square feet.

CPA:18 – Global’s offering was declared effective in May 2013 and closed in April 2015 after raising $1.2 billion in investor equity. As of the first quarter of 2022, the REIT had investments in real estate of $2.4 billion.

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Hines Global Income Trust Buys Houston Office Tower for $145 Million

Hines Global Income Trust Inc., a publicly registered non-traded real estate investment trust, has purchased 200 Park Place, a 206,000-square-foot, 15-story Class AA office building located in the River Oaks District submarket of Houston, for $145 million.

Located at 400 Westheimer Road, 200 Park Place is part of a mixed-use community within Houston’s Inner Loop and is surrounded by retail establishments, restaurants and green space. Completed in April 2020, the fully leased property, anchored by JLL and Buckeye Partners, has a diversified rent roll with finance, insurance, real estate, midstream energy and renewables tenants.

Amenities include a building concierge, a tenant lounge, conference center and 6,000-square-foot outdoor landscaped terrace, 24/7 security, and a sushi restaurant on the ground level. Hines noted that “the building is WELL and LEED certified and is fully electric, exceeding current local codes relative to sustainability and performance requirements.”

“As high-profile companies continue to look to Houston for best-in-class, well-amenitized buildings, and Houston continues to lead the U.S. on return-to-office rates, our acquisition of 200 Park Place allows us to strategically capitalize on these trends and the ongoing evolution of commercial real estate,” said Janice Walker, chief operating officer of Hines Global Income Trust. “200 Park Place is a high-quality asset with an environmentally sustainable approach making it an attractive addition to the portfolio especially when factoring in its basis which is below current replacement cost…”

Hines Global’s $3.4 billion portfolio is roughly two-thirds weighted toward the industrial and living sectors.

Hines Global Income Trust commenced operations in 2014 and invests in commercial real estate investments located in the United States and internationally.

From inception in August 2014 through June 15, 2022, Hines Global Income Trust raised approximately $2.3 billion in investor equity in its three public offerings and distribution reinvestment plan. The REIT launched its second follow-on offering at the beginning of June 2021 and has raised $1.07 billion as of July 15, 2022.

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Opinion: SEC & Regulatory Overreach – Nondelegation Doctrine

By: Publius

In my first piece that I wrote, almost one year ago, I opened with a quote from Warren Buffett: “If a cop follows you for 500 miles, you’re going to get a ticket.” We saw this happen once again recently with one of the largest financial services companies in the world: Charles Schwab.

The SEC accused Schwab of not disclosing hidden fees and of allocating funds in a sub-optimal fashion, via its robo-advisory service. Schwab, according to their press release, “neither admits nor denies the allegations” and agreed to settle for $187 million because this decision is “in the best interest of our clients, company and stockholders.”

In short, Charles Schwab, a company with an excess of $8 trillion in assets under management, decided to accept a nearly $200 million fine because they felt that was the better business decision. This, of course, aligns with the finding stated on FinanceFeeds.com that 96 percent of all SEC cases are settled before trial. If a global giant like Schwab believes that it makes more financial sense to settle with the SEC, what hope do smaller firms have?

One such smaller entity that did decide to fight back is George Jarkesy. Jarkesy was accused by the SEC of, among other things, overestimating the value of his hedge fund assets (approximately $24 million). After nearly 10 years of fighting against the SEC’s in-house judge, the Commission imposed a fine of $300,000 in civil penalties and $685,000 in disgorgement.

Jarkesy appealed to the Fifth Circuit Court of Appeals, claiming that the SEC violated his Seventh Amendment right to a trial by jury, and the Court agreed. The Fifth Circuit called upon a seldom-used legal theory known as nondelegation doctrine. Nondelegation doctrine states that Congress cannot delegate its legislative powers to other entities without an “intelligible principle” on which to base their regulations.

While the SEC may or may not have a compelling case against Jarkesy, the power that the Commission has is simply un-American. What makes our country so unique and wonderful is our system of checks and balances. In some parts of the world, the government can simply decide that you are guilty, but our founding fathers had the foresight to separate power to our three different branches: executive power to the President, legislative power to Congress, and judicial power to the federal courts.

It is the slow dissolution of this separation of power that has essentially established the SEC as an overreaching, draconian system. The Fifth Circuit decided that allowing the SEC to decide when to use their own in-house administrative law judges (ALJs) amounts to delegation of the legislative power vested to Congress.

Additionally, the Court also observed that these ALJs have the ability to exercise executive power – that is, they do not pass or interpret laws, but they do have the ability to enforce them as written. Per Article II of the Constitution, the President has the authority to remove officers in the executive branch. SEC ALJs, however, may only be removed for good cause via a Merits System Protection Board meeting. The Fifth Circuit ruled that this insulation of ALJs was unconstitutional.

I started writing this series to help shed some light on the different issues created by the regulatory agencies here in the United States, specifically the SEC. I believe that the SEC is, at its heart, an organization designed to aid and protect those of us who work in the financial sector and our investors, but, as it stands now, it is little more than a tyrannical, hypocritical system that seems to only make decisions based on its own self-interest.

As always, I welcome your thoughts. What do you think of the SEC and its separation –or non-separation—of powers? Please email me at Publius.Connect@gmail.com and let me know. Together, we can work to restore the SEC and other overreaching regulatory systems to a true, fair and equal design.

Editor’s note: The author of the preceding article is a chief executive officer in the financial services industry, who, for fairly obvious reasons, elects to share his thoughts on this subject anonymously. The DI Wire does not normally publish articles that do not disclose the author. In this instance, however, we have allowed it given the nature of the piece, the importance of open discussion and varying viewpoints, and the fact that we have personally confirmed Publius’ identity.

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The views and opinions expressed in the article are those of the author and do not necessarily reflect the views of The DI Wire.