MVP REIT II Buys Texas Parking Garage for $11 Million

MVP REIT II Inc., a publicly registered non-traded real estate investment trust, has purchased a multi-level parking garage in Lubbock, Texas from Raiderpark LP for $11 million, plus acquisition and financing-related transaction costs, according to a filing with the Securities and Exchange Commission.

The property includes approximately 1,500 parking spaces, as well as 20,500 square feet of retail space. The parking garage will be operated by Isom Maintenance Company LLC, an affiliate of the seller, under long-term lease agreement. The purchase was funded from the company’s unsecured credit line with KeyBank and cash on hand.

In late September, shareholders of MVP REIT II and affiliated MVP REIT I voted and approved the merger of the two companies. The combined company will be renamed The Parking REIT Inc. and plans to list on a national securities exchange.

MVP REIT II closed its offering in December 2016 and has raised $62 million in investor equity. As of the third quarter 2017, the company owned interests in 15 properties with a total purchase price of approximately $147.9 million, according to Summit Investment Research.

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UDF Files Lawsuit in Response to Ponzi Allegations

United Development Funding’s family of funds have filed a lawsuit in a Texas court against well-known hedge fund manager Kyle Bass and his Hayman Capital hedge funds which held a short position in one of UDF’s entities. UDF is the sponsor of several non-traded real estate investment trusts, as well as a traded REIT, United Development Funding IV (NASDAQ: UDF).

The lawsuit claims that the UDF funds were financially damaged due to statements made by the defendants, including that the funds operated as a Ponzi scheme. UDF believes that Bass and his funds raked in profits of an estimated $60 million or more as a result of their short position.

As reported by The DI Wire in late 2015, Bass anonymously authored and posted a series of online reports on an investor networking website that detailed unsubstantiated claims against UDF that sent stock prices plummeting.

It was later revealed that Bass and Hayman Capital were shorting UDF IV after he launched the website which disclosed that “Hayman will profit if the market price for common shares of UDF decline and, conversely, Hayman will lose money if the market price increases for the common shares of UDF.”

Bass’s Hayman Capital hedge funds focus primarily on short-selling stocks, or betting that a company’s stock price will decline. Bass is best known for betting against subprime mortgages and securing massive profits for himself in 2008 following the housing market crash.

The complaint argues that Bass was under pressure to hit another big payout after a series of losses and made UDF his target, engaging in an illegal “short-and-distort” scheme where a “short seller spreads false and damaging information about the target company it is betting against in order to harm the business and its stock price.”

UDF alleges that Bass spread false information directly to its business partners, including lenders, borrowers, accountants, companies, with the sole purpose of driving down its stock price. For example, Bass accused UDF’s largest group of borrower entities, Centurion, of being insolvent and a participant in the fraudulent scheme.

Following the Ponzi scheme claims and subsequent reports, UDF said that it lost access to credit and capital markets and was forced to sell its assets at reduced prices and to pay off many of its loans. The company also noted that it lost builder and developer customers and future investors, which allegedly caused damages in the hundreds of millions of dollars.

In December 2015, UDF disclosed that it was the subject of a non-public fact-finding SEC investigation that started in April 2014, and a few months later its Grapevine, Texas headquarters was raided by the FBI.

UDF believes that Hayman’s general counsel Christopher Kirkpatrick, a former branch chief of the SEC’s enforcement division, contacted his old employer, as well as the FBI and the United States Attorney’s Office in Dallas “to prompt those agencies to take some public action against UDF that defendants understood and hoped would spook investors.”

Since listing on NASDAQ in June 2014 until December 2015, UDF IV had traded in a range of $16.02 to $19.95 per share. By mid-February 2016, UDF IV traded below $4 per share, before trading was halted by NASDAQ. The company was delisted in October 2016 for failing to file its 2015 annual financial reports and subsequent quarterly reports with the SEC.

UDF alleges that the delisting was part of Hayman Capital’s plan to buy discounted shares of UDF IV in the over-the-counter market from institutional investors, since UDF IV was no longer in the Russell 2000 Index.

The UDF funds had previously raised more than $1.2 billion in investor capital between 2003 and December 2015. UDF V, a non-traded REIT seeking to raise $1 billion, terminated its offering in March 2016.

The complaint alleges multiple counts including business disparagement, tortious interference, civil and conspiracy. Plaintiffs demand a trial by jury on all issues and seek monetary relief in excess of $1 million for damages, disgorgement, pre-judgment interest, attorney’s fees, and other relief.

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Nexpoint Capital Announces Offering Close-out

The board of NexPoint Capital Inc., a publicly registered non-traded business development company sponsored by an affiliate of Highland Capital Management, approved the closing of the company’s public offering to new investors when its current registration statement expires on February 14, 2018.

The company also amended its distribution reinvestment plan to participating stockholders, which will take effect following the close of the offering.

Under the current plan, cash distributions are reinvested in additional shares of common stock at a price equal to 92 percent of the public offering price per share in effect as of the date of issuance. The company recently increased its public offering price from $10.42 per share to $10.47 per share.

Under the amended plan, cash distributions will be reinvested at a price determined by the board. The price will not be less than the net asset value per share immediately prior to the payment of the distribution, and no more than 2.5 percent greater than the NAV per share. The company’s current net asset value per share, as of November 27, 2017, is $9.63.

NexPoint Capital, Inc., a healthcare-focused BDC, has raised $86 million in investor equity, as of the third quarter of 2017, and oversees a $64 million portfolio consisting of investments in 40 companies, according to Summit Investment Research. The company’s $1.5 billion offering was declared effective by the SEC in August 2014.

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RK Properties Fully Subscribes First DST Offering

RK Properties, a sponsor of non-traded alternative investment offerings, has sold out $22.5 million in capital raised for RK Edwards Mill DST, the company’s first Delaware statutory trust offering.

The offering was designed for investment opportunities for 1031 exchange buyers and direct capital investors. RK Properties has previously acquired and sold out 53 tenant-in-common transactions, of which 33 have gone full cycle.

“We are excited to complete our first DST structure with the purchase of Edwards Mill,” said Steve King, vice president of RK Properties. “We are currently looking at several opportunities for the next DST structured deal and expect to be under contract very soon.”

Built in 1984, Edwards Mill is a 220-unit Class A community located in Raleigh, North Carolina. The property is situated on nearly 37 acres of land, with one-, two- and three-bedroom units that average 1,200 square feet. Current rents average $1,129 per month, and the complex is 95 percent occupied.

Community amenities include a swimming pool, clubhouse, business center, fitness center, grilling and picnic areas, car-care center, and detached and attached garage parking. Each apartment home includes central air conditioning and heat, walk-in closets, and washer/dryer hook-ups.

RK Properties is implementing a marketing and value-add campaign targeted towards repositioning the property with improved rents and management. The company has commenced interior upgrades including faux hardwood flooring, stainless steel appliance packages and lighting fixtures, and washers and dryers in all units.

The company believes that these upgrades will justify average rent increases of $75 to $125 per month, depending on unit sizes. Planned exterior building enhancements include the pool area, fitness center and office upgrades, and exterior paint.

RK Properties is based in Long Beach, California and has a 40-plus year track record in the multifamily apartment market and focuses on acquiring multifamily assets in locations with historical rent growth and a value-add opportunity. To date, the company has purchased and managed more than $1.5 billion in assets across the country.

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ARC New York City REIT Executes Three New Leases at 123 William Street

American Realty Capital New York City REIT Inc., a publicly registered non-traded real estate investment trust, has entered into three new leases totaling approximately 67,000 square feet at 123 William Street in Manhattan.

123 William Street is a 26-story, 541,000-square-foot Class A office building in Lower Manhattan’s Financial District which the REIT purchased in March 2015 for $253 million.

ARC NYC REIT entered into a 20-year, 40,610-square-foot, office lease with The New York City Department of Citywide Administrative Services for two full floors in the building. The New York City Department of Youth Andy Lei Community Development will occupy both floors.

The company also entered into a 10-year, 23,400-square-foot, office lease with Knotel for one full floor in the building. Knotel is a real estate company that runs a network of custom locations that provides businesses with adaptable headquarters. Knotel anticipates fully occupying the space by mid-2018.

Additionally, the REIT entered into a 10-year, 3,000-square-foot, retail lease with I Love Kickboxing for retail space in the building. I Love Kickboxing is a franchise-operated chain of kickboxing studios and training facilities.

The three new leases increase the building’s occupancy to approximately 97 percent.

American Realty Capital New York City REIT is a non-traded real estate investment trust focused on properties located in the five boroughs of New York City, with a focus on Manhattan. The company closed its initial public offering in May 2015 and raised a total of $772 million in investor equity, as of the third quarter 2017. The company’s $785 million portfolio is comprised of six properties.

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Carter Validus Mission Critical REIT II Commences Follow-On Offering

The follow-on offering for Carter Validus Mission Critical REIT II Inc., a publicly registered non-traded real estate investment trust, has been declared effective by the Securities and Exchange Commission. The company closed its initial public offering on November 24th after raising $1.2 billion in investor equity.

The $1 billion follow-on offering will consist of three classes of shares, including Class A, Class I, and Class T shares of common stock. The REIT intends to offer the shares in this offering for a period of 9-12 months.

Class A shares are priced at $10.20 per share and include a 7 percent selling commission and 3 percent dealer manager fee.

Class I shares are priced at $9.27 each and include a 1 percent dealer manager fee and no selling commission. The dealer manager may receive up to 2 percent of the gross offering proceeds from the sale of Class I shares as a dealer manager fee, of which 1 percent will be funded by the REIT’s advisor, Carter Validus Advisors II LLC, without reimbursement. The 1 percent of the dealer manager fee paid from offering proceeds will be waived if an investor purchases Class I shares through a registered investment adviser that is not affiliated with a broker-dealer. In that case, Class I shares would be priced at $9.18.

Class T shares are priced at $9.77 and include a 3 percent selling commission, a 3 percent dealer manager fee, and an annual 1 percent distribution and servicing fee.

SC Distributors LLC serves as the dealer manager in the offering.

The REIT recently updated its estimated per share net asset value to $9.18 for Class A, Class I, and Class T shares of common stock, as of June 30, 2017. The company’s previous NAV per share was $9.07, which was the first declared by the company in October 2016.

Carter Validus Mission Critical REIT II, which invests in net leased data center and healthcare assets, went effective in May 2014. The REIT’s portfolio is comprised of 63 properties (20 data center and 43 healthcare properties) that were purchased for approximately $1.4 billion.

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KBS REIT Sells Final Property

KBS Real Estate Investment Trust Inc., a publicly registered non-traded real estate investment trust, has sold the last real estate asset in its portfolio, North Creek Parkway Center in Bothell, Washington, for $36.5 million.

North Creek Parkway Center is a six-building suburban office and laboratory campus located within the 52-acre North Creek master-planned business park. The six buildings were built in two phases in 1986 and 1987 on nearly 14 acres of land.

KBS REIT originally purchased the property in August 2008 for approximately $41.1 million. The net cash to the REIT from the disposition was approximately $34.8 million, net of closing credits, closing costs and disposition fees.

KBS Real Estate Investment Trust, which launched its initial public offering in January 2006, stopped selling common shares in May 2008 and closed its dividend reinvestment plan in April 2012. The company raised $1.7 billion in the primary offering and $233.7 million under the dividend reinvestment plan.

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Waddell & Reed Financial Announces Executive Team Changes

Thomas Butch has stepped down as executive vice president and chief marketing officer of Waddell & Reed Financial Inc. (NYSE: WDR) and as president of its subsidiaries Waddell & Reed Inc. and Ivy Distributors Inc. He was with the company for 18 years.

In conjunction with this transition, the company announced several changes to its executive team.

Shawn Mihal will become president of Waddell & Reed Inc, a registered broker-dealer subsidiary that offers securities and insurance products and investment advisory services through financial advisors. Mihal, who currently serves as chief operating officer, will be responsible for all aspects of the company’s broker-dealer operations.

Brent Bloss, who has served as chief financial officer of the company since March 2014, was promoted to chief operating officer of Waddell & Reed Financial. Bloss will continue to serve as CFO through the filing of the company’s annual report at the end of the year. In his new role, he will be responsible for the day-to-day management of the company’s operations and the delivery of strategic initiatives.

The board intends to appoint Benjamin Clouse, who has served as the company’s chief accounting officer since February 2017, as CFO to succeed Bloss in 2018. Clouse is a CPA with 21 years of finance and accounting experience, formerly serving as CFO of Executive AirShare Corporation and in various leadership positions on the finance team at H&R Block.

Nikki Newton will become president of Ivy Distributors Inc, a subsidiary that serves as the largest distributor of the Ivy Funds. Newton, who has 25 years of industry experience and has been with the company since January 1998, currently serves as head of global relationship management for IDI, which includes national accounts and consultant relationships, as well as institutional sales. In his new role, Newton will lead wholesale and institutional distribution, and sales and product development, as well as manage strategic relationships.

Waddell & Reed, Inc., founded in 1937, is one of the oldest mutual fund complexes in the United States. Through its subsidiaries, Waddell & Reed Financial, Inc. provides investment management and financial planning services to clients in the United States and internationally.

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HC Government Realty Trust Buys Immigration and Customs Enforcement Property in San Antonio

HC Government Realty Trust Inc., a Regulation A REIT that invests in federally-leased properties, has purchased an Immigration and Customs Enforcement facility in San Antonio, Texas for approximately $8.4 million.

The ICE facility is an approximate 39,000-square-foot, single-tenant office building which was redeveloped to meet the requirements of the Department of Homeland Security. The property is located at 1015 Jackson Keller Road and is 100 percent leased to the United States of America under a 10-year commitment ending in April 2027.

HC Government Realty Trust acquires and operates built-to-suit properties leased to the United States of America “that fulfill mission-critical or direct citizen service functions” primarily located across secondary or smaller markets.

The company focuses on acquiring properties that range between 5,000-50,000 rentable square feet, and that are newly constructed or retrofitted to post-9/11 standards. The company said that it has identified more than 1,300 potential acquisition targets that fall within these parameters.

HC Government Realty Trust was formed in 2016 and oversees a portfolio of 13 properties occupied by federal agencies, including the Drug Enforcement Administration, the Federal Bureau of Investigation, the Social Security Administration, and the Department of Transportation. The company is externally managed and advised by Holmwood Capital Advisors LLC and raised $5.9 million in investor equity as of November 2017, according to a filing with the Securities and Exchange Commission.

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DOL Delays its Fiduciary Rule for 18 Months

The Department of Labor announced on Monday that certain fiduciary rule provisions will be extended for 18 months until July 1, 2019. The provisions were slated to take effect on January 1, 2018.

The delay includes the special transition period for the best interest contract exemption (PTE 2016-01); the class exemption for principal transactions (PTE 2016-02); and certain amendments to the prohibited transaction exemption involving insurance agents and brokers (PTE 84-24).

The fiduciary rule seeks to eliminate conflicted retirement advice and is currently under review as ordered by President Trump earlier this year. Trump directed the DOL to examine the rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.

The DOL said that the extension gives the necessary time “to consider public comments submitted pursuant to the July request for information, and the criteria set forth in the presidential memorandum of Feb. 3, 2017, including whether possible changes and alternatives to exemptions would be appropriate in light of the current comment record and potential input from, and action by the Securities and Exchange Commission, state insurance commissioners and other regulators.”

The agency intends to complete its review under the presidential memorandum and decide whether to propose further changes.

During the extended transition period, the DOL maintains that fiduciary advisers must continue to provide advice that adheres to “impartial conduct standards.”

“These fiduciary standards require advisers to adhere to a best interest standard when making investment recommendations, charge no more than reasonable compensation for their services, and refrain from making misleading statements,” the DOL said in a statement.

The DOL also extended the temporary enforcement policy to cover the 18-month extension period. From June 9, 2017 to July 1, 2019, the DOL will not pursue claims against fiduciaries working “diligently and in good faith” to comply with the fiduciary rule and the principal transactions exemptions.

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