Cole Equity Raise Up 56 percent in 2016, Eyes Wirehouse Distribution
Vereit (NYSE: VER), the publicly-traded real estate investment trust formerly known as American Realty Capital Properties Inc., released its earnings results for 2016 and the fourth quarter.
Cole Capital, the company’s investment management segment, sponsors and manages five publicly registered, non-traded REITs, three of which have ongoing public offerings. Cole’s open REITs include Cole Credit Property Trust V, Cole Office & Industrial REIT, and Cole Real Estate Income Strategy, a daily NAV REIT.
On a Thursday conference call, Vereit CEO Glenn Rufrano discussed Cole’s financials, its new selling agreements, the Department of Labor’s fiduciary rule, and Blackstone’s entry into the space.
During the quarter, Cole raised $104 million of capital on behalf of its REITs, including $36.5 million through their respective distribution reinvestment plans. This is a decrease of 30.8 percent compared to the fourth quarter of 2015 when Cole’s REITs raised $150.2 million, including $33.8 million of DRIP proceeds.
In 2016, Cole increased its capital raise 56 percent to $629.7 million, including $142.6 million of DRIP proceeds, compared to 2015 when the REITs raised $403.7 million, including $132.8 million of DRIP proceeds. The company increased its market share to 10.8 percent and was ranked fourth by Stanger in its 2016 year-end sponsor ranking – compared to number 13 in 2015.
Cole noted that the increase in capital raise was due to new broker-dealer relationships, as well as certain broker-dealers lifting the suspension of their selling agreements from the ARCP accounting scandal of 2014. Cole Office & Industrial REIT secured 16 new selling agreements, and Cetera Financial Group recently began selling Cole products.
Cole invested $173.1 million in 15 properties on behalf of the Cole REITs in the fourth quarter of 2016, compared to $236.4 million in 26 properties during the same time last year. For 2016, the company invested $660.2 million in 55 properties on behalf of its REITs, compared to $992.2 million in 158 properties for 2015.
In addition to possibly bringing on larger platforms in the future, Rufrano commended Blackstone for its entry into the non-traded REIT space and hinted at being open to selling Cole’s products through wirehouses in the future.
“What Blackstone has done is very good – we hope – for the whole industry, having the wirehouses sell their product,” said Rufrano. “We would like to piggyback on that very frankly – that would be very good for us. We continue to work with the wirehouses as we do the larger broker-dealers to sell more product over time.”
Rufrano also discussed the fiduciary rule that is scheduled to begin implantation in 45 days.
“I think we’d all would agree that the fiduciary rule is a good thing. People should be fiduciaries – The problem has been the definition of fiduciary. What has been happening is, in light of poor definition (in my view – from the DOL) the broker-dealers themselves have been creating definitions that they believe work,” said Rufrano.
He added, “That’s going to be very helpful this year. For instance, if you have a [daily NAV] product with no commission, that’s an easy choice. But T shares, under certain circumstances, are being considered applicable to that rule. It’s working its way through the system as we speak. Larger companies have come up with their own internal proposals on how to meet that rule. As those decisions get made, it will help us move forward in 2017.”
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