SAN DIEGO-“Liquidity is our mandate; we are not long-term asset managers.” So said Nick Schorsch, president and CEO of American Realty Capital Properties, during the “Liquidity in Non-Traded REITs: Insights from Industry Leaders” panel at the REISA (Real Estate Investment Securities Association) Spring Symposium here this week.
Schorsch added, “Our job is to find the best path and execute on it.” He also had something to say about mergers and acquisitions, a subject of which he has had firsthand knowledge recently due to his firm’s recent attempts to acquire Cole III, a non-traded REIT run by Cole Real Estate Investment. “M&A is a part of business,” said Schorsch. “Had the deal [for Cole III] gone through, it would have been the most lucrative liquidity event in the history of the non-traded REIT industry.”
Notably absent from the panel, which was moderated by Tony Chereso, president and CEO of FactRight, was Marc Nemer, president and CEO of Cole, who bowed out following weeks of a publicly contentious battle between ARCP, a publicly traded REIT, and Cole over the former’s efforts to acquire the REIT. While the panel was intended to focus on the recent spate of liquidity events among non-traded REITs, it was anticipated to be a showdown between Nemer and Schorsch in light of the recent battle.
Schorsch said that more M&A activity would be seen among non-traded REITs. “It happens all the time among traded REITs, and it will begin to happen more frequently among non-traded REITs.”
Andrew Hyltin, group president, fund management, for CNL Securites Corp., who was also on the panel, added, regarding the ARCP/Cole battle, “This is normal M&A activity. In my view, this has gotten blown out of proportion. There have been lots of headlines, probably more as a result of the personalities involved.”
Schorsch emphasized that non-traded REITs—the backbone of REISA’s membership—are the future. “Tomorrow’s public companies are coming from this room. We are the [traded] REITs of the future. There is life after a non-traded REIT.”
Daniel Goodwin, chairman/CEO of the Inland Real Estate Group of Cos., said that economic cycles are often more determinative of performance than the skill of the management team. “Liquidity only became an issue in the industry after the most recent recession.” He added that every industry remakes itself periodically, “as the non-traded REIT industry has in recent years to the benefit of investors and the industry as a whole.”
After the panel, Chereso commented, “It was an honest conversation on where the market is going. The panel provided insight on the evolution of non-traded REIT products, the challenges the industry has faced over the years and how sponsors have addressed those challenges. The real issue is whether, given the current market conditions and recent liquidity events, are we growing the market organically or recycling investors?”