Thursday, November 29, 2012

Getting Ready to Wait

Cole Credit Property Trust II (CCPT II), in response to its now year-and-a-half-old liquidity event proclamation, disclosed in an 8-K earlier this month that "numerous potential bidders" are looking at all or part of the REIT.  The 8-K also said that Cole has asked the bidders to submit any offers by the end of November, which is fast approaching.  I, for one, am not delaying Holiday shopping plans waiting around to analyze an early-, mid-, late- or post-December 8-K filing detailing a liquidity event for CCPT II.  I'll believe it when I see it.

Is it me or is the "or part" language interesting?  Except as I discuss below, I'm skeptical that Cole would sell CCPT II in three parts - single tenant retail, multi-tenant retail and office and industrial.  CCPT II's prior disclosures have mentioned partial sales before, but this is the first time three distinct portfolio sectors have been identified.   A partial sale would be messy and time consuming.   The second best scenario for Cole is an all-cash sale where it can try get as much money as possible recycled into its two current non-traded REITs.  In my opinion, the best option for investors is one where they receive full, immediate liquidity  - none of this staged, multi-period listing nonsense - while keeping the option to continue receiving a high distribution.

I have stated before that I think Cole will try and pull a WP Carey and provide liquidity to investors while keeping control of CCPT II's assets. Slicing the portfolio into thirds makes this hypothesis / guess less a stretch.  Cole's Corporate Income Trust can buy the office assets while Cole Credit Property Trust IV buys the retail assets.  This is the best scenario for Cole.  Heads Cole wins, tails Cole wins. 

A commenter in my last post on CCPT II stated correctly that in a complete asset sale Cole would not have to internalize its advisor.  While true, I don't see Cole, or any non-traded REIT sponsor that hasn't waived an internalization fee, selling a portfolio without negotiating some form of liquidation payday, whether through internalization or some other form.   Cole didn't hire two investment bankers for nothing. 

No comments: