Thursday, September 04, 2014

The Quiet Liquidity Event

Liquidity events for non-traded REITs have become so routine that Tuesday's announcement that Cole Corporate Income Trust (CCIT) is being acquired by Select Income REIT (SIR) seemed a non-event.  CCIT investors can choose to take $10.50 per share in cash or receive .36 shares of SIR stock for each CCIT share.  Neither the cash option or the stock option can exceed 60% of the total.  The merger values CCIT at $3 billion and is expected to close in early 2015.

The Wall Street Journal's article on the transaction is worth reading, and here is the Bloomberg article on the deal.  American Realty Capital Properties / Cole Capital's press release on the transaction notes that $.20 per share is being paid for incentive fees and transaction costs.  I like this disclosure, as many of these non-traded REITs' liquidity events involve fees to their sponsor firms.  I have not seen the incentive fees so clearly disclosed before and would like to see these listed on all future liquidity events.

Complacency is never good.  Non-traded REITs are long-term, illiquid investments, and liquidity events should not be viewed as a regular occurrence.  The market has favored liquidity events for a few years, but this has not always been the case, and markets can change fast.

Speaking of liquidity events, I was on vacation when the NorthStar Realty Finance (NRF) agreed to acquire Griffin-American Healthcare REIT II in a $4 billion transaction.  By the time I got back to work most of the news on the deal had been out for more than a week making any thoughts I had on the deal stale.  I am still watching for updates and will comment as appropriate.


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