B-Ds throw in together to pitch nontraded REITs
Amid industry difficulties, CNL and Behringer pair up to scare up cash for property trusts
CNL Securities Corp. and Behringer Securities LP are teaming up to raise capital for a pair of nontraded real estate investment trusts.
Global Growth Trust Inc. and Global Income Trust Inc. are sponsored by CNL but will be marketed by both broker-dealers. The arrangement gives CNL access to a greater range of clients without having to add additional sales staff and gives the sales staff at Behringer something to offer clients while it is between products, executives at the firms said.
The deal came together in the last six weeks and probably wouldn’t have happened without Mark Petersen, formerly of CNL, who joined Behringer as president in January.
“We had two funds that Mark was very familiar with,” said CNL president Jeff Shafer. “Our business plan called for us to go hire more salespeople, but when we started talking, it became clear there was a unique way to raise dollars for these funds quickly.
“It would have taken us months and a fair amount of capital to build a similar sales team,” Mr. Shafer said.
It’s no surprise that nontraded REIT sponsors are looking for ways to save money when raising capital. Increased scrutiny over valuations and the real estate market’s struggles have forced some broker-dealers and REIT sponsors to hunker down.
Summit Brokerage Services Inc., an independent broker-dealer, last month suspended its selling agreements with sponsor KBS Holdings LLC following a recent lawsuit against one of the latter’s real estate investment trusts.
Meanwhile, Wells Real Estate Funds, an industry powerhouse, laid off its executive sales staff over the past month in an effort to cut costs.
And one smaller nontraded REIT, Paladin Realty Income Properties Inc., last week told investors it is ending the sale of its stock next month — after raising $78.7 million over more than four years — because it lacks the scale needed to cover expenses.
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Mr. Petersen said he was was open to the selling agreement because it gives Behringer’s sales force a chance to keep busy over the summer while the firm is between products. “It will continue to keep our reps active and busy raising capital,” he said.
The selling agreement is slated to last for 12 months, and while there is the possibility of it being extended, both Mr. Petersen and Mr. Shafer emphasized that is a one-time agreement and not a sign of a coming merger or combination of operations.
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