Nontraded REIT cuts fee to adviser

$2.9 billion KBS REIT II won't pay compensation; other REITS taken same path

Oct 17, 2012 @ 1:06 pm

By Bruce Kelly

nontraded REIT, REIT
+ Zoom

Another large nontraded real estate investment trust plans to wave a heavily criticized fee tied to changes in the REIT's management.

KBS REIT II, which has $2.9 billion in total assets, in a statement on Tuesday said it would not pay an internalization fee or compensation to its adviser, KBS Capital Advisors LLC, should the REIT decide to make a transaction such as acquiring its adviser.

Over the past 10 years, REIT sponsors have consistently imposed the charge — commonly referred to as an internalization fee — when the contract between the REIT and its outside adviser expires, with the REIT then acquiring the outside adviser.

That charge, which has drawn criticism because it typically isn't fully disclosed in offering documents, has cost investors in several prominent REITs hundreds of millions of dollars.

“This announcement gives us the flexibility to choose the best liquidity event, and positions the REIT to take advantage of the changing markets and new opportunities that could maximize shareholder returns without the shareholders having to bear the burden of internalization fees,” Charles Schreiber, chief executive of KBS REIT II, said in a statement.

Other major REIT sponsors this year have said they are also forgoing such fees.

Wells Real Estate Funds Inc., one of the most prominent sponsors of nontraded REITs, said in June it was taking a pass on charging such an internalization fee for its $6.2 billion Wells REIT II.

Nicholas Schorsch, chairman and CEO of American Realty Capital, which currently sponsors five nontraded real estate securities, said recently that such internalization fees are on the wane and that American Realty Capital does not have such fees for its nontraded REITs.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

DOL fiduciary rule opponents and supporters sound off on Jan. 1 deadline

Senior reporter Mark Schoeff Jr. and managing editor Christina Nelson discuss the latest batch of comment letters on the regulation, this round focused on timing of the full implementation date.

Latest news & opinion

CAPTRUST acquires $19B RIA in its sixth deal this year

With $243 billion in assets, CAPTRUST continues to grow on its own terms.

Fiduciary advocates press CFP Board for specifics on standards changes

Meanwhile, few brokerages and their trade associations, which blasted the DOL's fiduciary rule in comment letters, are responding to the CFP Board's proposal.

Big gains attract new money to emerging markets, but should investors stay?

An estimated $6.7 billion has flowed into emerging-market stock funds and ETFs so far this year, according to Morningstar.

Attorney blasts Finra after regulator loses insider trading case

Lawyer says it was 'slimy' of Finra to publicize the case while it was still being litigated.

Will Jeffrey Gundlach's Trump-like approach on Twitter work in financial services?

The DoubleLine CEO's attacks on Wall Street Journal reporters is igniting a discussion on what's fair game on social media.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print