Nick Schorsch, a dynamo in the nontraded real estate investment trust business, is now buying a leading independent broker-dealer, First Allied Securities Inc.
RCAP Holdings LLC, which is controlled by Mr. Schorsch and a team of managers, said on Wednesday morning it was acquiring the outstanding shares of First Allied Holdings Inc., which includes First Allied Securities and the Legend Group. In total, First Allied Holdings has 1,500 independent contractor registered reps and financial advisers who control $32 billion in client assets. First Allied Securities generated $233 million in gross revenue last year.
Terms of the deal were not revealed. Private equity manager Lovell Minnick Partners has been the owner of First Allied Holdings. RCAP Holdings owns Realty Capital Securities, the wholesale broker-dealer that distributes Mr. Schorsch's REITs.
Mr. Schorsch is also the CEO of American Realty Capital, a REIT sponsor currently with 13 investment offerings, most of them nontraded REITs. American Realty Capital has acquired and managed more than $10 billion in real estate since 2001.
Over the past few years, Mr. Schorsch has shaken up the nontraded REIT industry by delivering speedy returns of investors' capital through “liquidity events” such as mergers and share listings. He has also preached transparency of fees for such REITs, many of which saw their value plummet during the real estate collapse of 2007 and 2008.
In an interview, Mr. Schorsch declined to state the purchase price of First Allied, but said that RCAP Holdings made an initial commitment of $200 million for the purchase and growth of First Allied. He also said that First Allied would operate as an independent company and continue to be led by its current management, including First Allied's CEO Adam Antoniades.
“We approached First Allied because we thought this was a great team,” Mr. Schorsch said. “We weren't shopping for 15 broker-dealers. We were looking for a great one.”
“What was attractive for us in RCAP was seeing an organization that's willing to challenge the status quo and commit capital,” Mr. Antoniades said.
Mr. Schorsch said that the acquisition of First Allied was in no way a deal to broaden the distribution of the nontraded REITs he oversees. As an example, he pointed to leading insurance companies such as American International Group Inc. who own independent broker-dealers that sell house products but also have advisers who demand open architecture to sell the products they choose.
“I don't think anyone can say we're buying distribution,” Mr. Schorsch said. “We sell only three products on First Allied's platform. They're not a huge distributor for us. We want to invest in a company that is focused on the mass affluent.”
It's been a busy June for Mr. Schorsch. Earlier in the month, American Realty Capital Properties Inc., a REIT that Mr. Schorsch runs, announced it had signed a definitive merger agreement with a traded REIT, CapLease Inc. in a deal valued at $2.2 billion. A day later, American Realty Capital Trust IV Inc., one of Mr. Schorsch's net-lease real estate investment trusts, announced it had agreed to buy a $1.45 billion collection of retail properties from GE Capital.
Schorsch talks to INTV on April 27