Schorsch plans liquidity events for two more REITs

American Realty Capital this month will list shares of ARC Healthcare Trust and ARC New York Recovery REIT

Apr 1, 2014 @ 7:22 am

By Bruce Kelly

American Realty Capital will list shares of two more of its nontraded real estate investment trusts this month, the head of ARC said late Monday.

ARC chief executive Nicholas Schorsch plans the listings to occur in back- to-back weeks. The first will be the $1.73 billion American Realty Capital Healthcare Trust Inc. on April 7. The second will be the $2.05 billion American Realty Capital New York Recovery REIT Inc. on April 15.

Mr. Schorsch is CEO and chairman of both REITs.

Shareholders of the ARC Healthcare Trust will receive a tender off of $150 million at the time of the listing for $11 per share. The REIT was initially launched in February 2011 and sold at $10 per share. The company will list on the Nasdaq Global Stock Market with the ticker HCT.

ARC Healthcare intends to continue payment of monthly distributions at an annualized rate of 68 cents per share.

Shareholders of the New York Recovery REIT, which will list on the New York Stock Exchange, will be offered a $250 million tender offer at the time of the listing for $10.75 per share. The REIT was launched in September 2010 and sold for $10 per share.

Shareholders of New York Recovery REIT will see their dividend cut from 60 cents per share a year to 46 cents per share a year.

“The company believes this rate is competitive with its publicly traded company peers, and that it will increase the company's ability to reinvest in its business and grow its dividend year-over-year, thereby positioning the company to maximize total stockholder value,” according to a company statement.

The two REITs will bring to a half dozen that ARC will have either listed on exchanges or merged with other listed companies, Mr. Schorsch said.

He said the markets were primed for a variety of real estate offerings. “You plan and you prep and you do all the right things,” he said. “The time is just opportune.”

ARC’s ability to shave years from the lifecycle of a nontraded REIT and make listings or mergers more quickly than those in the past has been a hit with advisers, said Eric Schwartz, owner of Cambridge Investment Research, a leading independent broker-dealer. “In the past, after getting into real estate or a REIT, you had to wait 10 years to get out,” Mr. Schwartz said.

“Nick changed the REIT world to some degree,” said Mr. Schwartz . “The strategy was to get in when assets were low, wait a few years and get out when the opportunity was good.”

Mr. Schorsch’s timing was almost perfect, investing in real estate during and after the credit crisis when prices were at lows, Mr. Schwartz said. “It’s been a perfect five year cycle to do that in. Not every cycle will have this explosive growth.”

“Now clients and advisers think that, you invest in a REIT and in five years you will make a lot of money,” Mr. Schwartz said. “It’s been a great run, but advisers can’t think that every five-year period will see performance like that.”

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