Cole REIT eyes asset sale or IPO

SEP 02, 2012
Cole Credit Property Trust II, one of the nation's largest nontraded real estate investment trusts, told financial advisers last Monday that it had engaged two investment banks as it pursues a “successful exit event.” Translation: Management is exploring a potential sale of assets or an initial public offering. Investors and their financial advisers watch these exits, known in the nontraded-REIT industry as “liquidity events,” with tremendous interest. The sale of a REIT's assets or an IPO is an opportunity for the adviser of the REIT to return as much capital as possible to in-vestors, who typically pay $10 per share and then collect an annual “distribution” or dividend, usually in the range of 5% to 7%. With almost $3.4 billion in invested assets, Cole Credit Property Trust II is the seventh-largest nontraded REIT that has stopped raising cash and selling its shares, according to research supplied to InvestmentNews by MTS Research Advisors. The trust primarily invests in single-tenant buildings occupied by such retailers as Walgreens and Rite Aid.

HEADING FOR THE EXITS

In a letter to investment advisers, Cole Real Estate Investments chief executive Marc Nemer said that in March the REIT hired Morgan Stanley and UBS Investment Bank “to move as expeditiously as possible toward a successful exit.” The Cole REIT's estimated valuation is $9.35 per share, close to the $10 offering price. The valuations of other large REITs have dropped dramatically — to 30% to 50% of the initial share price — as they've suffered with assets bought at the height of the commercial real estate bubble. The track record for nontraded REITs that have sought to sell assets this year has varied dramatically. In March, American Realty Capital Trust Inc. was listed for public trading at $10 a share. It was trading at $11.83 per share last Friday. On the other hand, Retail Properties of America Inc., formerly the Inland Western Real Estate Trust, opened for trading in April at a split adjusted price of $3.20 per share, far below the $10 that investors paid nearly a decade ago. The price of the Retail Properties of America Trust shares has improved since the listing, however. On April 5, its first day of trading, the REIT closed at $8.75 per share. Shares were trading last Friday afternoon at $11.20, a 28% gain. [email protected] Twitter: @bdnewsguy

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