Another nontraded real estate investment
trust, the Monogram Residential Trust, formerly dubbed the Behringer Harvard Multifamily
REIT I, last week said it was preparing for a “liquidity event,” or a potential listing of its shares on an exchange.
While liquidity events and their announcement for nontraded REITs have seen a pop over the past two months, this one has a bit of a twist; the
REIT's former sponsor, Behringer Harvard Holdings Inc., now Behringer Investments, was a fundraising powerhouse before the real estate crash of 2007 but then fell on hard times. The sponsor saw the valuations of its nontraded REITs and real estate private placements slide, leading a handful of independent broker-dealers to end their selling relationship with Behringer.
For example, the former Behringer Harvard
REIT I Inc., now known as Tier
REIT Inc., last November announced an estimated valuation of $4.20 per share. The majority of the
REIT was sold at $10 per share around the time that it launched in 2003. It has $2.4 billion in total assets.
“This is a good event for Behringer Harvard as a sponsor,” said Kevin Gannon, president and managing director of Robert A. Stanger & Co. Inc., who has worked as an adviser for Monogram
REIT's management during its spinoff earlier this year from Behringer to become a self-managed company. “The criticism against them is that they haven't monetized enough. If it occurs, this is a good event for the Behringer Harvard platform on balance.”
(See also: Duration risk in nontraded REITs: Hiding in plain sight)
Behringer management was sanguine at the prospects of a listing.
“Behringer's management believes that, given the size and composition of the portfolio and other factors, listing the (REIT's) common stock on a national securities exchange may best position the company to maximize stockholder value over the long term,” said Behringer chief operating officer Jason Mattox.
The REIT's chief executive, Mark Alfieri, said in a letter to shareholders last Thursday that the REIT's board had authorized the company to begin the process of exploring a listing on a national securities exchange.
“The board also believes that current market conditions may be favorable for a listing in the near future,” Mr. Alfieri wrote. The REIT's board and management are working with lawyers and investment bankers to explore the process, he wrote.
Meanwhile, the board also increased the valuation of the Monogram Residential Trust to $10.41 per share from $10.03 per share. Mr. Alfieri added in the letter that the valuation did not represent that amount at which the REIT's shares are likely to trade when listed on an exchange. Like most nontraded REITs, the Monogram Residential Trust sold most of its shares for $10 per share.
The REIT began its initial public offering from retail investors in September 2008, days before the stock market crash in a period that saw liquidity all but disappear. It has $2.6 billion in real estate assets and $3 billion in total assets.
“It's got a great portfolio of assets,” Mr. Gannon said, with a significant amount of the portfolio's assets in developments rather than finished apartment buildings. While developments carry more risk than real estate purchases, the strategy could prove effective, since demand for apartment buildings has increased and prices have gone up, he said.
