Two nontraded real estate investment trusts managed by Nicholas Schorsch's AR Capital have, at least for now, called off listing on a national stock exchange this quarter.
The company pointed to market turbulence and the expected closing of AR Capital's sale to an affiliate of
Apollo Global Management as the reasons.
Both American Finance Trust Inc. and Healthcare Trust Inc. said in filings with the Securities and Exchange Commission that “in light of current market conditions” their boards have determined it is in the best interests of the two companies not to pursue a listing during this quarter.
Both also cited AR Capital's pending sale to
Apollo Global Management as a deterrent. Management of both REITs “recommended that no further action be taken with respect to the pursuit of a liquidity event until the merger transaction is completed,” according to the SEC filings.
At least one industry expert cited another reason: “I suspect [ARC is] not able to hit the original offer price [of $25 a share] and recognizes that the broker-dealer community would not support it,” said Kevin Gannon, president and managing director of investment bank Robert A. Stanger & Co. Inc.
A spokesman for AR Capital, Andrew Backman, said the company had no comment beyond the public filings with the SEC.
As of Monday, the FTSE NAREIT All Equity REITs index was down close to 6% for the year, while the S&P 500 was down about 8% in 2015.
(More: How Nick Schorsch Lost His Mojo)
Both REITs said earlier this year that they intended to list on an exchange.
In August, Mr. Schorsch and AR Capital said they were selling a 60% stake in the company for $378 million in cash and Apollo stock. A renamed entity, AR Global Investments, will own substantially all of the ongoing asset management business of AR Capital.
Mr. Schorsch, the chairman and CEO of AR Capital, burst onto the brokerage industry in 2007 when the company was launched. He later won fans among the numerous registered reps who sold REITs for quickly having liquidity events, or listings on stock exchanges or mergers with other companies. At least five ARC REITs have listed or merged.
The latest AR Capital liquidity event proved difficult. Sold to investors at $10 per share, Global Net Lease Inc. listed in June and its shares on Tuesday afternoon were trading at close to $9, a decline of 10% from its offering price.
Mr. Schorsch's empire has been under siege since October 2014, when it was announced that American Realty Capital Properties Inc., the giant listed
REIT he formerly controlled, had intentionally not corrected a $23 million accounting misstatement in the first half of that year.
American Finance Trust, with $2.2 billion in total assets, was formerly known as American Realty Capital Trust V Inc. It began raising money in 2013 and was sold to investors at $25 per share. Healthcare Trust, with total assets of $2 billion, also was launched also in 2013 and sold to investors at $25 per share. It was formerly known as American Realty Capital Healthcare Trust II Inc.
