B-Ds join to pitch REITs

Behringer Securities LP and CNL Securities Corp. are teaming up to raise capital for a pair of nontraded real estate investment trusts. Global Growth Trust Inc. and Global Income Trust Inc. are sponsored by CNL but will be marketed by both broker-dealers. The arrangement gives CNL access to a greater range of clients without having to add additional sales staff, and gives the sales staff at Behringer something to offer clients while it is between products, executives at the firms said. The deal came together in the past six weeks and probably wouldn't have happened had Mark Petersen, formerly of CNL, not joined Behringer as president in January. “We had two funds that Mark was very familiar with. Our business plan called for us to hire more salespeople, but when we started talking, it became clear there was a unique way to raise dollars for these funds quickly,” CNL president Jeff Shafer said. It is no surprise that nontraded- REIT sponsors are looking for ways to save money when raising capital. Increased scrutiny over valuations and the real estate market's struggles have forced some broker-dealers and REIT sponsors to hunker down. Summit Brokerage Services Inc., an independent broker-dealer, last month suspended its selling agreements with sponsor KBS Holdings LLC following a recent lawsuit against one of the latter's REITs. Meanwhile, Wells Real Estate Funds, an industry powerhouse, laid off its executive sales staff over the past month in an effort to cut costs. And one smaller nontraded REIT, Paladin Realty Income Properties Inc., last week told investors that it is ending the sale of its stock next month because it lacks the scale needed to cover expenses. Mr. Petersen said that he was open to the selling agreement because it gives Behringer's sales force a chance to keep busy over the summer while the firm is between products. The arrangement is slated to last for 12 months, and though it could be extended, both Mr. Petersen and Mr. Shafer emphasized that it is a one-time agreement. [email protected]