After shepherding a handful of nontraded real estate investment trusts to the public markets, American Realty Capital CEO Nicholas Schorsch is set to launch a public offering for a broker-dealer that specializes in taking illiquid REITs public.
RCS Capital Corp., a new venture of Mr. Schorsch's, said on Wednesday it intends to sell 2.75 million shares of common stock, with an expected IPO price of $19 per share to $21 per share. After registering with the Securities and Exchange Commission in February, RCS Capital Corp. on Wednesday issued a free writing prospectus outlining its IPO.
Because RCS Capital Corp. is in its quiet period, Mr. Schorsch was not available to comment, said Tony DeFazio, a company spokesman.
American Realty Capital has been a leader in the nontraded REIT industry in creating "liquidity events" for investors, meaning returning capital to clients through a REIT merger or listing on an exchange. After the credit crisis, nontraded REITs were widely criticized for several shortcomings, including a lack of liquidity. An increasing number of such REITs, however, have been able to have "liquidity events" as investors' appetites for listed REITs – and the dividends they kick off - remain strong.
One example: the formerly nontraded Chambers Street Properties REIT, with a $2.5 billion market capitalization, listed Tuesday on the NYSE. According to the prospectus, American Realty Capital has executed four liquidity events in the past year-and-a-half, creating $2.7 billion in shareholder value by total cash and stock appreciation, including dividends.
At the midpoint of $20 per share, the RCS Capital Corp. offering would raise $55 million if sold completely.
That's a modest amount, but would allow its broker-dealer and investment bank, Realty Capital Securities Corp., to expand its ability to sell other illiquid investments. Those nontraded REITs and business development companies would be created by sponsors looking for distribution into independent broker-dealers, which commonly have no investment banking groups of their own to create products for clients.
According to the prospectus, the company's use of proceeds from the IPO "is to expand lines of business by funding internal growth and by acquiring complementary businesses, as well as for general corporate needs."
Mr. Schorsch is executive chairman of the new company. The company, which is scheduled to price the week of June 3, will trade on the NYSE under the ticker symbol RCAP. The new company's market capitalization is expected to be $535 million after the offering, based on a $20 per share offering price. According to the prospectus, the management expects to pay an annualized dividend of 72 cents, payable quarterly in the third quarter of 2013. That's equivalent to a 3.6% dividend yield, again based on a $20 per share price.
The managing underwriters are two small broker-dealers, JMP Securities and Ladenburg Thalmann & Co. Inc., which has a network of independent broker-dealers that have sold American Realty Capital REITs.
Realty Capital Securities, the broker-dealer, is expanding its market share of equity raised in the nontraded REIT industry. In 2012, the B-D accounted for 27.9% of the equity raised
24 May, 2013
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Source: http://www.investmentnews.com/article/20130522/FREE/130529969
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