CIM Group is entering the non-traded real estate investment trust space through the acquisition of Cole Capital, a subsidiary of Phoenix-based VEREIT, for $120 million in cash, the groups said last week. The deal is also expected to generate $80 million in fees for VEREIT.
“CIM is acquiring expertise and what we believe are best-in-class performing funds in the net/finance lease sector,” said Richard Ressler, CIM’s co-founder, in last week’s statement. “We believe that adding net/finance lease offerings to CIM’s product capabilities is complementary to CIM’s real asset platforms.”
Both buyer and seller declined to comment on the deal.
VEREIT had long planned to sell Cole, which was not a strategic fit for the REIT, and had lined up several potential institutional buyers, a source with knowledge of the deal said. Although CIM, like other private equity real estate firms, had access to the wirehouses to capitalize feeder vehicles for high-net-worth capital in its institutional funds, the Cole purchase gives CIM broader access to independent broker-dealers and registered investment advisors, the source said.
“We believe that adding net/finance lease offerings to CIM’s product capabilities is complementary to CIM’s real asset platforms.”
– Richard Ressler
One source said CIM will continue to market Cole’s current vehicles, and in the long-term, the firm will likely launch or market other products through Cole’s retail channels. Cole currently operates five closed- and open-ended non-traded real estate investment trusts with a total of $7.6 billion of assets under management.
CIM is joining several of its peers in the non-traded REIT space, though to date, most firms have created the products internally – an expensive and time-consuming process – rather than acquiring an existing platform. Recently, Blackstone launched Blackstone Real Estate Investment Trust in August to raise up to $5 billion; Starwood Capital Group filed a registration form with the Securities and Exchange Commission in October; and TH Real Estate is planning to register a vehicle in the coming months, PERE previously reported.
“When you look at the institutional players, they have historically had great relationships with wirehouses, sovereign wealth funds and endowments,” a source unaffiliated with the Cole deal said. “They’re new to the independent broker-dealer space. It’s a lot more blocking and tackling at that level, with an expensive build-out to get to thousands of advisors. When you look at what CIM’s done in regards to Cole itself, Cole has a strong reputation and a broad distribution network into the independent broker-dealer space. What it does is it really complements what CIM has today and allows them to leverage not only the product but also the platform.”
CIM oversees $18.1 billion, according to its website.