Daily NAV Offering Going Nowhere

Daily NAV Offering Going Nowhere

Postby losemoneynow » Fri Apr 20, 2012 10:58 am

Nontraded REIT sponsors see the writing on the wall as FINRA and the SEC continue to scrutinize the performance of the industry. The easy retail money chasing yield might not flow through the front door so quickly if investments have to be shown net of fees on the monthly statements. Thus, grandma and grandpa might be a bit surpurised to surprised to see that the $100,000 they invested in a NTR is actually $85,000 when they receive their first statement. We can only hope this comes to pass as this will all but decimate fund raising efforts through advisors held to a "suitability" standard. I'm guessing these old folks might want to know why $15k was vaporized day one and where that money went.

Which leads me to the latest craze; creating perpetual life, daily NAV offerings. ARC went effective in AUGUST with their daily NAV offering. This REIT has failed to raise any money. Why? Because selling shares through advisors held to a "fiduciary" standard is a helluva tougher sale than sellling product through advisors held to a "suitability" standard. Ever met a wholesaler from a NTR? Not the sharpest tools in the shed and these "fee for service" advisors will actually ask some tough questions when the wholesaler comes a calling. Some might even scrutinize the real estate that is being acquired. In ARC's case, the first asset this fund acquired is in Chili, NY....huh? That's right, a Fed Ex facility paying north of $13 in rent in suburban ROCHESTER. Does this sound like institutional quality real estate to you? This is an asset paying significantly above market rent in a trade area with no future prospects for growth. ARC may have piled up this kind of stuff in its other programs and gotten away with it but I doubt the daily NAV space will be so receptive to assets acquired in tertiary markets with no upside potential. All I can is buyer beware!

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