Cole Launches Daily NAV REIT

We did not have sex with that Pension Board!
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losemoneynow
Posts: 22
Joined: Tue May 11, 2010 5:29 pm

Cole Launches Daily NAV REIT

Post by losemoneynow » Fri Dec 16, 2011 2:21 pm

According to the latest SEC filings, a similar product to the the Cole Daily NAV REIT was launched by ARC and has failed to raise capital. While it is very early in the process, the big question many of us are asking is: Will advisors held to a fiduciary standard of care actually recommend this product to their clients? And if so, what advantage would a non-traded REIT with daily liquidity have over the plethora of publicly traded REITs? The short answer is the dividend yield. ARC and COLE are trying to offer a yield that exceeds what might, on average, be available from the publics. How to pay that yield? I submit the following language from Cole's Daily NAV S11:

"We may pay distributions from sources other than cash flow from operations, including from the proceeds of this offering, from borrowings or from the sale of properties or other investments, among others, and we have no limit on the amounts we may pay from such sources."

Yes it's the same ole game they play with the products they market to advisors held to a "suitability" standard. Will Registered Investment Advisors, whom I presume will actually read the prospectus, recommend a cash flow stream that can include incoming cash from new investors to their clients? Time will tell I suppose.

As to that wonderful daily liquidity feature, here's what the S11 has to say about that:

"While we designed our redemption plan to allow stockholders to request redemptions on a daily basis, of all or any portion of their shares, our ability to fulfill redemption requests is subject to a number of limitations (namely liquidity)....we may not always have sufficient liquid resources to satisfy redemption requests and you may not always be able to redeem your shares."

So the question is...will you have liquidity when you really need it? If you believe you won't have liquidity in a crunch, and you demand an illiquidity premium for such an occasion, is a higher dividend yield (a yield that can erode capital if not fully covered by cash flow from real estate) vs. the publicly traded REITs fair compensation for the illiquidity?

losemoneynow
Posts: 22
Joined: Tue May 11, 2010 5:29 pm

Re: Cole Launches Daily NAV REIT

Post by losemoneynow » Tue Nov 13, 2012 9:12 am

Epic Fail

No properties acquired in this program for 2012. I guess fee for service advisors are a little more discriminating than their compadres that hawk NTLs in search of big fees. How long can Cole afford to keep feeding the overhead associated with this program? :roll:

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