Banker Views Liquidity Events as PNLR Litmus Test
04/18/2014 | by Allen Kenney

David Lazarus, senior managing director with Eastdil Secured, joined for a video interview during REITWise 2014: NAREIT’s Law, Accounting and Finance Conference held in Boca Raton, Fla.

Lazarus was asked about the lessons learned from the recent wave of liquidity events held by public, non-listed REITs (PNLRs).

“What we’ve seen as we’ve participated with these companies in generating liquidity for shareholders is that seems to have become the seminal event for shareholders to be able to evaluate the performance of these REITs over time,” he said. “There are some of these [PNLRs] that have been in existence for more than a decade. On the other hand, there are some that have been existence for 18 months, two years, three years and created liquidity. Because of the nature of the business, you understand you’re getting a dividend, and you know that you’re getting it as some point marked to [net asset value]. But the realization of your investment is really that liquidity event.”

As such, the liquidity events represent a “litmus test” for capital raising, according to Lazarus.

Lazarus also offered his opinion on the future of non-listed REITs. He noted that PNLRs raised approximately $20 billion in 2013, the best year on record and a “significant increase” from the year before that.

“They are now a bit more cycle-tested,” Lazarus said. “My supposition here would be that they’re here to stay. I think that the financial industry and regulatory bodies are spending a lot of time making sure that they’re doing the right things for investors, and that will only make the product more acceptable over time. Frankly, for the traded market, it has become an incubator either for new publicly traded companies or for larger existing traded companies to purchase large groups of assets that have been aggregated in a different format with a different shareholder base with different objectives. I think it will be a bigger industry five years from now.”