FINRA Notice Impacting PNLR Fundraising, Analyst Says

Ross Prindle, managing director at Duff & Phelps, joined REIT.com for a video interview at REITWise 2016: NAREIT’s Law, Accounting and Finance Conference at the Marriott Marquis in Washington, D.C.

Prindle said the Financial Industry Regulatory Association’s (FINRA) Notice 15-02 is having a significant impact on the public non-listed REIT (PNLR) market. Previously, he explained, PNLRs could wait until after they had concluded selling shares before reporting net asset value (NAV) to investors on customer account statements. Under 15-02, PNLRs have to report NAV within 150 days after the two-year anniversary of breaking escrow and then annually after that.

Prindle said the new system avoids the previous scenario in which PNLR shares failed to reflect market volatility and organizational expenses.

“Regulators were looking for transparency and a quicker valuation of the shares onto customer account statements,” according to Prindle.

Prindle noted that increased transparency concerning the value of PNLR shares is already starting to “hurt fundraising a little bit.”

Turning to the commercial mortgage-backed securities (CMBS) market, Prindle discussed the market’s ability to handle the wave of paper coming due in the next couple of years.

“Either the market will get fixed, spreads will tighten, and people will understand how to price the bonds and they’ll be able to lend again, or you’ll see other lenders stepping in to fill the void,” he said.