PNLR Liquidity Events Changing, Lawyer Says

Ken Betts, international partner with Locke Lorde LLP, joined REIT.com for a video interview during REITWise 2015: NAREIT’s Law, Accounting and Finance Conference held in Phoenix.

Betts noted that liquidity events are becoming more common in the public non-listed REIT (PNLR) sector. He described two different kinds of liquidity events for PNLRs. Roughly 50 percent have consisted of mergers and acquisitions (M&A). The other half have come through initial public offerings (IPOs).

“What you’re seeing is a progression in the thought process of sponsors as to how to more effectively get the liquidity events to occur,” Betts said. As an example, he pointed out that PNLRs are moving away from “phased-in” IPOs to a “tender offer concept” allowing for immediate sales of shares by existing investors.

“What this means is that sponsors recognize the necessity for liquidity events and are being very clever and creative in the way they’re implementing liquidity events,” he said.

Looking ahead, PNLRs will remain “a very robust form of real estate investment,” according to Betts. However, he cited three factors that could change the outlook for PNLRs.

First, liquidity events must continue to be successful, Betts said. Additionally, PNLRs have to address regulatory changes, according to Betts. Lastly, he said investors’ reactions to rising interest rates will influence the future market for PNLRs.

Betts also said he foresees more REITs coming from the infrastructure real estate segment.