W.P. Carey Plans to Launch a Non-Traded BDC
Another non-traded REIT sponsor plans to launch a non-traded business development company (BDC). W.P. Carey revealed last week in a filing that the Carey Income Fund 2015 (the Fund) registered with the SEC in September, but has yet to be declared effective.
Business development companies typically invest in the debt or equity of middle market companies that may not be able to secure financing at favorable terms or at all through more common channels like banks.
W.P. Carey, an experienced, successful real estate investor, will follow the industry trend and partner with an experienced middle market lender.
Franklin Square Capital Partners, the pioneer of the first non-traded BDC, partners with GSO/Blackstone.
REIT sponsors that have jumped into the BDC market have done the same.
Hines offers a non-traded BDC, HMS Income Fund, that’s sub-advised by a subsidiary of Main Street Capital Corporation (NYSE: Main), a publicly-traded BDC. CNL’s Corporate Capital Trust is sub-advised by KKR Asset Management.
Just recently NorthStar Asset Management announced that it will file to launch a non-traded BDC sub-advised by Och-Ziff Capital Management Group, LLC.
As for the Carey Income Fund, W.P. Carey, through Carey Credit Advisors, LLC, will handle overall management while Guggenheim Partners Investment Management (Guggenheim), a privately held global financial services firm with over $210 billion in assets under management, will manage day-to-to decisions related to the investment portfolio.
Guggenheim will be responsible for identifying, evaluating, and structuring the investments of the Fund, although both advisors (Guggenheim and W.P. Carey) will participate in approving investment decisions.
The Fund’s investment objectives are to provide investors with current income, capital preservation, and to a lesser extent, long-term capital appreciation. It will invest in large, privately-negotiated loans to private middle market U.S. companies with earnings before interest, taxes, depreciation and amortization (EBITDA) of $10 million to $50 million. Typical loan sizes will range from $20 million to $120 million.
Also, the Fund will seek out businesses with a clear competitive advantage.
“These companies generally possess distinguishing business characteristics such as a leading competitive position in a well-defined market niche, unique brands, sustainable profitability and cash flow, and experienced management,” according to the Fund in a filing.
The Fund will offer both Class T and Class A shares via a $200 million and $500 million offering respectively. Class T shares are offered at an initial price of $9.52 with a 5.5% front-end load, while Class A shares are offered at $10 with a 10% load.
