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GlobeSt.com UPDATE: SKB Swapping Public REIT for Private Fund

PORTLAND, OR-Despite having all the pieces in place, ScanlanKemperBard Cos. opts to hold off on its plans for a public, non-traded REIT, citing concerns about conflicts with its existing business and intelligence about a new deep-pocketed player in the market. Instead, the company is now planning for its first private equity fund.

By Brian K. Miller | Updated on January 23, 2005

PORTLAND, OR-Locally based ScanlanKemperBard Cos. is holding off on launching the public, non-traded REIT it has been planning for the past year. Company principal Bob Scanlan tells GlobeSt.com that despite having all the pieces in place, for a variety of reasons he has chosen to put it on the back burner for the time being while the company instead launches its first private equity fund.

SKB invests in real estate on behalf of about 450 high-net-worth individuals, families and trusts. The public-non-traded REIT wasn’t designed for its existing clients, which typically invests between $100,000 and $1 million in a deal and must have a minimum net worth of $1 million or be earning $200,000 annually alone or $300,000 as a couple. The REIT shares, on the other hand, could be sold to anyone through a national network of broker-dealers and typically attracts investments of between $1,000 and $50,000, with the average being about $23,000 per person.

Scanlan tells GlobeSt.com that while going through the approval process to operate its public, non-traded REIT, company principals became concerned that the new product may be perceived as taking his focus off the high-net-worth clients with whom they have built the business to date. They also have concerns about the rapid proliferation of such REITs–which numbered six at the end of 2003 and now stands at 29, either in existence or in the planning stage–and the fact that the heavy up-front fee structure runs counter to SKB’s existing business, which makes its profit only if there is significant upside on the ultimate disposition of an asset.

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