AR Global, the alternative investment sponsor controlled by Nicholas Schorsch, said on Monday it had reached an agreement to sell the investment adviser of Business Development Corp. of America, a nontraded business development company it started, to Benefit Street Partners, the credit investment arm of Providence Equity Partners, a private equity firm.
Investment advisers to BDCs and nontraded REITs provide management services to those entities and collect fees for doing so.
Terms of the deal were not released in the latest SEC filing from Business Development Corp. of America. The closing is contingent upon the approval of a committee of Business Development Corp.'s independent directors and its stockholders.
Jesse Galloway, a spokesman for AR Global, formerly known as American Realty Capital, did not return calls seeking comment.
One industry executive, who asked not to be named, said that the asking price for the investment adviser of Business Development Corp. of America could be as much as $70 million.
“I'm not sure of the number, but given the fund has $2.5 billion of assets with a 1.5% asset management fee, it has to be in the $70 million range,” said the source.
That figure is close to two times the annual management fees that Business Development Corp. of America pays to its investment adviser. According to the proxy statement for the company from April, Business Development Corp. of America accrued approximately $36 million in base management fees in 2015 payable to the adviser. The company paid approximately $34.4 million of these fees last year, according to the proxy.
If the deal is approved, Benefit Street Partners intends to: invest in the company at its current net asset value; recommend four additional independent directors to expand its board; and replace existing insider directors with the top management of Benefit Street.
Business Development Corp of America's net asset value at the end of March was $8.86 per share. It began raising money in 2011 and was originally sold to investors at $10 per share. Realty Capital Securities, which closed its doors in December after a proxy fraud scandal, was the wholesaling broker-dealer for Business Development Corp. of America.
(See:
Nontraded REIT sales fall off a cliff as industry struggles to adapt
A variety of changes are afoot at AR Global. In April, InvestmentNews reported that AR Global was
attempting to consolidate more than a half-dozen real estate investment trusts with almost $10.5 billion in assets. Weeks later, a former independent director of two nontraded real estate investment trusts controlled by AR Global
claimed a “manifest conflict of interest” in the potential merger of one of those REITs into a related company.
