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Jacob Frydman Eyes $1.3Bln Capital-Raise
Dec 2011

Jacob Frydman Eyes $1.3Bln Capital-Raise Through Non-Traded REIT.

December 2011 -

Commercial Real Estate Direct Staff Report New York investor Jacob Frydman is looking to get into the non-traded REIT world.

He has filed to raise up to $1.3 billion of equity through the sale of shares in United Realty Trust Inc., which would invest in a broad range of commercial real estate - including debt instruments, such as bridge and mezzanine loans - that would involve office, industrial, retail and hotel properties in the eastern United States.

In order to generate cash flow to pay shareholders dividends, the New York company would target stable properties. But in an effort to bolster potential yields, it will also pursue properties that can be repositioned or redeveloped or developed.

In a regulatory filing, the REIT warned that its latter strategy would require additional capital investments, oftentimes in the form of debt, and would entail a greater degree of risk than would its strategy of pursuing stable properties. But the returns they can potentially generate could be much greater.

Like most non-traded REITs, United Realty will sell shares for a pre-determined price. The first 5 million shares will be sold for $9.50 apiece and the remaining 95 million shares at $10 apiece. But instead of subtracting from that commissions and brokerage fees, like most other traditional non-traded REITs, it is tacking on those fees. So investors will actually pony up $10.45 for each of the first 5 million shares sold and $11 each for the remainder.

Nonetheless, only 88.9 percent of the capital raised will actually go toward investments. The rest will go to pay fees.

United Realty's broker-dealer affiliate, Allied Beacon Partners, will earn the commission and dealer-manager fees.

Allied Beacon, a unit of Beacon Acquisition Partners, is an Ontario company led by Robert Mather, a former managing director of equities at TD Securities.

In another break from traditional non-traded REIT habits, 29 months after United Realty has started formally raising capital, or after it has raised at least $650 million, or accumulated a $1 billion portfolio, it will determine the net asset value of its common shares on a daily basis, based on quarterly appraisals of its entire portfolio. But it will only use that to determine the price at which investors could acquire additional shares through the company's dividend reinvestment program, or redeem shares.

Like other REITs, investors in United Realty will have limited liquidity. The REIT will redeem only up to the equivalent of up to 5 percent of its NAV every quarter.

Frydman, who is chief executive of United Realty, has been developing and investing in real estate for more than 30 years and has been involved in more than $1 billion of transactions. Among his best known deals was the development of Two Dag Hammarskjold Plaza, an office-condominium building at 866 Second Ave. in Manhattan that is used by foreign governments as missions for the United Nations. He also acquired and redeveloped the old Global Crossing Building in Manhattan into a mixed-use property. The property at 636 11th Ave. was purchased in 2003 for $46.2 million and sold in 2005 for $91.2 million.

Since 1996, Frydman has acquired 27 properties with 5.4 million square feet for nearly $262 million for his own account. He also was involved in Surrey Equities, which acquired real estate as well.

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