A Deeper Look at CNL
February 18, 2020 | James Sprow | Blue Vault
On February 11, Blue Vault presented a webinar exploring the performance of programs sponsored by CNL Financial Group (“CNL”). Founded in 1973 by James M. Seneff, Jr, CNL and/or its affiliates have formed or acquired companies with more than $34 billion in assets and have raised more than $19 billion in private and public offerings through the broker-dealer and institutional investment communities.
CNL has sponsored seven nontraded REITs that have had full-cycle events. The annualized shareholder returns for early investors in these nontraded REITs ranged from a maximum of 10.49% for CNL Growth Properties in 2017 to -1.18% for CNL Lifestyle Properties that same year.
CNL currently has two nontraded REIT programs. CNL Healthcare Properties, Inc. closed its public offering in 2015 after raising over $1.7 billion. From its portfolio of 142 properties at the end of 2018, the REIT has been selling properties as part of its Strategic Alternatives planning. In May 2019 the REIT sold 59 properties to Welltower Inc. for $1.25 billion that had been acquired for $1.01 billion. In May the REIT paid a special distribution of $2.00 per share related to the sale of these properties. Its adjusted net asset value as of December 31, 2018 was $7.99. The REIT cut its quarterly distributions for Q2 2019 to $0.0512 per share from $0.1164 per share. As of February 6, 2020 the REIT owned 77 properties with a combined acquisition price of $1.6 billion. With the reduction in the distribution, the yield is 1.94% annualized based upon the last offering price of $10.58. The REIT’s MFFO ratio when compared to distributions including DRIP for Q3 2019 was just 48%.
CNL Healthcare Properties II, Inc. raised only $50.8 million in its offering that closed in October 2018. It reduced its three-property portfolio by selling a Mid America Surgery center in May 2019 for approximately $15.4 million which the REIT purchased for approximately $14 million in December 2017. In January 2020 the REIT signed an agreement to sell its remaining two Assisted Living properties to Waypoint Residential LLC in February for $48.85 million. This REIT had suspended cash distributions as of Q2 2019 and stopped redeeming shares as of Q1 2019. The sale of its final two properties and a liquidating distribution will produce a full-cycle event and provide early investors with an estimated annualized return of less than 4.5%.
CNL sponsors the nontraded CNL Strategic Capital, LLC, a program that invests in the equity and debt of small businesses. Its offering was declared effective in March 2018 and is anticipated to close in March 2021. The program reprices its shares monthly and pays distributions monthly. The LLC invests in companies with revenues between $25 million and $250 million, the ability to generate consistent cash flows through different economic cycles, with durable and growing businesses, market leadership and sustainable competitive advantage, and strong management teams.
As of September 30, 2019, the company had total assets of $149.6 million. It had paired equity and debt investments in Lawn Doctor, Polyform Products and Auriemma U.S. Roundtables. Since that time, it has made additional investments in two more companies, Milton Industries and Resolution Economics. The Company’s estimated performance returns as reported in Blue Vault’s report as of September 30, 2019, was 9.56% for Class A shareholders for 2018, and 4.76% YTD 2019, assuming all distributions were reinvested and before any sales loads. Class T shareholders had an estimated 2018 total return of 7.94%, and a 4.01% estimated YTD 2019 return, assuming all distributions were reinvested and before any sales loads.Go Back
I have been in the financial services industry for 20 years and our firm provides an education platform that gets clients to “think differently” about their financial picture. For many years we have communicated to clients the need to diversify their portfolios using alternative asset classes and more specifically, private non-traded investments. Due diligence on these types of financial vehicles is essential and when I learned about Blue Vault in 2010, our firm immediately began using their material as a tool to build confidence in the minds of our advisors on which alternatives to recommend to clients. I am impressed with the way Blue Vault continues to add value to their subscribers and I view their publication as a tremendous resource in today’s complex world.