Calling it another step forward for RCAP Holdings L.L.C., Nicholas Schorsch, chairman & CEO of American Realty Capital and sister company RCAP Holdings, said it was expanding into the independent broker-dealer financial services business with the acquisition of First Allied Holdings Inc., of San Diego.
Schorsch said Tuesday that New York-based RCAP Holdings has signed a definitive merger agreement to purchase all the outstanding equity of First Allied which, together with The Legend Group, has about 1,500 independent financial advisors who control approximately $32 billion in assets for 300,000 clients. RCAP is a holding company managed by Schorsch and his ARC team of William Kahane, Michael Weil, Peter Budko and Brian Block, with more than $10 billion in assets under management.
The purchase price was not made public, but Schorsch told InvestmentNews that RCAP Holdings had made an initial commitment of $200 million. First Allied, which will continue to operate under its current management structure and brands, will use the money to make substantial investments in technology, add personnel, expand its 401(k) and 403(b) platforms and enhance advisor marketing and lead generation, according to a news release from the firms.
Lovell Minnick Partners, a private equity firm focused on the financial services industry, will be selling its majority interest in First Allied.
For Schorsch, who has been on a significant spending spree for the ARC REITs lately, the First Allied acquisition fulfills RCAP Holdings’ desire to expand its presence in the independent broker-dealer segment of the financial services industry. It has been involved in the wholesale broker-dealer part of the business since 2007. RCAP Holdings focuses on the retail direct investment industry and owns a direct majority stake in Realty Capital Securities, L.L.C., a wholesale broker-dealer and investment banking and capital markets business.
“We believe that the challenges and opportunities we witnessed in the wholesale distribution channel exist in the broader retail network as well, and we see value and opportunity for growth in a paradigm shift toward a sustainable direct relationship between the mass affluent investor and their independent financial advisor,” Schorsch said in the news release.
Weil, CEO of Realty Capital Securities and a RCAP Holdings manager, said RCAP Holdings’ financial strength and proven management track record when paired with the experienced team at First Allied will allow First Allied to “grow and innovate.”
“The association of First Allied with RCAP Holdings and its family of companies allows us to broaden our portfolio of financial companies in order to provide a fully integrated investment solution to the investor, not only indirectly through our wholesale broker-dealer, but to directly reach the individual investor through First Allied’s extensive network of independent financial advisors,” Weil said in the release.
Adam Antoniades, CEO and president of First Allied, who will remain in his position, said in the release that RCAP Holdings “significant financial support” will enable the firm to accelerate implementation of key initiatives. He added that the merger will give First Allied and Legend advisors a competitive advantage.
“Our affiliated advisors will benefit from immediate access to a well-capitalized platform tailored to provide the mass affluent, emerging high-net worth, and retirement-focused investors with the next generation of industry-leading investment solutions focused on durable income and principal preservation,” Antoniades said.
Schorsch has been in the news lately with a series of big deals that have closed in the last few weeks and one that never got off the ground in March and April, the ill-fated attempt to buy Cole Credit Property Trust III for $9.7 billion. Last week, he announced that American Realty Capital Properties, a net-lease REIT, was paying $807 million for a portfolio of 471 net-lease properties from GE Capital. A few days earlier, ARCP had agreed to acquire CapLease Inc., for about $2.2 billion, including debt, adding about 70 properties to its overall portfolio. Schorsch also announced last week that another ARC affiliate, American Realty Capital Trust IV, had agreed to buy a 986-property retail portfolio for $1.45 billion from GE Capital.