Griffin Capital Exploring Options Regarding Its Business Development Company
Los Angeles, CA – (March 16, 2016) – Griffin Capital Corporation (“GCC”) on behalf of Griffin Capital BDC Advisor, LLC (“BDC Advisor”), the advisor to Griffin-Benefit Street Partners BDC Corp. (“GB-BDC”), announced today it is actively exploring strategic options relating to GB-BDC. According to Kevin Shields, President of BDC Advisor and Chairman and CEO of GCC, the motivation for the strategic structural shift includes, but is not limited to, the following:
- The confluence of regulatory pressure occasioned by changes in the account statement rule (FINRA NTM 15-02), the impending fiduciary standard rule proposed by the DOL, and prospective state securities administrators’ movement toward uniform asset concentration limits will continue to inhibit equity growth in the non-traded business development company (“BDC”) market;
- Available investment alternatives to a BDC are limited in scope and by market forces – the non-traded BDC sponsors focus on originating and/or acquiring senior secured and senior debt of private corporations or public corporations with a market equity capitalization of less than $250 million – this narrow bandwidth restricts efficient capital deployment and allocation in a fluid and dynamic credit market;
- High offering expenses coupled with the lack of equity investment options available to a debt investment platform presents a meaningful challenge in recovering an investor’s initial equity investment in a portfolio monetization scenario – we believe these fees, particularly for a debt platform, have to compress to enhance an investor’s positive economic experience;
- A positive investor outcome is further challenged given the propensity of the public BDC market to trade at a discount to Net Asset Value, which discount recently exceeded 20%; and,
- A non-traded BDC illiquidity premium is illogical to the extent an investor can acquire, in the current market environment, a liquid, traded BDC with a demonstrably higher current return.
Given the regulatory environment, structural challenges and market and yield dynamics associated with operating a BDC, the GB-BDC Board of Directors voted to cease the current offering effective March 15, 2016. GCC will work with the Board to explore strategic options for GB-BDC that are in keeping with the best interests of the shareholders of GB-BDC. In that regard, GCC is working to expand the Griffin Institutional Access family of investment products to build upon the success of Griffin Institutional Access Real Estate Fund (“GIREX”). Among other initiatives, GCC intends to develop a global credit oriented interval fund that will complement and expand upon the investment mandate of the GB-BDC.
Mr. Shields indicated: “In GCC’s opinion, the interval fund structure offers a number of potential advantages to investors over the business development company structure including, but not limited to:
- Greater Net Asset Value Transparency – daily pricing frequency;
- Enhanced Liquidity – given the ’40 Act mandate requiring an interval fund to offer shareholders periodic redemptions of at least 5% of the fund’s outstanding shares, typically on a quarterly basis;
- Wider Range of Investment Opportunities – GB-BDC, like all BDCs and unlike an interval fund, must comply with the investment limitations set forth in the ’40 Act that are unique to BDCs, including the requirement that 70% of the assets of the BDC must be invested in specific types of issuers;
- Lower Fees – unlike BDCs, interval funds generally are prohibited from charging investors an incentive fee. Mr. Shields continued: “Benefit Street Partners is an important relationship to us and their involvement is critical to achieve ongoing success. We could not be more pleased that we have the full support of Benefit Street to engage in this strategic shift. Further, we look forward to sharing information with the market in the near term regarding both our plans for GB-BDC and our exciting product development initiatives.”
About Griffin Capital Corporation and Griffin Capital BDC Advisor, LLC
Griffin Capital BDC Advisor, LLC (“GBA”), an indirect subsidiary of Griffin Capital Corporation (“GCC”), serves as the investment adviser to GB-BDC. GBA is primarily responsible for managing all day-to-day operations and providing investment advisory and management services to GB-BDC, including reviewing and approving investments. GCC is a privately-held, Los Angeles headquartered investment and management company with a 20-year track record sponsoring real estate investment vehicles and managing institutional capital. GCC is led by senior executives, each with more than two decades of real estate and capital markets experience who have collectively closed transactions representing over $20 billion in value. Griffin Capital and affiliates, through the end of 2015, owned, managed, sponsored and/or co-sponsored an institutional-quality portfolio of commercial real estate located in the United States and United Kingdom, representing approximately $6.7 billion in asset value. Additional information about GCC is available at www.griffincapital.com.
Benefit Street Partners L.L.C. (“BSP”) serves as the Sub-Adviser to GB-BDC. BSP is primarily responsible for assisting with sourcing, originating, conducting due diligence on, and recommending investments to GBA. Benefit Street and its affiliates manage assets across a broad range of credit strategies including middle market private debt, long-short liquid credit, long-only credit and commercial real estate debt. Benefit Street has a team of approximately 109 employees, including 67 investment professionals, which collectively provide a debt investment management capability by combining industry knowledge and relationships with credit markets expertise. Benefit Street has capabilities across the full credit spectrum – from subordinated and mezzanine to senior secured debt – and has experience investing through multiple business cycles. BSP is an affiliate of Providence Equity Partners L.L.C. (“Providence”), a leading, global sector-focused private equity firm. Founded over 25 years ago, Providence has invested in over 150 companies, currently has $45 billion in capital under management in its equity and credit platforms.
Investors are advised to carefully consider the investment objectives, risks, and charges and expenses of GB-BDC before investing. The prospectus, which has been filed with the Securities and Exchange Commission, contains this and other information about GB-BDC and should be read carefully before investing. This press release may contain certain forward-looking statements. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to uncertainties relating to: our future operating results; our business prospects; the impact of the investments that we make; the ability of our portfolio companies to achieve their objectives; our expected financings and investments; the adequacy of our cash resources, financing sources and working capital; the use of borrowed money to finance a portion of our investments; the timing of cash flows, if any, from the operations of our portfolio companies; the timing and amount of distributions and dividends from the companies in which we may invest; our contractual arrangements and relationships with third parties; actual and potential conflicts of interest; our ability to locate suitable investments for us and to monitor and administer our investments; the ability to attract and retain highly talented professionals; the general economy and its impact on the industries in which we invest; our ability to source favorable private investments; the tax status of the companies in which we invest; our tax status; the effect of changes to tax legislation; changes in the economy; risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; future changes in laws or regulations; and other risk factors as outlined in the prospectus, as amended from time to time. This is neither an offer nor a solicitation to purchase securities. A registration statement relating to these securities was filed and has been declared effective by the Securities and Exchange Commission. Copies of the prospectus can be obtained by contacting the dealer manager, Griffin Capital Securities, LLC, at (949) 270-9300.