CNL Financial Group Going Global With REIT

ORLANDO, FL - With property values plummeting worldwide, Orlando-based investment powerhouse CNL Financial Group Inc. is preparing to launch a new real-estate-investment trust to acquire commercial properties in partnership with an even larger, global player based in Australia. The REIT, to be called CNL Macquarie Global Growth Trust, is expected to be open to investors during the second half of this year and will buy office, retail and health-care properties as well as shopping centers, business parks, industrial parks and multifamily housing, CNL executives said Wednesday.

CNL, with $5.8 billion in assets, sold off three REITS in 2006 and 2007, during the peak of the real-estate boom, and is ready to search for deals now that prices have fallen, said Curtis McWilliams, a longtime CNL executive who will serve as president of the new, unlisted REIT. "We're starting with a clean slate," McWilliams said, with "no heavy legacy assets" to limit the company as it looks to build a multibillion-dollar portfolio.

REITs are a way for investors, including small, individual investors, to take bets on real estate without holding property and incurring taxes and other costs. The trusts typically pay healthy dividends, higher than most stock dividends, because operators of REITs, in return for certain tax advantages, are required to pass through most of the income in the form of dividend payments.

As much as 30 percent of the new real-estate trust will be in property outside the United States, and CNL will lean on the international expertise of Sydney-based Macquarie Group Ltd., McWilliams said. Macquarie is a banking, financial-advisory, investment and funds-management group that manages more than $180 billion in assets worldwide.

CNL and Macquarie have filed to register the new REIT with the U.S. Securities and Exchange Commission, but the registration has not yet become effective. Shares will be sold through a network of private broker-dealers that CNL has used through the years to raise capital, rather than through a public exchange, though company officials did not rule out the possibility that the new REIT might eventually seek a listing on an exchange.

CNL currently has one REIT, CNL Lifestyle Properties Inc., which is unlisted and invests mainly in resorts, golf courses, attractions and other leisure properties. The company has also had, or helped launch, a number of publicly traded REITs in the past, including one that invested in restaurants, Trustreet Properties Inc. That REIT, headed by McWilliams, became the nation's largest restaurant real-estate trust and was sold in October 2006 to General Electric Co. for about $3 billion, including debt.

Not all of CNL's past deals have had big payoffs for investors, though, other than for top directors and insiders. In 2006, for example, CNL agreed to pay $35 million to settle a lawsuit challenging the finances of CNL Hotels & Resorts, after that REIT failed to complete a planned public offering. CNL denied any liability or misconduct but agreed to the settlement to resolve a class-action lawsuit brought by investors who alleged they had been misled about the REIT's finances.

CNL Financial spokeswoman Carolyn Gosselin defended on Wednesday the company's past oversight of its REITs. "We did have a stumble," Gosselin said, but said that overall, the company's investment trusts were good deals for investors. She said the company's timing on exiting real-estate markets was nearly flawless, as "all three [REITs] sold within two or three months of the peak" of real-estate values in the segments they represented.

Longtime Orlando entrepreneur James Seneff Jr., chairman and chief executive officer of CNL Financial, founded the company in 1973 with a $5,000 loan from his father. Through the years, he has formed or acquired companies and real estate worth more than $23 billion combined.