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Blue Vault Reports Non-Traded REIT Fund Raising Plunges During 1Q15

Editor’s note: The DI Wire reported yesterday that Blue Vault Partners’ recently issued 1Q15 Nontraded REIT Industry Review asserted that the sale of non-traded REIT shares totaled $2.34 billion in the first quarter of 2015, and that fundraising among non-traded REITs had contracted significantly compared to 4Q14. Thoughtful readers pointed out that this figure was significantly less than the $3.3 billion total reported by Robert A. Stanger & Co. and SK Research. When the discrepancy was brought to Blue Vault’s attention, they immediately took steps to identify and correct the mistake. According to a spokesperson for the company, the newly corrected figure is $3.28 billion, indicating that fundraising among non-traded REITs has remained relatively unchanged quarter-over-quarter. In addition, they pointed out, for the first time since the second quarter of 2012, AR Capital was not the leading capital raise sponsor, but came in second with Griffin Capital taking the top spot. Blue Vault’s corrected report will be re-released to their subscribers shortly. The DI Wire regrets the error.

Sale of shares in non-traded real estate investment trusts during the first quarter of 2015 totaled $2.34 billion, down significantly from the $3.47 billion recorded in the fourth quarter of 2014.

According to the recent Nontraded REIT Industry Review published by Blue Vault Partners LLC, the $2.34 billion is also below the average quarterly totals for 2014 of $3.95 billion. “At the end of 2014, we observed the impacts of negative publicity surrounding American Realty Capital Properties on equity capital raised by open non-traded REIT programs, particularly among ARC-sponsored REITs and those of Cole Capital,” the report says. “With the changes that have been made at ARC-sponsored non-traded REITs and the resumption of sales by broker dealers, there has been a rebound, but clearly the fallout has hurt both the industry generally and Cole specifically.”

According to the report, AR Capital continued its leadership in equity raise in the first quarter of 2015, with a market share of 18.2 percent, up from 14.8 percent in the fourth quarter of 2015. NorthStar, KBS, CNL and Inland together accounted for 41.4 percent of industry sales in the first quarter of 2015, which increased from 34.7 percent in the fourth quarter of 2014. “Cole’s sales woes continued in the first quarter of 2015, dropping 74 percent from the fourth quarter of 2014,” the report cites.

The one full-cycle event in the first quarter of 2015 that provided some potential for “re-cycled” equity capital, according to the report, was the acquisition of Cole Corporate Income Trust by Select Income REIT in January. According to the report, it “freed up approximately $1.25 billion in cash for its common shareholders,” but the report adds that “very little of that cash made its way back into Cole’s three open non-traded REITs.”

Unless sales pick up substantially in the second quarter of 2015 and beyond, the report says that the industry is unlikely to approach Blue Vault’s expectations of a rebound to around $20 billion in sales for 2015 from the 2014 total of $15.8 billion.

Robert A. Stanger & Company and SK Research both disputed Blue Vault’s numbers, each reporting an approximate $3.3 billion equity raise for non-traded REITs during the first quarter of 2015.