Nontraded REIT Sales Continue Slump in Q3

Sales of nontraded REITs during 3Q 2015 totaled an estimated $1.96 billion, down from the $2.74 billion recorded in 2Q 2015. That is according to the latest Q3 Nontraded REIT Industry Review report from Blue Vault Partners.

According to the report, that number is more than 50 percent below the average quarterly totals for 2014 of $3.95 billion. Capital raise, including proceeds from distribution reinvestments, totaled an estimated $7.84 billion for the nine months ended September 30, 2015, compared to an estimated $12.4 billion for the first nine months of 2014.

AR Capital continued its leadership in equity raise in 3Q 2015 with a market share of 18.8 percent year-to-date and 19.7 percent in the third quarter, the report said. And Griffin Capital, NorthStar, CNL, Phillips Edison and Dividend Capital together accounted for 53.8 percent of industry sales so far in 2015. NorthStar, CNL and Phillips Edison all saw increases in their market share in the quarter. AR Capital announced during the fourth quarter that it was ending the equity offerings of all of its nontraded REITs and would exit the business at the end of 2015. The news follows a series of scandals involving AR Capital and its affiliated companies.

The Blue Vault report cited two new full-cycle events producing liquidity for nontraded REIT shareholders in the third quarter of 2015. On July 23, TIER REIT Inc. (formerly known as Behringer Harvard REIT I), listed on the New York Stock Exchange under the ticker “TIER.” On September 29, 2015, SmartStop Self Storage merged with Extra Space Storage Inc. On September 29th, AR Capital announced that it was calling off the planned listing of two nontraded REITs, American Finance Trust (formerly known as American Realty Capital Trust V) and Healthcare Trust (formerly known as American Realty Capital Healthcare Trust II). These two REITs, with total assets exceeding $2 billion each, were originally sold to investors at $25.00 per share and there was concern that their listings would not yield that price, given that the FTSE NAREIT All Equity REIT index was down 6 percent for the year at September 30th.

Check back with The DI Wire in the next day or so for more from this report.