Fundraising for non-traded real estate investment trusts jumped to $938.1 million during the first quarter of 2018, a 6.9 percent increase compared to the $871.6 million raised in the fourth quarter of 2017, according to Robert A. Stanger & Company Inc. This represents the second fundraising increase in recent quarters, as non-traded REIT fundraising rose 10.5 percent from the third to fourth quarters of 2017.
“The single event that is allowing the industry to turn the corner is the entry of Blackstone into the non-listed REIT market and the distribution of their product by Wall Street investment banks,” says Kevin Gannon, chairman of Robert A. Stanger & Company.
Blackstone Real Estate Income Trust raised more than $1.8 billion dollars in 2017, and $633 million in the first quarter of 2018, or approximately 67 percent of all funds raised by non-traded REITs in 2018.
Stanger pointed out that the success of the Blackstone’s NAV REIT, as well as the recognition that an increasing proportion of national retirement savings will be under the control of retail investors and their advisers, has led to the recent entry of other name–brand institutional money managers, including Starwood, Cantor Fitzgerald, Nuveen/TIAA, Oaktree and Rialto.
“We believe this ongoing entry of more world-class sponsors offering improved products and the addition of Wall Street distribution channels represent the first step toward a dramatically broadened acceptance of these products,” added Gannon.
Stanger indicated that there appears to be a shift from “traditional” finite life non-traded REITs to perpetual life NAV REITs, driven in large part by Blackstone’s success in the space. NAV REITs offer regular liquidity at net asset value, while “traditional” REITs offer investment opportunities for a five to seven year holding cycle.
Starwood, Nuveen, FS Rialto, and Oaktree recently introduced new NAV REIT products, while Black Creek Group, Griffin Capital, and Hines have converted certain “traditional” non-traded REIT programs into NAV REITs.
The top five non-traded REIT sponsors in the first quarter of 2018 were The Blackstone Group, which captured two-thirds of the current market with nearly $632.8 million raised, Black Creek Group was in a distant second with 6 percent of the market and $56.6 million raised, followed closely by Griffin Capital, CIM Group’s Cole products, and Carter Validus.
Griffin Capital raised approximately $53 million and held 5.7 percent of the market; CIM Group raised $46.6 million with a 5 percent market share, and Carter Validus raised $34.1 million with a 3.6 percent share.
Blackstone also leads NAV REIT performance over the 12-month period ended February 2018, posting a total return of 11.6 percent, before fees. During the same period, RREEF Property Trust had a total return of 7.1 percent, followed by Cole Real Estate Income Strategy (Daily NAV) with 6.7 percent, and Black Creek Diversified Property Fund with 2.7 percent. JLL Income Property Trust had a one-year total return of 7.6 percent for the 12-month period ended December 31, 2017.
Stanger also noted that the publicly-traded REIT sector showed more volatility and weakness over the same period, as represented by the RMS G Total Return Index which was down 10.2 percent.
During the first quarter of 2018, more than $2.3 billion of Lifecycle REIT equity was monetized through the merger and listing of the NorthStar Real Estate Income REITs into Colony NorthStar Credit Real Estate Inc., and special liquidating distribution made by American Realty Capital Healthcare Trust III and Carter Validus Mission Critical REIT.
Robert A. Stanger & Company Inc. is an investment banking firm specializing in real estate and direct participation program securities. The company is regularly involved in real estate mergers and acquisitions, debt and equity financings, real estate appraisals and securities valuations.