Robert A. Stanger & Company reported that non-traded REIT sales in January 2019 jumped to $426 million compared to $262 million during the same period last year, an increase of 62 percent.
Non-traded REIT fundraising has continued to climb each quarter after hitting a low of $794 million in the third quarter of 2017, and according to Stanger chairman Kevin Gannon, the firm “expected the upward trend in fundraising to continue in 2019, and so far, that is bearing out.”
NAV REITs (perpetual entities that offer periodic liquidity at net asset value) accounted for $322.8 million in sales in January 2019, while traditional lifecycle REITs (entities that anticipate a five to seven year holding cycle followed by a liquidity event) contributed another $102.1 million.
During the fourth quarter of 2018, NAV REITs raised nearly $1.1 billion, a 22.2 percent increase compared to the third quarter of 2018, and ended the year with approximately $3.6 billion raised. Lifecycle REITs raised $290.8 million during the fourth quarter, a 15.9 percent increase compared to the previous quarter, and ended 2018 with an equity raise of just over $1 billion.
Both NAV REITs and lifecycle REITs also posted year-over-year fundraising gains. NAV REIT fundraising increased from $183.2 million in January 2018 to $322.8 million in January 2019, a 76 percent jump. Lifecyle REITs posted a 24 percent increase year-over-year, from $78.4 million raised in January 2018 to $102.1 million in January 2019.
Private equity giant The Blackstone Group (NYSE: BX) led the fundraising turn-around with its entry into the non- traded REIT market and the distribution of their NAV REIT by Wall Street investment banks. Blackstone Real Estate Income Trust raised $237 million in January of 2019, bringing sales since its launch to $5 billion.
Black Creek Group was the second highest fundraising sponsor with $42 million in combined sales of its lifecycle and daily NAV products, followed by Griffin Capital ($35 million – Lifecyle and NAV REITs), Starwood ($28 million – NAV REIT) and Hines ($19 million – NAV REIT).
Stanger noted that Blackstone’s success has led to the recent entry into the industry of other name–brand institutional money managers, including Starwood, Cantor Fitzgerald, Nuveen/TIAA, Oaktree and Clarion. Gannon noted that, “Stanger expects these new entrants will propel the acceptance of real estate investment products structured as NAV REITs.”
“We believe that the performance of non-traded REITs will further propel fundraising activity,” added Gannon. A recent study conducted by Stanger and published in the IPA/Stanger Monitor shows cumulative total returns for the Stanger NAV REIT Index and the Stanger Lifecyle Index of 22.2 percent and 18.2 percent, respectively, for the three years ended December 31, 2018. Both Stanger REIT indices outperformed many major U.S. REIT indices.
Robert A. Stanger & Co. is an investment banking firm specializing in providing strategic planning, investment banking, financial advisory, fairness opinion and asset and securities valuation services to partnerships, real estate investment trusts, and real estate advisory and management companies in support of strategic planning and execution, capital formation and financings, mergers, acquisitions, reorganizations and consolidations. Stanger’s publications include The Stanger Report, a newsletter focused on direct participation programs and non-traded REIT investing; The Stanger Market Pulse, focused on public DPP, non-traded REIT and BDC sales; The Stanger Interval Fund Report, focused on non-traded interval fund investing, and the Stanger Digest, a newsletter providing a weekly update on industry activities.