Non-traded real estate investment trusts raised a total of $919 million in capital in the first quarter of 2018, according to the latest Non-Listed REIT Market Snapshot issued by research and due diligence firm Summit Investment Research. Summit noted that perpetual life REITs, a growing trend in the non-traded REIT space, raised approximately 75 percent of the total equity during the first quarter.
Last year, non-traded REITs raised a total of $3.9 billion, a far cry from the $20 billion fundraising peak of 2013. Summit commented that “non-traded REIT sponsors will need to adapt to regulatory changes and a market transition with revised product structures and reduced fees to return to long-term equity growth.”
Blackstone Real Estate Income Trust, which broke escrow in January of last year, continues to dominate the space with a 66 percent market share and an impressive $602 million raised during the quarter.
Griffin-American Healthcare REIT IV and Carter Validus Mission Critical REIT II rounded out the top three fundraisers with $57 million and $44 million respectively. Cole Real Estate Income Strategy (Daily NAV) took the fourth spot with $36 million, and Black Creek Industrial REIT IV came in fifth with $28 million.
Summit notes that lease terms for retail, office, and industrial, occupancy are key metrics to assess performance trends and investment risk, and market occupancies have increased over the last five years with the broad market expansion.
Occupancies for non-traded REITs declined slightly to 92 percent in the first quarter 2018, compared to 93 percent last quarter. For retail, office, and industrial assets, average lease terms also decreased slightly to 7.6 years, compared to 7.8 years in the fourth quarter of 2017.
The leverage ratio for non-traded REITs increased from 42 percent in 2017 to a moderate 43 percent in the first quarter, which is comparable to traded REITs. With high commercial real estate prices, Summit said that non-traded REITs have utilized variable rate debt to boost their leveraged yields. Variable debt ratios have increased from 17 percent in 2012 to 31 percent in the first quarter of 0218. Non-traded REITs also have a high 40 percent short-term debt ratio.
Summit Investment Research has been active since April 2016 and covers non-traded REITs, business development companies, interval funds, and listed REITs (that acquired non-traded REITs or were once non-traded). The company’s research is utilized by financial advisors, registered investment advisors, broker-dealers, sponsors, service providers such as law firms, due diligence firms, industry organizations, and news organizations, and institutions.