A Deeper Look at Blackstone, Bluerock Real Estate, and CION Investment Group
July 18, 2019 | James Sprow | Blue Vault
In this Performance Series Webinar, Jim Sprow and Luke Schmidt of Blue Vault presented analysis of the performance of five different alternative investments:
• Blackstone Real Estate Income Trust (a nontraded REIT)
• Bluerock Residential Growth Trust (a listed REIT offering nontraded Preferred)
• Bluerock Total Income+ Real Estate Fund (an Interval Fund)
• CION Investment Corporation (nontraded BDC)
• CION Ares Diversified Credit Fund (an Interval Fund)
Blackstone’s REIT has continued to dominate the nontraded REIT space with over $3.05 billion in sales YTD through June 2019, a dominating share of the $4.21 billion raised by all NTRs that have reported sales to Blue Vault. Together with the distribution yields on the four share classes offered by the REIT, ranging from 5.82% for Class I to 5.04% for Class T shares, and the appreciation of the REIT’s per-share NAV’s averaging 0.85% per month so far in 2019, total returns for shareholders have averaged over 9% annualized so far in 2019.
Blackstone REIT’s performance metrics reported by Blue Vault, including the average return on assets over a trailing 12-month period and estimated refinancing required based upon recent debt composition have been impacted by the REIT’s rapid growth in assets and its use of variable rate debt. These metrics should improve if and when the REIT’s impressive asset expansion stabilizes.
Bluerock Residential Growth Trust
This REIT began as a nontraded REIT in 2009 and completed a full-cycle event in 2016 with its listing of all common shares on the NYSE. The full-cycle return for its investors was extremely disappointing, as reported in Blue Vault’s NTR Full-Cycle Performance studies. Since 2016 the REIT has raised over $868 million through issuance of nontraded preferred stock. It is currently issuing 6% Series B Preferred. Common stock investors have enjoyed an impressive 33% total return over the trailing 12 months through July 10, 2019, and the REIT recently had a forward dividend yield of 5.40% ($0.65 per year).
Bluerock Total Income+ Real Estate Fund
This Interval Fund, sub-advised by Mercer Investment Management, has over 80% of its portfolio in private equity real estate securities, issued by some of the largest private equity funds in the U.S., including Morgan Stanley, Clarion, Blackstone, and CBRE vehicles. This gives individual investors access to private equity not otherwise available. The Fund ranks 6th in total assets among the 32 funds covered by Blue Vault and has provided over 7% total returns to all share classes since inception in 2012, adjusted for the maximum sales charges. Importantly, the Fund’s standard deviation of total returns has been second lowest of all Interval Funds, and its Sharpe Ratio measuring risk-adjusted returns has been the highest (most favorable) among the 32 funds in Blue Vault’s reports.
CION Investment Corporation
This nontraded BDC closed its offering in January 2019, after raising $1.3 billion. It had total assets as of March 31, 2019, of $1.89 billion. The BDC’s NAV per share has decreased from its original offering price of $10.00 to $9.40 as of Q1 2019. By sustaining its quarterly distribution rate since inception, the effective distribution yield has increased to 7.78%. The BDC can boast of outperforming the two benchmark indices used in Blue Vault’s BDC Review, the S&P/LSTA Leveraged Loan Index and the B of A Merrill Lynch High Yield Master II for four of the five previous years. In 2018, when both benchmark indices had negative returns, the BDC had a positive 2.98% return.
CION Ares Diversified Credit Fund
This continuously offered Interval Fund began in 2017 and has raised $330.5 million as of April 30. Advised via a joint venture with Ares Capital, the Fund accesses Ares’ transaction flow across a spectrum of private asset-backed investments, including direct lending to U.S. and European companies. The Fund has increased its pace of capital raise from $162 million in Fiscal 2018 to $145 million in just six months in Fiscal 2019. As of July 8, 2019, the Fund has an annualized return before sales charges of 11.73% and offers a current distribution rate for all five share classes of 5.38%. Among the 32 Interval Funds in Blue Vault’s reports, the Fund ranks third in Sharpe Ratio at 2.8 over the trailing 12 months through April 30, with a recent 3.06% six-month return and a low 1.40% annualized standard deviation of its NAV.
Sources: Blue Vault, SEC, Bluerock Real Estate and CION Investments
Our firm has been using Blue Vault from the first year it was available.
We have found it to be a valuable tool to verify what wholesalers tell us and to dig deep into how the reported investments are really performing.
We appreciate that Blue Vault has expanded its services from initially covering REIT's to now also including BDC's.
Our clients also appreciate that we conduct this additional due diligence on their behalf.