A Deeper Look at Black Creek and Resource
July 26, 2019 | James Sprow | Blue Vault
Black Creek Group
Black Creek Group sponsors four programs that were evaluated in the webinar. A very significant event announced on July 15 was the merger of Industrial Property Trust’s property portfolio with Prologis, a listed industrial REIT. The deal as announced estimated a cash payment to common shareholders from the sale of $12.18 per share. In addition, a portfolio of excluded assets with an estimated value of $1.08 per share, bringing the potential total cash payout with total liquidation of the nontraded REIT to an estimated $13.26 per share. This result would provide early shareholders with an estimated annualized return of around 10%, with the capital gain and distribution yields combined.
Black Creek Diversified Property Fund, a monthly NAV continuous offering was converted to that format in 2012, and has raised over $2.5 billion since its 2006 inception. The REIT’s portfolio is diversified over office, retail and industrial assets and has paid distributions to its four classes of common stock ranging from 4.28% to 5.13% based upon its Q1 2019 NAVs. With regard to the fund’s volatility, its standard deviation of NAV since inception has been a low 1.74%, giving a Sharpe Ratio which measures risk-adjusted returns at a positive 3.31.
Black Creek Industrial REIT IV is currently raising capital as a life cycle REIT, with over $370 million raised through Q2 2019. With distribution yields for its three common share classes ranging from 4.22% to 5.42% net of fees.
Black Creek’s interval fund offering, PREDEX, has a strategy of investing in U.S. core property funds managed by leading institutional real estate sponsors, giving individual investors access to funds that were traditionally available only to institutional investors. Among the 30 interval funds covered by Blue Vault, PREDEX ranks near the top in terms of low volatility (annual standard deviation since inception as of 6/30/19 at 0.59%) and an excellent Sharpe Ratio of 4.89 since inception.
Resource sponsors two interval fund programs that together have raised over $600 million in their offerings. Resource Real Estate Diversified Income Fund invests in real estate and real estate industry securities, primarily in income producing equity and debt securities, including private REITs, public REITs and preferred stock. Since inception, the NAV has averaged an annual return of 6.93% since inception and 5.93% with the maximum sales charge. Resource Credit Income Fund invests in fixed-income and fixed-income related securities, including bonds and notes, bank loans. With a current yield of 6.40%, the fund has averaged a 7.43% NAV annual rate of return since inception (and 5.72% with the maximum sales charge of 5.75%) as of June 30, 2019.
Resource has also sponsored three nontraded REITs, two that have closed and one, Resource Apartment REIT III that is currently raising capital. Each nontraded REIT has an investment strategy of purchasing multifamily properties, adding capital and professional management, increasing occupancy and income, and eventually selling the property. This opportunistic strategy has resulted in an increase in NAV for Resource Real Estate Opportunity REIT, the sponsor’s first nontraded REIT program to $10.83 per share as of 12/31/18, and a 6.00% distribution yield based upon the original $10.00 offering price.
Resource Real Estate Opportunity REIT II, introduced in 2014, raised $570 million in its offering and currently owns 17 multifamily properties. The REIT has sold only one property to date as it is earlier in its life cycle. For Q2 2019 the REIT reduced its distribution rate to a 4.00% yield based on its $10.00 offering price.
Resource Apartment REIT III is raising capital currently with approximately $111 million in raise as of June 24. It owns six multifamily properties and had distribution rates of 5.69% on its Class I shares and 4.46% on its Class R shares for Q1 2019, net of fees. The fund’s NAV per share was $9.12 as of June 30.
Sources: SEC, Blue Vault, Black Creek Group, Resource
Blue Vault helps me to stay well informed on the financial status of both open and closed nontraded REITs and BDCs, so that I can help my clients better understand the product, before they make the decision to invest and after.