Blackstone is Paving the Way For Lower Fees in the Alternative Investment Industry.
September 16, 2016 | by Beth Glavosek | Blue Vault
In a move closely watched by industry observers and participants, Blackstone has rolled out its first nontraded REIT – Blackstone Real Estate Income Trust – and it’s further paving the way for lower fees in the industry.
Following announcements from Inland and Hines regarding lowering their fee structures, Blackstone is the latest product sponsor to offer capped fees, multiple share classes, and a minimum internal rate of return to be reached before the advisor receives performance compensation. The Class T shares offered will have a purchase price of $10 plus $0.30 maximum upfront selling commissions and $0.05 dealer manager fees applicable during the escrow period. As is the case with other nontraded REIT offerings, the Class T shares will have a stockholder servicing fee (0.85% of NAV annually) that will reduce the distribution rate to that share class.
According to CoStar, this fee structure is more aligned with traditional institutional platforms, thereby making the playing field more level for average investors.
This decision is a welcome change for many. Global wealth advisor 1st Global has openly called for product sponsors to lower fees in an effort to revive sales of nontraded investments and direct participation programs. With industry sales falling steadily since 2014, 1st Global Executive Vice President of Compliance, Legal and Risk Assessment Michael Pagano believes that fee changes are long overdue. “It’s time for the industry to stop talking about lowering costs and actually lower them,” Pagano said.
Blue Vault is just what advisors need to size up the different offerings in the nontraded REIT market. Just as importantly, it’s what the industry needs to encourage best practices among REITs.