Non-Traded REITS Raise Lowest Volume of Capital in 14 Years

April 24, 2017


April 20, 2017 | by Orest Mandzy | Trepp.com

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The departure of AR Global Investments from the non-traded REIT world, coupled with uncertainty surrounding substantial pending regulations, has put a sizable damper on the ability of the non-traded REIT sector to raise capital. According to Summit Investment Research, only $4.8 billion of equity was raised by sponsors of 35 entities last year. That was the lowest volume in 14 years, and pales in comparison to the $10.2 billion of equity that was raised in 2015.

New Millennium, New Sector

Although the non-traded REIT sector has been in existence for more than 25 years, the sector didn’t shift into high gear until the mid-2000s. In 2004, $6.3 billion of equity was raised by companies such as Behringer Harvard, Cole Capital Corp., CNL Income Corp., and Hines. The firms that raised equity took advantage of improving real estate markets, as well as a growing appetite among retail investors to put money into the sector. As a result, capital-raising ballooned.

Three years later in 2007, $12.2 billion of equity was raised. Just about every major sponsor in the sector launched a non-traded REIT vehicle that year. Real estate of all stripes, driven by abundant liquidity in both debt and equity, was increasing in value almost daily.

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Loreen M. Gilbert, CIMA, AIF, CRC, CLTC – President, WealthWise Financial Services
Blue Vault
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