As we welcome in a new year, last week the nontraded REIT industry welcomed its newest member and the eighth offering to incorporate a daily pricing model. Continuing with a trend that began in 2011 and maintained momentum throughout 2012, as of January 8th, daily priced nontraded REITs represent more than a third of all offerings declared effective during the past two years.
Currently, nontraded REITs that offer daily priced shares make up 18% of all REITs raising capital from investors. And while there may be much applause over this innovative product design from sponsors within the industry, the true measure comes by analyzing how well these offerings are being received by investors and financial advisors. One way to do that is by comparing how quickly daily priced REITs have been able to break escrow compared to those nontraded REITs with a traditional pricing model. Our findings to date indicate that there is no significant difference. In fact, it is taking an average of five months for all nontraded REITs launched within the past two years to raise the minimum capital needed to break escrow.
But the innovation in the industry is not limited to daily pricing. In fact, we have seen a number of “industry firsts” within the past six months that have ushered in a new way of thinking for the industry. Examples of this include the re-introduction of a previously closed offering, the creation of a multi-share class system in several offerings, and the conversion of an eight-year old privately offered REIT into a publicly registered nontraded REIT offering. And as the table below illustrates, the industry is well positioned for further enhancements in 2013.
|Daily Share Valuation
|Daily Share Valuation
Begins at End of Offering
|American Realty Capital Daily Net Asset Value Trust, Inc.||8/15/11||•||•|
|American Realty Capital
Global Trust, Inc.
|Clarion Partners Property
|Cole Real Estate Income Strategy (Daily NAV), Inc.||12/6/11||•||•|
|Dividend Capital Diversified Property Fund, Inc.||7/12/12||•||•||•|
|Jones Lang LaSalle Income Property Trust, Inc.||10/1/12||•||•||•|
|RREEF Property Trust, Inc.||1/3/13||•||•|
|United Realty Trust, Inc.||8/15/12||•||•|
For more information on each of the nontraded REITs mentioned above, click on the name of the company to download a copy of the prospectus.
I have been using Blue Vault Partners for the past five years. I have found them to be a valuable, unbiased resource when it comes to evaluating and comparing non-traded REITs. The reports help me analyze which sponsors are doing a responsible job of managing their offerings. This allows me to limit my REIT recommendations to only the most competitive products, and then track those REITs throughout their life cycle.