Blue Vault Partners Releases Preliminary Third Quarter Results for Nontraded REITs

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Blue Vault Partners, first with online performance reporting about the nontraded REIT industry, has released preliminary results from its third quarter report indicating that the industry will raise $9 billion in new capital and acquire over $13 billion in commercial real estate properties in 2011.

Nontraded REITs, an $81 billion segment of the real estate investment trust market, raised an estimated $2.0 billion in new capital from investors during the third quarter of 2011 compared to $2.4 billion during the previous quarter, according to analysts Blue Vault Partners. There have been 11 new nontraded REIT offerings declared effective by the SEC so far in 2011, slightly down from 13 new product offerings during the same period in 2010.

The slower rate of fundraising by the 45 nontraded REITs that were raising capital during the quarter will bring a revision in the annual sales forecast for the industry, down from $10 billion to approximately $9 billion. Preliminary results show that those REITs that began fundraising in 2010 and 2011 collectively represented 15% of all capital raised year to date but make up half of all REITs raising funds during the third quarter. These numbers indicate the difficulty Emerging LifeStage REITs have in gaining market share.

Early estimates also show that commercial property acquisitions by nontraded REITs are expected to exceed last year’s volume. In its third quarter 2011 report to subscribers, Blue Vault will detail how nontraded REITs, with $10.5 billion in acquisitions year to date, are on pace to exceed 2010’s $13 billion. The most active REIT during 2011 has been Cole Credit Property Trust III, Inc. with approximately $969 million in acquisitions. While commercial property acquisitions by nontraded REITs declined by 32% versus 2Q 2011, a third quarter dip in acquisitions is consistent with historical trends in the commercial real estate market.

In addition, commercial property dispositions by all nontraded REITs increased by $184 million compared to the previous period and totaled $888 million for the third quarter. The largest disposition was made by Hines Real Estate Investment Trust, Inc. with the sale of 3 First National Plaza in Chicago for $344 million.

Distribution yields among nontraded REITs vary significantly, from 1 percent to 8 percent. The average yield paid in the third quarter by all nontraded REITs was 6.1 percent, compared to 5.23 percent for the FTSE NAREIT All REITs cash dividend yield during the same period.

Blue Vault Partners’ Nontraded REIT Industry Review provides additional details to subscribers including the ability to monitor metric trends for 69 individual companies as well as better understand the REIT’s ability to pay distributions consistently over time. Blue Vault’s third quarter 2011 report with all final data will be released on December 14th.


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