Nontraded REITs – Over $84 Billion in Assets and Growing

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In a special report, Blue Vault Partners, the first independent research firm to offer peer analysis and quarterly performance reporting of nontraded REITs, finds the industry continued to grow in 2011 launching 11 new offerings and increasing industry assets by 18% compared to 2010.

Nontraded REITs, a unique niche in real estate investing, continued its growth trend in 2011 by introducing 11 new offerings and reaching an estimated $84 billion in assets, according to new research from analysts Blue Vault Partners.

Blue Vault Partners is the first independent research firm to provide peer analysis and quarterly performance reporting of nontraded REITs -- real estate investment trusts whose shares are issued directly, not via the stock market. In a special annual edition for subscribers, BVP notes that amid the uncertainty in the world capital markets, the nontraded REIT industry remained strong, raising an estimated $8.2 billion in new capital from investors in 2011, just slightly below the $8.3 billion raised in 2010.

The report also provides a summary of the industry as of December 31, 2011, indicating that there are a total of 69 nontraded REITs in the industry managed by 35 sponsors. Ten out of the 35 sponsors collectively manage 87% of all industry assets, down from 90% in 2010. “Even though the nontraded REIT industry is still dominated by larger sponsors that have been in the market for eight years or more, the industry continues to grow and attract new sponsors and offerings,” said BVP managing partner Stacy Chitty. “But what we have not seen much of is a significant increase in the number of liquidity events.”

While there have been a total of 94 nontraded REITs launched since 1990, as of December 2011, there have only been 19 full-cycle events whereby investors have the opportunity for the return of capital. “We expect 2012 to be a year of transition for the industry and are encouraged by recent developments such as the listing of shares for one nontraded REIT on a stock exchange during the first quarter of 2012 and announcements by two more REITs that they intend to initiate liquidity events for investors before the end of the year,” added managing partner Vee Kimbrell. “As the commercial real estate market continues to improve, we believe the continuation of more full-cycle events over the next few years will have a significant influence on the industry’s ability to continue to grow.”    

BVP also notes that three out of the 11 nontraded REITs launched during 2011 will provide investors with daily portfolio valuations and higher levels of liquidity which, for the first time, will give investors the ability to make more meaningful performance comparisons to publicly traded REITs.

Blue Vault Partners’ Nontraded REIT Industry Review provides additional details to subscribers including the ability to monitor various metrics, trends and peer comparisons for individual companies on a quarterly basis. Blue Vault’s fourth quarter 2011 report with all final data will be released in April 2012.


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