Blue Vault Partners and The University of Texas at Austin McCombs School of Business Collaborate on Second Annual Study of the Full-Cycle Performance of Nontraded REITs

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Blue Vault Partners, the first independent research firm to offer peer analysis and quarterly performance reporting of nontraded REITs, prepares to launch its second annual study analyzing the total returns of all full-cycle events that have occurred in the industry since 1990.

Blue Vault Partners, in collaboration with Dr. Jay Hartzell, Professor and Chair of the Department of Finance and the Executive Director for the Real Estate Finance and Investment Center at The University of Texas at Austin McCombs School of Business, is preparing to release its second annual study that compares the historical performance of nontraded REITs to those of publicly traded REITs and institutional direct real estate investments. The study sample includes 27 nontraded REITs that have experienced a full-cycle liquidity event between 1990 and 2013.

“We are excited to have a thought leader like Dr. Hartzell working with us again this year to publish this important research,” said Stacy Chitty, managing partner, Blue Vault Partners. “We believe it is critical information for anyone who studies the industry or who recommends these investments to their clients.”

Nontraded REITs are public real estate investment trusts whose shares are issued directly by the sponsor and are not traded on a stock exchange. Full-cycle liquidity events are triggered when a nontraded REIT lists its shares on a public stock exchange, liquidates its portfolio through the sale of all individual properties, or is acquired by or merges with another entity. To date, there have been twelve nontraded REITs that have completed a liquidity event via a stock exchange listing, five that have merged with an unaffiliated public entity, seven that have been acquired by another nontraded REIT, and three that have been acquired by an unaffiliated private entity.

“Given the unprecedented number of nontraded REITs that have completed a full-cycle liquidity event within the past 18 months, we believe this research provides timely insights into the performance of the industry as a whole as well as identifying the best and worst performers,” stated Vee Kimbrell, managing partner, Blue Vault Partners.

Complimenting previous research Dr. Hartzell has published on real estate investment trusts and alternative means of benchmarking real estate mutual fund performance, the 2013 study will not only provide performance results for each individual nontraded REIT in the sample, but it will also compare those returns to customized benchmarks built using the same percentage of leverage, property type allocations and geographic weightings. Key findings from the study include:

  • The amount of time that it has taken nontraded REITs to complete a full-cycle event has continued to trend downward as the average number of years from inception to the completion of a full-cycle event decreased from 8.7 years in the 2012 study down to 7.1 years in the 2013 study.
  • Additionally, the average assets under management for each REIT analyzed in the study increased to $1.45 billion in the 2013 study compared to $1.0 billion in the 2012 study.
  • Among nontraded REIT sponsors, Apple REIT Companies has completed the most full-cycle events followed by W.P. Carey, CNL and Inland.

Founded in 2009, Blue Vault Partners was created for the purpose of providing unbiased research, education and enhanced transparency for the nontraded REIT industry. As part of an ongoing effort to increase the awareness of these investment vehicles, the study was designed to provide a better understanding of the long-term returns, risks and rewards associated with these types of real estate offerings. Final results of the study will be made available exclusively to Blue Vault Partner subscribers beginning the week of November 4, 2013. Nonsubscribers who wish to purchase this study can request additional information directly from Blue Vault Partners by calling 877-256-2304.

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Stacy Chitty
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