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Nontraded REITs Raising $7 Billion in 2010

Nontraded real estate investment trusts (REITs) are on track to raise $7 billion in 2010, which represents a 17% increase over 2009, according to new research from Blue Vault Partners LLC.

“This fundraising effort adds to some $3.6 billion in existing cash reserves held by nontraded REITs that will eventually be used to purchase commercial properties such as office buildings, apartments, shopping centers, hotels and industrial complexes,” says Vee Kimbrell, managing partner at Blue Vault Partners.

The findings are part of a new study and first-quarter report on the nontraded REIT industry produced by Blue Vault Partners, an Atlanta-based research firm that specializes in independent analysis of nontraded REITs. The report tracks performance and trends of the 49 nontraded REITs that make up the industry.

Like their publicly traded brethren, nontraded REITs register their stock offerings with the Securities & Exchange Commission, but have limited liquidity as their shares are not traded daily on a stock exchange.

“Despite continued economic challenges, the nontraded REIT industry continues to expand as six new REITs totaling more than $12 billion in common stock registrations have become effective year-to-date,” says Stacy Chitty, managing director at Blue Vault Partners.

Here are a few industry highlights:

  • Of the total 49 nontraded REITs in the industry, 32 are currently raising capital from individual investors while 17 are closed to new investments.
  • Assets for the nontraded REIT market totaled $64.8 billion as of March 31, 2010.
  • Gross capital raised by nontraded REITs in the first quarter totaled $1.8 billion, compared with $2.7 billion raised by 20 publicly traded REITs (Equity IPO and Equity Secondary Market Offerings Only).
  • It is anticipated that 36 nontraded REITs will be raising capital from individual investors by the end of the second quarter of 2010.
  • As of March 31, for the 36 nontraded REITs that declared a dividend, the average distribution yield was 6.10% compared to the FTSE NAREIT Index yield (106 REITs) of 3.86% for the same period.
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