March REIT capital formation slows as investors size up impact of COVID-19

Sales of nontraded REITs totaled $5.65 billion during the first quarter of 2020, up 35 percent over the fourth quarter of 2019 and up 212 percent over first quarter last year, reported Robert A. Stanger & Co.

Nontraded REIT capital formation for the quarter is second only to third quarter 2013, when quarterly fundraising peaked at $6.47 billion at the height of the market. However, investors and their financial advisers have cut back on their allocations to the nontraded REIT market as the impact of COVID-19 winds its way through the economy. March 2020 capital formation leveled off to $781 million, following two blistering months of $2.4 billion and $2.5 billion in January and February 2020, respectively, in great part due to the efforts of industry leader Blackstone.

“In our view, this market is acting intelligently in initially slowing down on the pace of fundraising, while sizing up the impact of COVID-19 on rent collections, net operating income, cash flow a