Sales of nontraded REITs totaled more than $4.2 billion in the fourth quarter of 2019, their ninth consecutive quarterly increase since fundraising hit a bottom in third quarter 2017, and their highest quarterly total in over five years. Nontraded REITs closed out 2019 with more than $11.8 billion raised, their highest fundraising total since 2014.
The report compiled by Robert A. Stanger & Co. attributed the big numbers to the entrance of institutional asset managers — such as Blackstone, Starwood and LaSalle — into the nontraded REIT market, saying it has transformed the industry and will continue to fuel future fundraising — particularly as retail investors seek to diversify their investment portfolios to secure them against market uncertainty. Investors “now have access to real estate funds managed by the same well-regarded firms that institutional investors turn to,” the report notes.
“Stanger is projecting that nontraded REITs will raise more than $15 billion in 2020 as recent institutional-quality entrants continue to ramp up sales,” said Kevin Gannon, chairman and CEO of the firm.
NAV REITs (perpetual entities that offer limited periodic liquidity at net asset value) raised $11.0 billion in 2019, up 207 percent from the same period of 2018. Lifecyle REITs (entities anticipating a five- to seven-year holding cycle followed by a liquidity event) contributed $823 million, off 20 percent from the same period of 2018.
Blackstone led capital formation in 2019, raising $8.7 billion. Starwood Capital is also gaining traction with $874 million raised. Other 2019 top fundraisers include Black Creek ($464 million), LaSalle Investment Management ($406 million), and Hines Interests ($399 million). Oaktree Capital Management ($151 million) recently came online and FS Investments ($133 million) is now reporting sales. SmartStop Asset Management ($116 million) and Griffin Capital ($101 million) round out the top fundraiser list.
The Stanger survey of top sponsors of alternative investments included in The Stanger Market Pulse, revealed over $26.8 billion in funds were raised in 2019 via the retail pipeline. Alternative investments included in the survey are publicly registered nontraded REITs, nontraded business development companies, interval funds, nontraded preferred stock of traded REITs, as well as Delaware Statutory Trusts, opportunity zone and private placement offerings.
Alternative investment sponsors continue to innovate, the report says, offering new ways for investors to allocate capital to income-oriented real estate investments that are not directly correlated to the public equity markets. The emergence of NAV REITs, an expanding presence in the interval fund market and the introduction of opportunity zone funds are all examples.
“Stanger expects this innovation will continue to fuel alternative investment fundraising,” said Tisha Miller, executive managing director of Stanger.
Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.