UNLOCK THE POWER OF THE VAULT

The New Kids on the Block

January 9, 2013

As we welcome in a new year, last week the nontraded REIT industry welcomed its newest member and the eighth offering to incorporate a daily pricing model.  Continuing with a trend that began in 2011 and maintained momentum throughout 2012, as of January 8th, daily priced nontraded REITs represent more than a third of all offerings declared effective during the past two years.

Currently, nontraded REITs that offer daily priced shares make up 18% of all REITs raising capital from investors.  And while there may be much applause over this innovative product design from sponsors within the industry, the true measure comes by analyzing how well these offerings are being received by investors and financial advisors.  One way to do that is by comparing how quickly daily priced REITs have been able to break escrow compared to those nontraded REITs with a traditional pricing model.  Our findings to date indicate that there is no significant difference.  In fact, it is taking an average of five months for all nontraded REITs launched within the past two years to raise the minimum capital needed to break escrow.

But the innovation in the industry is not limited to daily pricing.  In fact, we have seen a number of “industry firsts” within the past six months that have ushered in a new way of thinking for the industry.   Examples of this include the re-introduction of a previously closed offering, the creation of a multi-share class system in several offerings, and the conversion of an eight-year old privately offered REIT into a publicly registered nontraded REIT offering.  And as the table below illustrates, the industry is well positioned for further enhancements in 2013.

Nontraded REIT
SEC Effective
Date
Existing Operations
and Prior
Offering
Multi-Share
Class Offering
Single Share
Class
Offering
Daily Share Valuation
Begins
Immediately
Daily Share Valuation
Begins at End of Offering
American Realty Capital Daily Net Asset Value Trust, Inc.8/15/11
American Realty Capital
Global Trust, Inc.
4/20/12
Clarion Partners Property
Trust, Inc.
5/16/11
Cole Real Estate Income Strategy (Daily NAV), Inc.12/6/11
Dividend Capital Diversified Property Fund, Inc.7/12/12
Jones Lang LaSalle Income Property Trust, Inc.10/1/12
RREEF Property Trust, Inc.1/3/13
United Realty Trust, Inc.8/15/12

For more information on each of the nontraded REITs mentioned above, click on the name of the company to download a copy of the prospectus.

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