May 2020 Nontraded REIT Capital Suppressed, Nontraded Preferred Issuances Increase

June 9, 2020 | James Sprow | Blue Vault

Blue Vault received May sales totals for 10 effective nontraded REIT program offerings as of June 9. Sales reported by those 10 NTRs totaled $58.4 million compared to $88.9 million for April, a decrease of $30.5 million, or 34%. Two additional nontraded REITs suspended their offerings or did not report sales for May (Hartman vREIT XXI and Rodin Income Trust). The two REITs that suspended their offerings or did not report sales had a total of just $0.307 million in sales in April.

Comparing sales of 14 REITs (including four that have suspended their offerings) during the same January through May period for 2019 and 2020, the total for the five-month periods is $1,248.2 million for 2020 and $853.2 million for 2019, a 46% Y-O-Y increase despite the significant drop-off due to suspensions and depressed sales during the COVID-19 pandemic.

As mentioned in the April sales article, all of the YOY increase in sales for the 14 REITs can be attributed to Black Creek Industrial REIT IV’s increase from $143.3 million in the first five months of 2019 to $691.5 million in the comparable 2020 period, an almost four-fold increase. (The 13 REITs without Black Creek Industrial REIT IV had a decrease in sales of $153.3 million). Black Creek Industrial REIT IV probably benefitted from reinvestment of proceeds from the Industrial Property Trust full-cycle event in January 2020. The sale by Industrial Property Trust of most of its assets to Prologis resulted in a special distribution to shareholders of $12.54 per share, much of which was apparently subsequently invested in Black Creek Industrial REIT IV. For example, Q4 2019 capital raise by that REIT totaled $73.1 million, compared to $623.3 million for Q1 2020.

Only CIM Income NAV among the 10 reporting REITs that were raising capital in both April and May had an increase in sales, from just $136 thousand in April to $542 thousand in May, a gain of almost 3X, but hardly significant in the nontraded REIT totals. All the other reporting NTRs had significant decreases in capital raise in May. The steepest drop was for Hines Global Income Trust, down over 56%, followed by Cottonwood Communities (-48%), Rodin Global Property Trust (-47%), and Black Creek Diversified Property Fund (-44%). 

Table I

Year-Over-Year NTR Capital Raise Comparisons

Despite the obvious impacts of the pandemic in the first five months of 2020, there is good news in the capital raise comparisons for the YOY results for the first five months of 2020 compared to 2019. As mentioned, Black Creek Industrial REIT IV saw a YOY increase of 383%, Nuveen Global Cities REIT had an increase of 1036%, and Griffin Capital Essential Asset REIT which was the surviving REIT from the merger of Griffin Capital Essential Asset REITs I and II, had an increase of 143%.

Year-over-year comparisons for the same five-month periods in 2020 vs. 2019 can be made for 14 NTRs that had sales in both the first five months of 2019 and 2020. That YOY comparison shows a 46% increase in sales on a same-store basis, despite the steep drop off in April and May 2020 due to the COVID-19 disruption in capital raise activity.

Table II

Nontraded BDC Sales

Three nontraded BDCs were raising funds in May 2020 and reported those sales to Blue Vault. Owl Rock Capital Corporation II raised $11.10 million, down 43% from $19.37 million in April. MacKenzie Realty Capital reported nontraded BDC sales in May of $0.165 million, down 49% from $0.325 million in April. Triton/Prospect reported $0.018 million sales in May, down from $0.042 million in April. The total capital raise for Owl Rock, MacKenzie Realty Capital and Triton/Prospect in May was $11.28 million compared to $19.74 million in April, a decrease of 43%. The total capital raised reported by the three nontraded BDCs for YTD 2020 was $202.5 million compared to $215.8 million reported by those same BDCs for the same five months in 2019.

Nontraded Preferred Stock Issued by Listed REITs

Four listed REITs reported their nontraded preferred stock issuances in May to Blue Vault, and unlike nontraded REIT and BDC sales, the trends were positive. Bluerock Residential Growth REIT issued $16.0 million of its preferred stock in May, up from $13.2 million in April, an increase of 22% and a notable recovery in issuances after a 54% drop-off from March to April. CIM Commercial Trust issued $5.04 million of its nonlisted preferred in May, up 216% from its April total of $1.59 million. Preferred Apartment Communities issued $8.51 million in PAC Preferred A1 and M1 shares in May, down 30% from the $12.2 million in April. Through the first five months of 2020, Bluerock Residential Growth REIT has issued $86.6 million in nonlisted preferred stock compared to $76.2 million for the same five months in 2019.  The year-to-date total for CIM Commercial Trust was $15.2 million for the first five months of 2019 compared to $15.9 million through May 2020.