Nontraded REIT NAV Study 3rd Edition is Now Available for Subscribers Only
April 17, 2023 | Research Team| Blue Vault
This study of the pricing and net asset values of nontraded REIT programs is the third compilation of such data for all effective programs by Blue Vault and attempts to report every offering price for the most common share class, each subsequent offering price change, and each announcement of net asset values (NAVs) by share class. Data for the third edition has been collected during several months, and may miss the most recent changes announced by the REITs.
In addition, we illustrate the timing of the NAV announcements measured in quarters after the REIT offerings was effective. By illustrating the timing of the NAV revisions on a common time scale, our subscribers can compare the trends in NAVs over the life cycles of the different programs. There are many factors, including market-wide trends in valuations within the commercial real estate sector and program-specific issues, that affect portfolio values and the estimates of net asset values per share.
For example, in a market environment in which commercial real estate values and transaction prices show increasing trends, we would expect the net asset valuations of nontraded REIT shares to increase also, other things equal. In a market environment like that which the sector experienced in the financial crisis beginning in 2007 when commercial real estate values plunged roughly 40%, the net asset values of REIT shares would be expected to fall as well, and to an even greater extent due to their use of leverage (debt) to finance investments. The pandemic of Covid-19 had an immediate impact on the industry as well, resulting in lower NAVs. Appendix II shows NAVs for the active life-cycle REITs, presented as a percentage of Q4 2019 NAV for each REIT. All the medians calculated in Appendix II are below 100%, which means that the majority of NAVs for the sample were below Q4 2019 NAV for each quarter presented.
This study compares the initial offering prices to the pricing of distribution reinvestment program (DRIP) shares which can be purchased by existing shareholders with the quarterly distributions they would otherwise receive in cash. These programs typically offer shares at 95% of the offering price during the offering period, but once net asset values are estimated or offering prices are revised, the boards of directors set new DRIP prices, usually reflecting the increase or decrease of the NAVs relative to the original offering prices, or as a percentage of the revised offering prices.
If you are a Blue Vault subscriber, the complete study can be found here: https://bluevaultpartners.com/subscriber-research/nontraded-reit-studies/
