NTR Sales Slow in May, Still 2nd Highest Month in Years

June 11, 2019 | James Sprow | Blue Vault

Reporting nontraded REITs booked capital raise of $825.9 million in May, down 9.3% from the $910.7 million total for April but up 100% from the $412.6 million monthly average for the same NTRs in Q4 2018. Blackstone REIT saw capital raise decrease in May by 8.2%, but the total for all other reporting  effective nontraded REIT offerings showed a decrease of 13%, from $200.8 million to $174.4 million, as Blackstone REIT’s share of total reported NTR sales continues to increase from 73% in March to 78% in April to 78.9% in May.

Starwood REIT did not respond to requests for sales figures for the quarter ended March 31, 2019, or for the months of April and May. Blue Vault estimates that Starwood REIT had sales of $165 million in Q4 2018, which, if continued at that pace, could add significantly to NTR sales totals for the month of May. Based on shares outstanding, it’s estimated that Starwood is averaging $49 million in sales per month.  Also, based on shares outstanding as of April 30, it’s estimated that FS Credit Real Estate Income Trust was raising common equity at a pace of roughly $7 million per month in April and May.  Phillips Edison Grocery Center REIT III did not report sales for May, but the REIT’s May 9 10-Q SEC filing for Q1 2019 states that subsequent to March 31, approximately $1.4 million was raised.  While total sales for the reporting REITs, without these three REITs, totaled $826 million, adding reasonable estimates for each could raise the industry’s May total above $880 million.

*The following NTRs would not provide sales data to Blue Vault:  FS Credit Real Estate Income Trust, Phillips Edison Grocery Center REIT III, and Starwood REIT. The following NTRs did not provide sales data to Blue Vault: Nuveen Global Cities REIT and Oaktree REIT.

With the Blackstone REIT May sales of $651.5 million, down 8.2% from sales in April of $709.9 million, the 9.3% decrease in total capital raise month-to-month among reporting NTRs was due mainly to that REIT’s drop and the decrease in sales by several other REITs. Jones Lang LaSalle Income Property Trust had sales decrease 30%, from $41.6 million to $29.2 million. On the positive side, Cantor Fitzgerald’s two nontraded REITs, Rodin Global Property Trust and Rodin Income Trust, had sales increases of 16.3% and 25.6%, respectively, to a total of $27.4 million for the sponsor in May.

In terms of ranking, after Blackstone REIT, the next NTR with $38.1 million and a 4.6% share was Hines Global Income Trust, followed by Jones Lang LaSalle Income Property Trust with $29.2 million for a 3.5% share. Black Creek Industrial REIT IV was fourth, with $25.3 million and a 3.1% share.

For the reporting sponsors of nontraded REIT offerings in May, Blackstone was first in capital raised with $651.5 million and a 78.9% share.  Black Creek Group, with two open programs, was next with $40.7 million for a 4.9% share. Hines Securities ranked third with $38.1 million and a 4.6% share, followed by Jones Lang LaSalle with $29.2 million and a 3.5% share of all reported NTR sales.

Due to the lack of capital raise reports from four effective NTRs, most notably Starwood REIT, it is likely that the industry total was significantly greater than $826 million for May, possibly over $880 million. Year-over-year, May 2019 NTR sales were up over 109% from May 2018, even without the non-reporting REITs. The estimated five-month YTD total is $3.45 billion, without Starwood, and at least $3.63 billion with Starwood’s estimated sales added. That would give an estimated Y-O-Y increase of over 110% for the first five months of 2019 compared to the same period in 2018.

Nontraded BDC Sales Rose 39% in May

Nontraded BDC sales rose 39% from $34.4 million in April to $47.8 million in May, with only three nontraded BDC programs raising funds in May 2019 compared to six in April 2018 and seven in February 2018. Owl Rock Capital Advisors again led nontraded BDC sponsors with sales of $45.9 million by its Owl Rock Capital Corporation II program, 96% of nontraded BDC sales in May, up 39% from its $33.0 million sales in April. MacKenzie Realty Capital was one of two other BDC programs raising capital with $1.77 million in sales for a 3.7% share in May, up 32% from its April sales of $1.34 million. TP Flexible Income Fund, formerly Triton Pacific Investment Corporation, raised $0.105 million in May, resuming capital raise after a merger on March 31, 2019, with Pathway Capital Opportunity Fund.

Nontraded Preferred Sales by Listed REITs

Blue Vault receives sales reports from three listed REITs that issue nontraded preferred shares. Nontraded preferred sales by these REITs totaled $22.29 million in May 2019, down 24.8% from the $29.63 million total in April. Bluerock Residential Growth had sales of $12.56 million for May, decreasing 36% from the $19.62 total for April. Gladstone Land Corp. reported nontraded preferred sales of $6.27 million for May, up 7.4% from the $5.84 million in April. CIM Commercial Trust had nontraded preferred sales of $3.46 million in May, down 17% from April sales of $4.17.

At least one additional listed REIT issues nontraded preferred stock. Preferred Apartment Communities, Inc. does not report monthly preferred share sales to Blue Vault but SEC filings for Q1 2019 show proceeds of $128.7 million, before offering costs, from sales of units consisting of one share of Series A Redeemable Preferred Stock and one warrant to purchase up to 20 shares of Common. If the pace of preferred sales by this listed REIT continued in May 2019, the total for four listed REITs issuing nontraded preferred would exceed $65 million for the month.

Sources:  Reporting NTRs and BDCs, SEC and Blue Vault