September NTR Sales Recede Toward June Levels, Down 15% From August

October 11, 2018 | James Sprow | Blue Vault

After nontraded REIT sales reached a high for the year at $420.1 million in August, sales receded to $365.3 million in September. There were 20 nontraded REITs reporting capital raise in September, the same number of programs reporting sales in August. For the quarter, total NTR sales were $1.16 billion, up less than 1% from $1.13 billion for Q2 2018, but more impressively, up 23.2% from the $0.95 billion total for Q1 2018.

It is interesting to see the changes in the sales by share classes for nontraded REITs in 2018 compared to 2017. The following table illustrates the share of total nontraded REIT capital raise by each individual share class. The Q3 2018 trend is (as it was in Q2 2018 versus 2017) away from Class A share sales and toward Class D shares. In 2017 Class A shares made up 17.7% of the shares issued in open REIT offerings, but in Q3 2018 that percentage had dropped to just 5.2% of shares issued, while Class D shares increased from just 1.2% of shares issued in 2017 to 7.2% in Q3 2018. Not all nontraded REIT sponsors have broken out distribution reinvestment programs (DRIP) proceeds in their capital raise reports, making DRIP comparisons less meaningful.

Blackstone REIT continued to dominate the NTR sector with $229.8 million in September capital raise, down 18.4% from $281.5 million in August, raising 62.9% of all capital in the sector. Among other REITs, Griffin-American Healthcare Trust IV, Inc. was next with $22.4 million for a 6.1% share, followed by Black Creek Industrial REIT IV with $17.3 million and a 4.7% share. Black Creek Diversified Property Fund raised $16.6 million and was followed by Cole Real Estate Income Strategy (Daily NAV), Inc. at $13.6 million. Of these programs, all but Griffin-American Healthcare Trust IV revise their offering prices either daily or monthly based upon revised estimated NAVs per share and are continuous offerings.

Among the sponsors of nontraded REIT offerings, Blackstone’s single offering raised 62.9% of the total for all nontraded REIT sponsors. Black Creek Group, with two open programs was next with $33.9 million raised for 9.3% of nontraded REIT sales, followed by Griffin Capital Company with two programs totaling $24.2 million in sales for 6.6% of the industry total, and CIM Group (formerly Cole Capital) with $15.8 million and a 4.3% share. Many industry insiders believe that approximately 90% of Blackstone REIT’s sales are coming via wirehouses. Blue Vault has asked Blackstone to report the breakdown by channel but as of yet Blackstone has not been responsive to these requests. Of all the industry’s Class S sales, Blackstone’s share was over 94% in Q3 2018, and the REIT’s share of Class I sales for Q3 2018 was 81%.

Among the REITs with significant increases in capital raised between August and September, the largest percentage increase was achieved by Hartman vREIT XXI, Inc. from $0.67 million in August to $3.93 million in September, an increase of 486%. Cantor Fitzgerald’s Rodin Global Property Trust, Inc. increased sales from $5.1 million in August to over $9.6 million in September, an 89% increase. Moody National REIT II raised over $4.1 million in September, up from $2.9 million in August, a 40% increase.

Nontraded BDC Sales Were Down in September

Nontraded BDC sales decreased from $42.6 million in August to $28.3 million in September, a decrease of 33.6%, with only three nontraded BDC programs raising funds in September compared to six in April and seven in February. Owl Rock Capital Advisors again led nontraded BDC sponsors with sales of $26.3 million by its Owl Rock Capital Corporation II program, 93% of all nontraded BDC sales in September, but down almost 33% from its $39.2 million sales in August. MacKenzie Realty Capital was a distant second with $2.8 million in sales for a 4.8% share of all BDC sales, and with September sales 56% lower than in August. CION Investment Corporation reported sales of $0.67 million in September, just 2.4% of nontraded BDC sales for the month.

For Q3 2018, total BDC sales were $97.8 million, down 7.2% from $104.8 million for Q2 2018, but 4.1% higher than the $94.0 million sales in Q1 2018.