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The Interesting Case of Highlands REIT-Part II in a Series on InvenTrust Properties Corporation

Highlands REIT, Inc. was created in 2016 to own and manage substantially all of the “non-core” assets previously owned and managed by InvenTrust...

The Latest Full-Cycle Events for Nontraded REITs

In June 2012, Blue Vault published the first comprehensive study of full-cycle events in the nontraded REIT industry. Since that time, five editions of Nontraded ...

Recent Changes to Nontraded REIT Estimated NAVs per Share

In this article, Blue Vault Partners compares the most recent NAVs, estimated by nontraded REITs, to the previous NAVs reported by the REITs. To make the...

Daily and Monthly NAV Nontraded REIT Performance Review for 2018

This report summarizes the 2018 estimated returns to investors in those nontraded REITs that have daily or monthly NAVs announced, with pricing of their...

Blockchain Applications in Commercial Real Estate? How, Why and When?

Blockchain Applications in Commercial Real Estate?  How, Why and When? July 11, 2018 | James Sprow | Blue Vault In 1976, this author had the opportunity to pose a question to Frank T. Cary, then CEO of IBM, at a party. I asked, “What do you do for an encore? You have 70% of the …

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How to Answer the Most Basic Questions About Nontraded REITs

Imagine that you are the type of financial advisor or individual investor who wants to do your own research on a nontraded REIT program, either a program in which you already have invested or are considering for future investment.

The Interesting Case of Highlands REIT-Part I in a series on InvenTrust Properties Corporation

Highlands REIT, Inc. was created to own and manage substantially all of the “non-core” assets previously owned and managed by InvenTrust Properties Corp.

The Challenges of Calculating Nontraded REIT Investor Rates of Return

With the recent release of the 5th Edition Blue Vault Nontraded REIT Full-Cycle Performance Study, this may be an appropriate time to offer perspectives on the challenges faced when calculating rates of return by investors in nontraded REIT programs.

Interval Funds Explained

What is an “interval fund”? Interval funds are SEC-registered closed-end funds that provide continuous offerings of their securities. They usually price and sell their shares daily, but do not list them on an exchange. They redeem shares by making periodic repurchase (tender) offers at net asset value in compliance with Rule 23c-3(b) of the Investment Company Act of 1940.

Distribution Coverage—Why It’s Important to Understand the Difference Between MFFO and Cash

At Blue Vault, we report the sources of distributions in the Nontraded REIT Industry Review because we think it’s important to distinguish that Modified Funds from Operations (MFFO) is not the same as the Cash Available for Distributions. Even when MFFO “covers” the distribution amount, the actual cash needed to pay investors — or portions of it — might still be obtained from other sources such as offering proceeds or debt financing. But how can that be?

The Use of Debt in Nontraded REITs

The Use of Debt in Nontraded REITs Virtually all nontraded REITs utilize debt to finance property portfolios. There are many reasons cited by nontraded REIT sponsors to finance investments in commercial real estate with combinations of equity raised through their public offerings and debt obtained in the form of mortgages secured by the REIT’s assets. …

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Are REITs Like Bonds: Why or Why Not?

Are REITs Like Bonds: Why or Why Not? With the Federal Reserve finally beginning to raise short-term interest rates from the historical lows over the last several years, we may want to compare REITs to bonds and consider the ways in which investor returns from nontraded REIT investments may resemble returns from bonds. Just as importantly, …

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Capitalization Rates Recapped in Today’s Market Environment

Capitalization Rates Recapped in Today’s Market Environment In an Insights article on the Blue Vault website in September, 2015, we defined capitalization rates and explained how they relate to values at the property level and the portfolio level. Real estate investments produce income available to investors in the form of NOI, or Net Operating Income. …

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Interval Funds and Nontraded Closed-End Funds: Defined and Demystified

Although still not as widely used in the financial services sector as nontraded REITs, BDCs and mutual funds; interval funds and nontraded closed-end funds are growing quickly. Why are they gaining popularity? Perhaps if we define and differentiate these fund types, we can better understand the answer to that question.

Economies of Scale in Nontraded REIT Offerings and Effects of Fee Discounts

Economies of Scale in Nontraded REIT Offerings and Effects of Fee Discounts Two complicating factors that must be considered in the analysis of fees associated with nontraded REIT offerings are: Economies of scale resulting from that portion of fees and/or expenses that are fixed or constant over a relevant range of offering proceeds Selling commission …

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Nontraded REIT Share Online Auctions - Update on July 2016 Article

After the publication (published July 18, 2016) of our recent Insights article on auction sites for nontraded REIT shares, we received requests for more information about other options for investors. We have updated our listing to include several other potential contacts for investors seeking competitive pricing for shares in secondary markets. These companies include a new online auction site (CFX Markets) as well as other companies that act as intermediaries between shareholders and potential buyers.

Also included in this list are two companies that engage in third-party tender offers to shareholders in nontraded REITs. Tender offers may be made directly to shareholders if the tendering company obtains a roster of names of all shareholders from the REIT (such provisions are included in bylaws and charters of some companies) or by filing a registered tender offer with the SEC.

Doing Your Due Diligence

A third-party due diligence firm is an essential tool in helping a Broker Dealer evaluate a product sponsor as part of its due diligence on the sponsor’s alternative investment offerings. As part of the process, the Broker Dealer obtains an investment research report produced by the third-party due diligence firm to aid their evaluation.

This Insight provides an in-depth look at the following:
- With regard to alternative investments, what is third-party due diligence?
- Who engages a third-party due diligence firm, an independent Broker Dealer or a product sponsor?
- Who is responsible for the reimbursement of bona fide due diligence fees and expenses in connection with a public offering of securities?
- How do Broker Dealers get started with the due diligence process of evaluating the offering, and what are the first steps?
- What documents, as applicable, should be requested and examined during due diligence for a product sponsor and for its sponsored alternative investment product?
- How do you know that a due diligence process has been successful?
- Perspectives on Effective Due Diligence
- Other Insights from Broker Dealer Due Diligence Professionals
- Items that Broker Dealers Would Like to See in a Due Diligence Report

Interval Funds: A Growing Industry, but What Are They?

You may have heard the term “interval fund” frequently over the past couple years. Many broker dealers have recently brought interval funds onto their platform as of late. Much more education needs to happen in the marketplace to understand interval funds and how they work. We will delve into the terminology surrounding these newly popular funds and provide some basic education in this post.

Nontraded REITs Share Online Auctions

Shareholders in nontraded REITs have limited options when attempting to liquidate some or all of their common stock holdings. While most nontraded REITs have share redemption programs, these programs may have been suspended due to liquidity issues, or restricted to redemption requests filed due to death, disability or other hardships. Funding for share redemptions is usually tied to distribution reinvestment programs (DRIP) and in numerous cases the redemption or repurchase of shares has been suspended indefinitely by the boards of directors. Blue Vault reports on the redemptions of nontraded REIT shares by each REIT on a quarterly basis, but a more complete picture of the redemption issue would require a comparison of redemptions granted to redemptions requested. REITs may place limits on the percentage of outstanding shares that can be redeemed in a given period and many REITs do not redeem all of the shares that stockholders have requested, in which case only a percentage of each request may be repurchased.

Capitalization Rates Defined – Part I

REIT investors may have seen the term “capitalization rate” used in discussions of individual real estate property acquisitions and valuations and even in the broader market context when comparing investor expectations and property portfolio values. In this article we explain what capitalization rates or “cap rates” are and what they aren’t, and how nontraded REIT investors might interpret them. Investors expect both a return on their investment and a return of their investment. Both types of returns involve risk. Rational investors realize that higher expected returns involve more risk, which may mean less predictable returns or greater chance of loss.

What is a Business Development Company?

A business development company (BDC) is an SEC-registered investment company that invests in primarily private U.S.-based businesses. This form of company was created by Congress in 1980 as amendments to the Investment Company Act of 1940. BDCs are typically taxed as regulated investment companies (RICs). Similar to REITs, BDCs are required to distribute at least 90% of taxable income as dividends to investors, and the company itself pays little or no corporate income tax.

Investment Timing and Performance in Full-Cycle Nontraded REITs

Many investment professionals assume that it is better to invest in nontraded REITS later in their fundraising period rather than earlier. The recent study of full-cycle events by nontraded REITs performed by Blue Vault and the University of Texas McCombs School of Business The University of Texas at Austin, casts doubt on that assumption.

The LifeStages™ Classification System—Using Meaningful Metrics to Compare Nontraded REITs

When recommending and choosing nontraded REITs for their clients, most advisors know the importance of looking at key metrics such as debt, distribution yield, MFFO payout ratios, and portfolio diversification. However, these metrics may vary greatly from REIT to REIT depending on where each program is in its life cycle.

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Our firm has been using Blue Vault from the first year it was available.

We have found it to be a valuable tool to verify what wholesalers tell us and to dig deep into how the reported investments are really performing.

We appreciate that Blue Vault has expanded its services from initially covering REIT's to now also including BDC's.

Our clients also appreciate that we conduct this additional due diligence on their behalf.

Loreen M. Gilbert President, WealthWise Financial Services Blue Vault July 6, 2016