Non-Traded REIT Redemptions Continue to Rise as Equity Falters
According to an article in the DI Wire, non-traded real estate investment trust fundraising is down. It has decreased to $1.02 billion in the second quarter of 2017, down from nearly $1.15 billion last quarter, according to the most recent Non-Listed REIT Equity Raise report issued by Summit Investment Research, a research and due diligence firm. REITs have raised nearly $2.2 billion so far this year.
Non-traded REIT capital raising activity exceeded $2.5 billion per quarter, during its peak in 2015. According to Summit there have been several factors affecting their numbers since then. Non-traded REITs have experienced a series of setbacks, including former industry leader AR Global and its related entities’ ceasing fundraising and cancelling their offerings following a number of scandals.
Additionally, the Department of Labor’s fiduciary rule and FINRA 15-02, and high market prices could continue to be an issue for non-traded REITs through the end of the year, according to Summit’s report.
During the second quarter, reinvested distributions continued to provide significant capital for non-traded REITs, with $362 million raised through distribution reinvestment programs. According to Summit, this trend is expected to continue. Reinvested distributions topped $346 million last quarter and $345 million year-over-year.
Share redemptions have remained high rounding out the second quarter at $339 million, a 26 percent increase from the same period last year when $269 million in shares were redeemed.
“The same factors that will create headwinds for non-listed REIT fundraising will continue to drive higher share redemptions in 2017 for closed non-listed REITs with open share redemption programs,” said Summit.
According to the study, most non-traded REITs cap annual share redemptions at 5 percent of outstanding shares, and some closed REITs have stopped offering share redemptions or are hitting their quarterly share redemption limits.
This information, which is publicly available, has been provided by The White Law Group.
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