Income-starved investors are expected to pour $60 billion into retail alternative investments this year, according to Robert A. Stanger & Co. Non-traded REITs alone are on pace to account for $30 billion, or half the total. The entire alternative space includes non-traded Business Development Companies (BDCs), preferred stock, interval funds and other vehicles, such as Delaware Statutory Trusts and Opportunity Zones.
Blackstone continued to dominate the non-traded REIT space with its BREIT, which raised $2.545 billion in June. The entire industry raised a record $3.5 billion last month.
So far in 2021, Blackstone has raised $10.02 billion of the industry’s $14.28 billion for a 70.2% market share. For all of last year, the industry raised $10.849 billion.
Other players in the field also posted stronger asset flwos. Starwood raised $2.92 billion for the first half, while Black Creek raised $789 million. Other participants included Nuveen with $257 million, FS Investments with $233 million and Hines with $221 million.
“Stanger now projects non-traded REIT fundraising will reach $30 billion this year, while retail alternative investments are projected to raise a staggering $60 billion,” said Kevin Gannon, chairman and CEO of Robert A. Stanger & Co.
NAV REITS are gaining respectability, Gannon added, as “institutional quality” asset managers like Blackstone, Starwood, Nuveen and Black Creek come to dominate the business. In the past, the business had a reputation for high fees, as well as governance and management problems.
As the stock market has soared in the last year and yields on bonds have grown increasingly anemic, many income-oriented investors have started looking for diversification, particularly among options that throw off more distributions. That has clearly contributed to the rising popularity of alternatives like NAV REITs, BDCs and other securities.
“Blackstone has clearly led the way as a highly credible real estate asset manager, providing great returns to retail investors using a better fee structure,” Gannon said. Blackstone is now the nation’s largest owner of real estate.
BREIT, its NAV REIT, is priced at net asset value, and allows investors to redeem 2% of their investment monthly and up to 5% quarterly and 20% per annum. A major criticism of the earlier generations of non-traded REITs was that they were illiquid and had high fees. Investors were forced to either hold onto the vehicle until it was liquidated or sell into the secondary market, where securities often traded at a discount.
According to Blackstone's website, BREIT has $50.3 billion in assets and a distribution rate of 5.21%. Since its exception in 2017, the REIT's annualized return has been 11.2%.
Among Business Development Companies (BDCs), the Blackstone Private Credit Fund raised $846 million in June, bringing its haul for 2021 to $5.69 billion. It is the first-ever perpetual life BDC.