The largest nontraded REITs

With commentary by Michael Stubben, president of MTS Research Advisors

Nov 15, 2011 @ 2:43 pm (Updated 1:15 pm) EST

  

Ranked by second-quarter invested assets

Rank Nonlisted REIT - closed 2Q11 invested assets Original share price Current share value* Original dividend yield Current divident yield 2Q11 MFFO payout ratio **
1 Inland American Real Estate Trust $12,094,700 $10.00 $8.03 6.20% 5.00% 135%
2 Inland Western Retail Real Estate Trust $8,436,000 $10.00 $6.95 6.40% 2.50% 67%
3 Wells REIT II $6,244,500 $10.00 $7.47 6.00% 5.00% 117%
4 Behringer Harvard REIT I $4,333,200 $10.00 $4.25 7.00% 1.00% 56%
5 Corporate Property Associates 16 Global $4,020,200 $10.00 $8.90 6.62% 6.62% Negative
6 Cole Credit Property Trust II $3,436,900 $10.00 $9.35 7.00% 6.25% 111%
7 Dividend Capital Total Realty Trust $3,186,800 $10.00 $8.45 6.00% 6.00% 130%
8 Corporate Property Associates 15 $2,914,800 $10.00 $10.40 7.28% 7.28% 99%
9 CNL Lifestyle Properties $2,908,000 $10.00 $10.00 6.25% 6.25% 240%
10 KBS Real Estate Investment Trust $2,877,000 $10.00 $7.32 7.00% 5.25% Negative
11 KBS Real Estate Investment Trust II $2,750,400 $10.00 $10.00 6.50% 6.50% 82%
12 Hines Real Estate Investment Trust $2,621,300 $10.00 $7.78 6.40% 5.00% 114%
13 Healthcare Trust of America $2,287,100 $10.00 $10.00 7.25% 7.25% 147%
14 Apple REIT Nine $1,683,700 $11.00 $11.00 8.00% 8.00% 133%
15 Apple REIT Eight $996,700 $11.00 Not priced 7.00% 5.00% 130%
16 Apple REIT Seven $959,000 $11.00 Not priced 7.00% 7.00% 107%
17 Apple REIT Six $925,100 $11.00 Not priced 7.00% 7.00% 91%
18 Lightstone Value Plus REIT $563,200 $10.00 $9.97 7.00% 7.00% Negative
19 Apartment Trust of America $383,600 $10.00 $10.00 7.00% 3.00% 150%
20 Cole Credit Property Trust I $206,000 $10.00 $7.65 7.00% 5.00% 86%
*Current value is the value disclosed by the nonlisted REIT as of Nov. 11. **MFFO is modified funds from operations. MFFO is based on NAREIT-defined funds from operations and is adjusted only for acquisition costs expensed in the current period. Source: MTS Research Advisors With closed non-listed REITs (“nREITs”), the above table highlights their original and current dividends and valuations. While certain recently closed nREITs, such as American Realty Capital Trust and KBS REIT II, have shown strong operating performance throughout their history, the majority of closed nREITs have seen significant negative impacts to their real estate operations. Both the commercial real estate capital markets pricing bubble (2006-2007) and the commercial real estate property market recessionary phase (2007-2011) have led to a widespread and significant decrease in dividends and valuations among nREITs. As a result, the market values of their assets have declined, and these nREITs have experienced declines in occupancies and rents. With the recent recovery of market prices and a stabilization of occupancies and rents, most of these closed nREITs will begin to see improving operations and higher valuations going forward. But, the total return of these closed nREITs has been significantly impacted.

 

Ranked by second-quarter equity raise

Rank Non-Listed REIT - effective 2Q11 equity raise 2Q11 invested assets Original share price 2Q11 implied cap rate Current divident yield 2Q11 MFFO* payout ratio
1 American Realty Capital Trust $648,200 $1,614,100 $10.00 8.08% 7.00% 122%
2 Cole Credit Property Trust III $291,300 $3,941,900 $10.00 7.98% 6.50% 97%
3 Behringer Harvard Multifamily REIT I $228,200 $1,039,800 $10.00 N/A 6.00% 222%
4 CB Richard Ellis Realty Trust $173,600 $2,034,800 $10.00 6.81% 6.00% 105%
5 Corporate Property Associates 17 - Global $149,700 $2,362,400 $10.00 8.04% 6.50% 113%
6 Hines Global REIT $144,400 $833,400 $10.00 7.70% 7.00% 153%
7 Apple REIT Ten $143,900 $188,500 $11.00 10.20% 7.50% 216%
8 Industrial Income Trust $107,700 $659,200 $10.00 7.63% 6.25% 163%
9 Grubb & Ellis Healthcare REIT II $82,200 $413,100 $10.00 9.66% 6.50% 114%
10 Inland Diversified Real Estate Trust $77,100 $792,400 $10.00 7.75% 6.00% 90%
11 Wells Core Office Income REIT $50,100 $171,600 $25.00 10.22% 6.00% 170%
12 Strategic Storage Trust $24,700 $401,100 $10.00 6.23% 7.00% 259%
13 Griffin Capital Net Lease REIT $8,300 $164,700 $10.00 8.28% 6.75% 110%
14 TNP Strategic Retail Trust $6,900 $99,100 $10.00 7.57% 7.00% 683%
15 Paladin Realty Income Properties $5,700 $165,700 $10.00 7.61% 6.00% 154%
N/A=not available. * MFFO is modified funds from operations. MFFO is based on NAREIT-defined funds from operations and is adjusted only for acquisition costs expensed in the current period. Source: MTS Research Advisors The above table highlights the equity raise, dividend yield, and MFFO payout ratio for effective nREITs. In the second quarter of 2011, effective nREITs raised a significant amount of equity capital and acquired a substantial amount of commercial real estate. The Top 15 fundraising nREITs have dominated the nREIT sector, as new nREITs struggle to raise capital in a crowded and competitive market. Most of the effective nREITs have been acquiring assets in a favorable commercial real estate capital market and a stabilizing commercial real estate property market. As a result, these effective nREITs will avoid many of the struggles highlighted among the closed nREITs, and these nREITs will experience higher total returns. The implied cap rate highlights the average gross yield on these nREITs' commercial real estate investments, and the MFFO payout ratio highlights the dividend as a percent of MFFO. NREITs should have a MFFO payout ratio below 100%, as they effectively deploy their equity capital and build up their portfolios.